That’s not a very pretty image. Al Norman believes, nonetheless, that the fear of a cannibalization factor is a major contributing factor to Wal-Mart’s unilateral decision to not build a record 45 Supercenters over the past 10 months.
From The Huffington Post:
According to a list released this week, Wal-Mart Stores has abandoned a record-shattering 45 proposed projects over the past 10 months — often leaving local officials dejected and confused. Another 19 Wal-Mart projects have been killed by local citizen’s groups. In total, the world’s largest retailer has suffered an historic loss of 64 projects.
In part due to the company’s pale 1.9% growth in same store sales in 2007, John Menzer, Wal-Mart’s Chief Administrative Officer, admitted, “We also have been focused this year on reducing cannibalization of existing stores via our more strategic selection of U.S. real estate projects.” Same store sales indicates the performance of existing stores by measuring the growth in sales for such stores during a particular period, over the corresponding period in the prior year. Wal-Mart’s same store sales have been dropping for 20 years, but this past year was the worst. The 1.9% growth rate in 2007 compares to 5% in 1997, and 13% in 1987.
“As we continue to add new stores in the United States,” the company told shareholders, “we do so with an understanding that additional stores may take sales away from existing units. We estimate that comparable store sales in fiscal 2007, 2006 and 2005 were negatively impacted by the opening of new stores by approximately 1% in fiscal years 2007, 2006 and 2005. We expect that this effect of opening new stores on comparable store sales will continue during fiscal 2008 at a similar rate.”
Sam Walton explained that his growth strategy was “to saturate a market area by spreading out, then filling in…We became our own competition.” He once boasted that Springfield, Missouri, for example, had 40 Wal-Marts within 100 miles. But Wal-Mart has paid a price for competing with itself. Today, the saturation card has been overplayed, and the retailer has been forced to go on a superstore crash diet. While hundreds of sling-shot coalitions have been hurling rocks at this retail Goliath for years, ironically, it is now the giant itself which is reeling from its own self-inflicted excesses.
Like Fonzie on water skies, is it possible that Wal-Mart jumped the shark?