Wal-Mart Thinks Small?

Yesterday the Financial Times had a story on how Wal-Mart is considering lessening its reliance on its Supercenters for future growth:

The world’s largest retailer, whose US stores had sales of more than $64bn last year, is seeking an executive to assess the “strategic implications of any possible M&A on our overall portfolio”, according to a Wal-Mart job posting.

I found it interesting, given my rant yesterday about the company's gas price commercial. It seemed like a contradiction - blaming "disappointing" results (though I am skeptical on how disappointing what you do can be when you're on the top of your particular hill) on high gas prices while essentially acknowledging that the biggest box store strategy might be a dead end, but on reflection it isn't.

If the story is right (and I suspect it is), Wal-Mart is looking at acquisitions, and sees this as an gengine of growth, not of continuance. So it's an addition - and that still leaves room to blame others. I think there's still a problem: economics, mathematics, and common sense suggest that there is only so much market share you can have. Eventually you run out of people who want to do business with you for whatever reason.

So, to get someplace new, give them a new reason to buy. The online music move is interesting - and even faster than Amazon.com. Maybe what Wal-Mart needs is a real challenge. Instead of acquiring some chain and then rebranding the name to some variation of its own, creating the inevitable emotional associations, Wal-Mart might think of doing heavy research, finding some concept that really is missing, and then investing and building its own chain with a different brand, from scratch.

That flies in the face of most assumed business logic, I know, but the idea would be to do more than just become more bloated. The company has all this money that could use investment. It could create an obvious internal challenge with a focus on something it could make happen rather than the fuzzier "get bigger." It could grow and make more revenue and profit as the natural byproducts of trying to achieve something concrete.

I think the psychological quirk of trying to control numbers and creating strategy as a result instead of the other way around is a definite problem in business. It led to the current mortgage market, to over-investment in the 1990s, and to many other general business failures. You don't get someplace by wanting to have fame as an explore; instead, you get fame as an explorer by heading to the North Pole. It's a lot harder, but ultimately more rewarding for management, for exmployees, and for investors.

Output and Jobs Statistics Don't Match

Although there isns't a free link to this, I'd urge people to subscribe to the Financial Times and look at the April 26 story by Krishna Guha titled Output and jobs pose statistical mismatch. It's an interesting examination of why output growth is apparently less than its potential and yet unemployment doesn't seem to go up, in violation of an economic rule called Okun's Law. Seems that there are three explanations. One is that official counts of unemployment are below the actual (the article seems to find this unlikely because the count is done by a household survey, but that would still depend on how the answers are classified). Another is that the official counts of economic growth are low-balling the number. The third is that the ptoential for the economy is lower than people have been thinking. In any case, an interesting read.