The Financial Times (subscription required) reports that Wal-Mart (NYSE: WMT) is considering acquisitions in the U.S. as it attempts to broaden its reliance on its 2,300 colossal "Supercenters" for future growth, citing a job posting that requests an executive to assess the "strategic implications of any possible M&A on our overall portfolio."This is Wal-Mart's first attempt in more than 25 years to acquire a company in its own backyard. The move is seen as a response to the upcoming opening of Tesco's (OTC: TSCDY) "Fresh & Easy" grocery markets in the United States. Tesco's smaller neighborhood grocery markets cover 10,000 square feet of selling space, compared to Wal-Mart's Supercenters, which dominate the landscape with 187,000 square feet. Wal-Mart also has discount stores without groceries that average 107,000 square feet.
In addition to the search for an executive with a strategic M&A background, Wal-Mart has already established a new business development team based in San Francisco that will experiment with new pilot programs. Wal-Mart is attempting to develop what the Financial Times calls a "comprehensive multi-format growth strategy," a program similar to what Tesco did in the U.K. back in the 1990s.
Wal-Mart's attempts to open stores in the urban centers of New York, California and Chicago have met local political opposition for years. Competitors like Costco Wholesale Corp. (NASDAQ: COST) and Target Corp. (NYSE: TGT) have not seen the same level of opposition compared to Wal-Mart, despite the comparable 'big-box' format. In comparison, Tesco's "Fresh & Easy" stores only fill 5% of a Wal-Mart Supercenter and would lack the same level of planning approval. The move to a smaller Wal-Mart store could allow the "evil empire" an entrance into these key urban centers.
Two other 'big-box' retail stores that could see this in the future -- Home Depot (NYSE: HD) and Lowe's (NYSE: LOW). With both companies blamed for destroying local "mom & pop" stores, America's handyman stores have become giant distribution centers. As the landscape in the home improvement market becomes oversaturated with jumbo-sized fix-it stores, the need to switch to a "multi-format growth strategy" to compete could be just the strategy they need stimulate growth.
Wal-Mart's attempts to open stores in the urban centers of New York, California and Chicago have met local political opposition for years. Competitors like Costco Wholesale Corp. (NASDAQ: COST) and Target Corp. (NYSE: TGT) have not seen the same level of opposition compared to Wal-Mart, despite the comparable 'big-box' format. In comparison, Tesco's "Fresh & Easy" stores only fill 5% of a Wal-Mart Supercenter and would lack the same level of planning approval. The move to a smaller Wal-Mart store could allow the "evil empire" an entrance into these key urban centers.
Two other 'big-box' retail stores that could see this in the future -- Home Depot (NYSE: HD) and Lowe's (NYSE: LOW). With both companies blamed for destroying local "mom & pop" stores, America's handyman stores have become giant distribution centers. As the landscape in the home improvement market becomes oversaturated with jumbo-sized fix-it stores, the need to switch to a "multi-format growth strategy" to compete could be just the strategy they need stimulate growth.
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Reader Comments (Page 1 of 1)
8-27-2007 @ 6:40PM
Richard said...
Many of the big box retailers are suffering from the lack of customer service as these companies attempt to use mass merchandising to serve the customers.
Lowe's and Home Depot are paying a crucial price with a drop in same store sales. The market is ripe for an expansion of a smaller rival in the home improvement market. Look to Menard's and Carter Lumber to possibly push ahead with expansion plans.
Neither Lowe's nor Home Depot has been able to stop the Menard's from expanding. Their stores are not hurting the small giant of home improvement.
Carter Lumber has purchased several regional dealers of building products, slated to the pro builder market.
These companies, along with Stock Building Supply are eating away at both Home Depot and Lowe's.
Walmart should be worried that Target will continue to gain on their market share. The success of Costco and BJ's Wholesale Club are another threat to Walmart and Sam's Club. More customers prefer to shop these than Sam's Club and Walmart.
Ace Hardware and True Value Hardware are both failing enterprises due to the lack of customer service and the higher pricing. The mom and pop hardware stores are proving effective in price points and service.
One chain of note for discount building materials is Builder's Discount Centers in North Carolina. While much of their product is factory seconds and lower quality, their pricing is very competitive against the Lowe's and Home Depot when compared to the quality of building materials they sell.