Go ahead, locate next to Wal-Mart -- as long as you can compete on price, selection

Posted Jan 4th 2007 12:29PM by Brian White
Filed under: Rumors, Products and Services, Consumer Experience, Competitive Strategy, Wal-Mart (WMT), McDonald's (MCD), Blockbuster Inc 'A' (BBI), AutoZone Inc (AZO), Bed Bath and Beyond (BBBY), Family Dollar Stores (FDO), Staples Inc (SPLS), Wendy's Intl (WEN), RadioShack Corp (RSH)

You know the charge: Wal-Mart kills small businesses. If one of the retailing juggernaut's Supercenters moves into your town, the logic goes, all the mom-and-pop shops that have faithfully served residents for decades will soon have no choice but to shutter their businesses.

But it doesn't always work that way. In some cases it actually makes sense for businesses to locate next to a Wal-Mart. You may be able to entice some of those throngs of bargain-hunters to stop by your establishment and spend a few bucks. But before you consider this strategy, be sure you can compete head-on with the retailing Goliath on price or selection.

I recently wrote about how Goodwill Industries -- one of the top thrift stores in the country -- is locating more of its stores adjacent to Wal-Mart Stores, Inc. (NYSE: WMT). In fact, that has become standard practice in the state of Ohio apparently. Why? Goodwill explained that both it and Wal-Mart serve the same types of customers ( or "demographic" as they call it in retail-speak). Sounds like a smart strategy to me.

But what about other retailers? From what I have seen, Wal-Mart Supercenters are retail anchors almost everywhere they are built. You see Blockbuster Inc. (NYSE: BBI), RadioShack Corp. (NYSE: RSH), Dollar Tree Stores (NASDAQ: DLTR) and chain restaurants like McDonald's Corp (NYSE: MCD) and Wendy's International (NYSE: WEN) pop up right next to Wal-Mart Supercenters. Why? Seems simple -- to get the traffic Wal-Mart has in and out of its parking lot.

What do these retailers have in common? They all offer either products and services that Wal-Mart does not provide or much deeper selection. Let me give you a few examples: AutoZone Inc. (NYSE: AZO) carries many of the same products that Wal-Mart's automotive departments stock. But AutoZone goes quite a bit further into product selection and other items that differentiate it from Wal-Mart's automotive offerings. Can Wal-Mart match the office supply selection of Staples (NASDAQ: SPLS) or the health and beauty products from Bed, Bath & Beyond (NASDAQ: BBBY)? Nope.

Same goes for Blockbuster Video (even though Wal-Mart did test several DVD-renting offerings), and even Dollar Tree, which targets the same core demographic as Wal-Mart. Those are customers who shop based on one criteria above all else -- price. Even Wal-Mart can't compete with Dollar Tree's "$1 for everything" strategy despite the fact that much of the product selection is very similar if not identical in some categories. I think Wal-Mart's main suppliers would go out of business if the world's largest retailer started trying to compete with dollar stores, even in limited categories.

So, the moral of the story, you may ask? While neighbors of Wal-Mart are there to feed off of Wal-Mart traffic for the most part, they also can serve niches for customers that Wal-Mart simply can't provide. And some of us thought Wal-Mart sold just about everything!

Tags: Wal-Mart, Wal-Mart Stiores, Wal-martStiores, WalMart, WMT

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Reader Comments (Page 3 of 3)

5-18-2007 @ 10:23AM

buddymaxncheese said...

Been a Independent Retailer for many years. Ive heard it all about Walmart. I shop at Walmart because it keeps me aware of new products, what's
selling and what's not. I know their loss leaders.
People dont realize that their are companies that have really kept Walmart on their toes and they have difficult competing with them. Costco, Publix, HEB, Wegmans. The reason is because Walmart Cant be all things to everyone. You wont
compete with Walmart on many household items that they import because they can do it better because they buy more, but you can beat them on service,
and face it people are in a hurry and are impatient.
Yes you can locate next to a walmart because you sell something different or food business that can take many of their customers, but you have to really look at The typical Walmart customer. They
fill their carts up at the first of the month and stay for over an hour. This isnt everyone's customer. Walmart is employing many people and hiring folks that wouldnt find a job easily elsewhere and they also have a minimum or 10 handicapped motor carts for handicapped persons that
cant walk around.

If more business owners spent their time taking care of business to have a small effect on Walmart Sales, they would be better off. Remember when you are number one you can only go one direction. Remember also, that Kmart and Sears used to be #1
for how many years? How many of you consider them to be your favorites today? What's interesting also
is Target is a much more impressive and well merchandised store including the Super Targets that can compete with Walmart. They do not serve the same customer and they can do well and compete. Of course they are more expensive but they sell convenience and you dont see as many screaming babies and families where their children are running wild and wrecking everything.

Yes, Walmart is cheaper and they can affect your business, but someone has to be there for you to learn from and set some standards. Not everyone
wants to spend two hours shopping at walmart.

GET A LIFE.

5-18-2007 @ 12:03PM

Tim Orris said...

Provide what walmart can't , Service. Perfect space for credit union, hair stylist, ethnic food resturaunts, fine wine and cheese shop, uniform suppliers,
If you can't bet there price provide better service

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