It May Be Time To Short Wal-Mart

I’ve never visited a Wal-Mart. Never been inside the building. The closest I’ve been is when I picked someone up in a Wal-Mart parking lot. I have no desire to go to Wal-Mart.

Now, I have been to Target (though my wife goes to Target more frequently than I do). I don’t mind going to Target and I’ve bought more than my fair share of stuff there.

Now it appears that Wal-Mart is not happy simply being the world’s largest retailer. They want people like me (actually, people like my wife) to start frequenting Wal-Mart instead of Target. I would advise them not to do that.

Probably the reason Wal-Mart wants more is that they need to justify their growing (and some would say inflated) stock price. To do this, they are willing to risk what has made them special. For all of the talk about Wal-Mart’s ability to take costs out of the equation, no one will ever convince me that this was their ‘secret sauce.’ As a matter of fact, it was the very fact that Wal-Mart’s competition always focused on the cost issue that gave Wal-Mart an unbeatable advantage. While K-Mart was investing in technology to reduce costs while being all things to all people; Wal-Mart was focused maniacally on serving the paycheck-to-paycheck customer. Wal-Mart’s success was the unrelenting focus on being something special to a specific group of people. Now, they are turning their backs on them and trying to move up-market.

I remember reading Marcus Buckingham’s book, The One Thing, where he quoted the head of Wal-Mart’s grocery division telling a group of business executives that Wal-Mart is not particularly interested in people who don’t live paycheck to paycheck. Wal-Mart’s focus, he said, was on providing a special place for people who live paycheck to paycheck. Wal-Mart built a great business with that philosophy (while I have never been in a Wal-Mart, I do admire the company).

I encourage you to read John Moore’s commentary on the story about how Dunkin’ Donuts is trying to compete with Starbucks to get a picture of how difficult it is to appeal to a group that is not inclined to use your offering. Even if Wal-Mart insists on doing it, don’t make this mistake with your business.