Professor Elam

Yep another story about the 3500 WMT stores.   Plea read the previous post about Execution and then the Halo Effect to put this in perspective.  Business Week toured three WMT stores, hardly a scientific sample size to be fair, and concluded that the strategy was not being executed. Like MSFT and not long ago Chrysler, WMT was hailed for a couple of decades as the new model in retailing. WMT increased its inventory turnover from 5 to 8 as Halo Effect author points out.  The stock was said to magically double after every split, as though splitting the stock was the trigger for future firm performance.  And for a while the stock did rise in parabolic fashion.  But no more, these days MSFT and WMT make lots of money, but not for the shareholders. While one can argue they are mature businesses, better suited to paying dividends than hitting growth targets, that is not their legend.

Patricia Pao notes that WMT has tried to go upscale with their interiors. While the stores are cleaner and there are some moves to put faux wood on the floors, the service is non existent. WMT is trying to be an electronics retailer.  In what is surely a great irony, WMT is now attempting to sell DELL computers, the firm that all but ran out of retail with its on line computer sales. Yet there were no DELL computers to be found at WMT.  Can anyone imagine asking a WMT clerk about a computer, I know I can’t.

But poor attitude on the part of the clerks means that there is nothing here for the shopper but low price.  Low price means low margins which means there is no money for raises.  Perhaps WMT should take a lesson from the owner of the Detroit Tigers, see previous post, and hire some real help instead of whoever shows up willing to work cheap.  But to be fair, the Tigers only have one team, WMT has 3,500.  Gee is that like pushing on the sliver of wet spaghetti. How does one motivate employees at 3,500 stores?  It used to be the upward stock price, now that it languishes, the reward bin is empty.

The point is that WMT enjoyed the Halo Effect on the way up. Now that JCP and TGT and others offer more upscale venues, WMT is stuck with, well, rolling back prices.  And without folks on the floor to execute the strategy, WMT has become the new Woolworth’s.