[Jewelry making - Article 00511] - Re: [Orchid] The Age of Walmart on CNBC

[Heather Plessner]

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    From: 
    moneycentral.msn.com/content/invest/forbes/P100080.asp?GT1=5809

    Posted 11/12/2004 

    Forbes 
    Wal-Mart's next victims The world's largest retailing machine is
    always looking for new worlds to conquer. Here are 5 that look
    particularly vulnerable, including banking and electronics. 

    When Toys "R" Us said in August that stiff competition from mass
    merchant Wal-Mart Stores was making it consider exiting the toy
    business, the news struck fear in the hearts of retailers
    everywhere. 

    After all, Toys "R" Us (TOY, news, msgs) pioneered the "category
    killer" concept that's now employed by big-box specialty stores like
    Best Buy (BBY, news, msgs), Home Depot (HD, news, msgs) and Bed Bath
    & Beyond (BBBY, news, msgs). The notion of creating giant specialty
    stores that cater to a particular product segment has become a
    staple of the U.S. economy. But Wal-Mart (WMT, news, msgs), the
    antithesis of a category killer with aisles stocked with a vast
    spectrum of products, is posing a dire threat to this way of
    business. 

    Wal-Mart had sales of $259 billion for fiscal 2004, ended Jan. 31,
    ranking it as the world's largest retailer. That sheer size has
    vaulted it to the No. 1 spot in categories as disparate as food,
    apparel, jewelry and home furnishings. For fiscal 2005, Wal-Mart
    plans to add 310 new stores and 30 new Sam's Clubs to its stable of
    3,625 locations. Oppenheimer retail analyst Bernard Sosnick expects
    that by 2010, Wal-Mart will have 3,000 supercenters, up from 1,600
    this year, and total company sales of half a trillion dollars. 

    That kind of growth will make Wal-Mart No. 1 in plenty of other
    product categories soon enough, and it will put an even tighter
    squeeze on existing players in arenas that Wal-Mart already
    dominates, like apparel and food. With a lion like Wal-Mart on the
    loose, no store is ever safe, but here we've identified five
    categories that that look particularly vulnerable to its looming
    threat. 

    Consumer electronics 
    Wal-Mart is the second-largest consumer electronics retailer in the
    U.S. behind Best Buy, but it won't be for long. This spring, it
    rolled out a private-label electronics line, ILO, which thus far
    includes low-priced 42 inch plasma TVs, LCD monitors and DVD
    recorders. That move put electronics stores large and small on
    notice, as have Wal-Mart's efforts to boost its brand partnerships,
    introducing Sony and expanding its relationships with Panasonic and
    RCA. Says retail analyst Howard Davidowitz, "They are going to fry
    Best Buy's brains out." 

    Banking 
    The superstore has been trying to get into banking for five years,
    but its efforts to buy banks in California, Oklahoma and Canada were
    thwarted by regulators. Wal-Mart has a ready-made market at hand:
    20% of the 100 million customers that come through its doors weekly
    don't have bank accounts. The chain already offers financial
    services such as check cashing, bill payment and money orders, and
    it boasts 28 Wal-Mart Money Centers, which are operated by SunTrust
    Banks, as well as hundreds of other in-store bank branches. The
    company says it has no plans to get into retail banking, but
    industry sources say Wal-Mart is still pushing this agenda quietly
    and is expected to take another run at banking again. 

    Pharmacy 
    Wal-Mart ranks fourth in the pharmacy business, behind giants
    Walgreen, CVS and Rite Aid, according to the National Association of
    Chain Drug Stores. But it is upgrading its profile, rolling out a
    handful of 24-hour pharmacies in August. Pharmacies are low-margin
    propositions, and people with health insurance who pay only
    co-payments aren't price-sensitive. That could put a kink in
    Wal-Mart's strategy of squeezing supply chains to push down retail
    prices. But for the shoppers who don't have insurance, many of them
    its customers, Wal-Mart's brand of competitive pricing would be just
    what the doctor ordered. 

    Gasoline 
    Gas pumps are a huge traffic driver for Wal-Mart. There are 1,555
    stations on Wal-Mart properties, 300 of which are operated directly
    by Wal-Mart's warehouse arm Sam's Club and the rest by third-party
    vendors like Murphy USA (MUR, news, msgs). Launched in 1996, its
    pumps already have a 3% share of U.S. retail gas sales -- the 10th
    largest in the U.S. As Wal-Mart's share grows, the only question is
    whether Wal-Mart will oust its vendors and go it alone. Independent
    gas suppliers are growing as the oil giants spin off their
    refineries, which makes that kind of a move plausible, and the sheer
    number of Wal-Mart locations makes it an appealing partner. Says
    retail analyst Kurt Barnard, "The volume they could offer would be
    of enormous interest to refineries." 

    Fashion 
    Wal-Mart may lead the apparel market, but it does so with the sale
    of mundane items like underwear, socks and sweatshirts. Analysts say
    that Wal-Mart is losing sales of fashion items to companies like
    J.C. Penney (JCP, news, msgs), Kohl's (KSS, news, msgs) and Target
    (TGT, news, msgs), which has had particular success with its lines
    from Isaac Mizrahi and Liz Lange. Wal-Mart is now gunning for a
    hipper milieu with George, the No.1-selling British apparel brand
    that Wal-Mart landed when it bought its parent, U.K. retail giant
    Asda, in 1999. Wal-Mart also stocks the Mary-Kate and Ashley line,
    licensed from the famed Olsen twins. Look for the retail giant to
    start sprucing up its clothing displays and marketing these brands
    more heavily as it reinvents its fashion sense.

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