- Internet Shopping - kahle
For over 30 years, retail sector growth was dependent on the shopping sprees undertaken by global consumers. However, the increase in the popularity of internet shopping could force one of the world’s largest retailers to cease any plans for expansion.
Everyone knows that Wal-Mart is a discount general merchandise retailer. Founded less than 40 years ago, it is the largest, most profitable and one of the most admired companies in the USA. Every year, the company experiences billions of dollars in sales. As of January 2003, the company operated over 4,300 stores, of which more than 1100 were outside the USA. They are located in Mexico, Canada, Europe and Asia.
Wal-Mart operates stores in several different formats apart from its original general convenience layout. Some are super-centers which is a combination of a supermarket and general merchandise store. Some are members-only warehouse stores, selling high volumes at very low individual profit margins. Some, yet again, are smaller, neighborhood-type markets with a focus on groceries, in carefully chosen urban locations.
Wal-Mart serves more than 100 million worldwide customers per week and the company employs more than one million people.
Controlling Costs Pay for Wal-Mart
A major reason for Wal-Mart’s success is its ability to control costs. The founder, Sam Walton (deceased), was known as one of the people who made the best use of control information in the industry. By the late 1970s, Wal-Mart was using a store-wide computer-driven information system that linked stores, distribution centers and suppliers. A few of the companies major competitors, like K-Mart, only commenced utilizing a similar system in the 1990s.
Today, Wal-Mart can convert information into action almost immediately. Since inception, the company invested US$700 million in computer and satellite systems, which collectively generate the largest civilian database in the world. These systems provide automatic replenishment and up-to-the-minute sales of any item by region, district and store.
By merging state-of-the-art communications technology with hands-on management, Wal-Mart, at least in theory, has developed a distribution system to the point that stores should never run out of stock. By doing this better than its competitors, the results are substantially more sales and a faster stock turnover.
The example that Wal-Mart has set demonstrates how effective planning and implementation are in a company’s performance. In the end, however, results are what counts. The company’s returns on its investment stock capital increased by 16% in 2008 and it has been labeled as recession-proof.
However, according to The Motley Fool, this will not last for very long. They place the blame squarely on the ease of internet shopping. The online retailer spearheading this trend is Amazon.com.
Changing the Perception of Warehousing and Stock Turnover
Amazon has commenced partnering with universities, colleges and other tertiary education institutions. Princeton has begun using Amazon’s Kindle program to read textbooks. According to the National Association of College Stores, this chops off approximately one-third of total student fees.
Additionally, according to one Motley Fool Special Report, Amazon has been retaining experts in mobile phone technology. They suspect that Amazon is plotting to do for reading what Apple’s iPod did for listening; become the standard for e-books, e-magazines and e-newspapers. (The Motley Fool, 5)
Amazon is growing its business and stealing market share from its competitors. Make no mistake; this company is now a full-fledged rival of Wal-Mart. Amazon no longer sells just books anymore. The company now sells everything that Wal-Mart does; from music CDs to movie DVDs, from groceries to cooking utensils, from home decorating to renovation, from gardening to landscape design. The list goes on and on.
Therefore, what does Wal-Mart do? They have jumped on the internet shopping bandwagon as well. Like Amazon, Wal-Mart customers can now shop for everything online. Wal-Mart has also begun providing customers with financial services (including credit cards); Amazon is not far behind in offering these services as well. It seems that these two companies have a ‘tit-for-tat’ relationship.
Ultimately, it is results that attract investment capital; management and entrepreneurs are paid to deliver better and better results. A company’s share price plummets when results are not what Wall Street expects. Whether the organization in question is a large public company such as Wal-Mart or a dot-com firm such as Amazon, results are what counts. It is results that permit organizational growth.
Sources:
Gardner, David and Tom Gardner. “The Death of Wal-Mart.” A Motley Fool Stock Advisor Special Report, April 2009
Carla Crepin-Swift - CC Swift wears many hats. She is a wife, mother, project manager and part-time musician living and operating in Trinidad & Tobago ...
