October 21, 2005

Not Wal-Mart's Specialty

The Houston Chronicle presents more evidence supporting my hypothesis that Wal-Mart can only be beaten by increasing affluence:

Kroger, which is still the biggest U.S. grocer, posted its biggest sales gain in five years last quarter, but largely because of heavy discounting. Albertsons, after reporting falling profits in three of the past four years, put itself up for sale last month.

Meanwhile, specialty grocers, such as Austin-based Whole Foods Market, are booming. Upscale stores offer better margins because grocers can charge higher prices. They also offer a broader selection of perishable items, such as produce. At its new "lifestyle" stores, Randalls promises organic fruits and vegetables, more prepared foods, full-service meat counters, and sushi and olive bars.

"They see it as a weakness that Wal-Mart isn't able to duplicate," Hamstra says.

I think Wal-Mart could duplicate this format -- perhaps using a different name entirely -- but at what cost to its other operations? How well can Wal-Mart integrate high-grade with middle-grade produce in one supply chain? Phrased differently, would you eat sushi at a Wal-Mart bar?

Posted by Kevin on October, 21 2005 at 10:43 AM