By Al Norman
Sprawl-Busters across America are celebrating this week.
Wal-Mart announced at its October 6th Investor's meeting that it "plans to slow new-store openings," shifting its capital investments towards e-commerce technology. In its superstore segment, Wal-Mart will drop from 69 new big box stores in FY 16, to 60 in FY 17, and only 35 by FY 18.
In his comments, Wal-Mart CEO Doug McMillon flatly stated: "We are a company that must become more of an e-commerce and technology company. There's no doubt that e-commerce is going to become a much more important part of our business."
Without once mentioning his desperate fixation on catching rival Amazon, McMillon promised customers a "fast and easy" shopping experience "when, where and how they want."
Wal-Mart's super-saturation of the retail landscape with big box stores, sometimes as close as two miles apart, is well into its Ice Age. The huge Dinostores, once seen as the dominant species of retailing, are now viewed as ill-adapted to the climate change overtaking the marketplace, most notably the global warm-up of online shopping. Wal-Mart became over-reliant on these vast retail caverns, hard to navigate and time-consuming to shop. Now they are trying to catch up to the Amazon model of fulfillment warehouses strategically placed around the globe.
Wal-Mart's Retail Ice Age is a result of its own misreading of the market. As I wrote in this space nine months ago: "Wal-Mart headquarters announced January 15th that the company will close a total of 269 stores world-wide, of which 154 are locations in the U.S. This store implosion represents the end of the line for Wal-Mart's smallest format, the so-called Wal-Mart Express. But it also reveals the giant retailer's over-saturation of American markets."
Last January, McMillon, tried to put a shine on these closures by reminding the media that "we'll open well more than 300 stores around the world next year. So we are committed to growing, but we are being disciplined about it." Translation: Wal-Mart will only be opening 50 to 60 Supercenters in America this coming year---which pales to its halcyon sprawl years in the 1980s when it cut-ribbons at a 250 to 350 store clip per year. Even as late as 2007, Wal-Mart's Annual Report said the retailer's "planned expenditures will include the construction of...265 to 270 new supercenters."
No doubt Wall Street will reward Wal-Mart for finally showing some "discipline" in its bricks and mortar store growth--but in its own Q&A format interview with McMillon, the company disclosed a very telling metric:
"More than 95% of the stores closing in the U.S. are within 10 miles on average of another Walmart."
In other words, Wal-Mart reached the point of store saturation years ago, and is only acting on that now. No retail trade area needs a Wal-Mart every ten miles. The stores that were chalked for closure last January were, frankly, redundant.
Wal-Mart has been cannibalizing its own stores for years by over-saturating market penetration. In 2007, John Menzer, Wal-Mart's Chief Administrative Officer, told shareholders: "We also have been focused this year on reducing cannibalization of existing stores via our more strategic selection of U.S. real estate projects... As we continue to add new stores in the United States, we do so with an understanding that additional stores may take sales away from existing units." That was nearly 9 years ago.
What does this mean for local communities? The prospect of only 35 new superstore by 2018 lifts a great burden off the backs of local communities that have been fighting Goliath with slingshot coalitions since the early 1990s. I have catalogued a list of 450 communities that have blocked superstore sprawl at least once.
Slashing new store production by 50% means that roughly 900 acres of land will be spared a blanket of asphalt and concrete, the environmental damages from huge developments will be reduced, and hundreds of local businesses will remain open for business. As McMillon admitted, shifting the business model away from superstores means "running our business with more sustainable practices."
The Dinostores are dying. Wal-Mart knows it. Shoppers know it. Perhaps by FY 19 Wal-Mart will be announcing no new superstore units at all, and the widespread closure of its outdated concrete mausoleums.
That will be a glorious day, indeed.
Al Norman has been helping communities fight sprawl-marts for nearly 24 years. He is the author of three books on Wal-Mart, the most recent being Occupy Wal-Mart.