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.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?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.
Posted by Kevin on October, 21 2005 at 10:43 AM
J wrote:The Whole Foods concept is probably the best path to profitability for companies that only sell groceries - the best execution I've seen so far is the "Central Market" concept operated by HEB (a Texas chain) - so it's no surprise that grocers are moving to take advantage of the popularity of "organic" groceries. It'll be a little tougher (though not impossible) for WM to take advantage of this, since organic groceries are basically a vanity product for relatively wealthy consumers, most of whom wouldn't be caught dead shopping at WM.
Nevertheless, though I would never eat sushi at WM (or, frankly, under any other concievable circumstance), my guess is they'll integrate this trend into their existing stores by, as with everything else they sell, convincing the people who will shop there that organic stuff is cheaper at WM.
-- October 22, 2005 10:00 AM ∞
