Abandoned Walmart store"In our lifetime we will see the last Walmart (WMT) discount store disappear," says John Rand, director of retail insights for Kantar Research in Massachusetts.

It's a bold forecast -- and one that may even seem far-fetched given the behemoth retailer's 50 years of history and more than 50% market share in many parts of the United States.

But what he's actually predicting is that smaller Walmart stores and even non-retail businesses will replace the big discount stores we're familiar with.

And there are already signs that the big-box store, while perhaps not headed for extinction, will indeed morph into something very different than we're familiar with.

Walmart's Dilemma: Radical Change or Gradual Demise

It will be tough, for sure. After all, it's not easy for a $220 billion company to completely re-envision the way it does business.

Gary Giblen, an independent retail analyst, admits that Walmart could "lose some of its luster over the next few years." He also points out that Walmart has become sloppy in executing big changes, which is "inevitable for an organization... after so many years of such explosive growth." Case in point is Walmart's slowness to develop a strong presence online.

Despite these fears, Walmart's leaders are optimistic that they can shift the business and position the retailer for long-term success. They are already testing a radical new concept -- downsizing stores, literally, by dramatically shrinking the square footage of new stores.

Smaller Is Better

The first 10 Walmart Express test stores opened last year, and more test stores will open later this year. One-tenth the size of the typical Walmart discount store, these Express stores are a combination of food, pharmacy, and convenience stores -- targeting customers more inclined to visit a smaller bargain store like Dollar General (DG), Family Dollar (FDO), or Dollar Tree (DLTR).

These Express stores are cheaper to build, less expensive to run on an absolute basis, and make it easier for customers to quickly find the items they're looking for.

And they're profitable.

Yet despite this being a viable way to reinvigorate domestic growth, Walmart's leadership team is hesitant to fully embrace the new concept.

Charles Grom, an analyst at Deutsche Bank, says Walmart is "the only retailer out there continuing to open up big box stores, which leads me to think they're not paying enough attention to what the consumer needs."

One explanation for the slowness may have been Walmart's recent focus on international growth. But, necessarily, it looks like the company is now going to set its sights back on its more profitable domestic market.


Turns Out the Grass Isn't Any Greener Abroad

Walmart's Mexican business has long been held up as one of the superstars of its international segment (last year Mexico generated roughly 21% of its foreign sales growth).

That success was tainted when the Mexican bribery scandal was brought to light. If Mexico's track record of success was solely because of bribery, perhaps the Walmart concept isn't as translatable into other countries as Walmart's management team believes.

In fact, Walmart's international business is struggling even beyond Mexico. According to Bloomberg, "Walmart is losing market share in Brazil and China. It has no retail stores in India. And in Canada Walmart is about to clash with Target (TGT)."

Brian Sozzi, chief equity analyst at NBG in New York, bluntly remarks, "The international business has not lived up to expectations. It's not what it needs to be to offset what's happening in the U.S."

Walmart's Future Rides on This

Walmart has two strikes already -- it can't compete online and is struggling globally. Now the only real opportunity for the retailer to continue to grow is through its Express stores.

It's up to Walmart's leadership team to step up to the plate. If they whiff on accepting the Express store model as the main driver of growth, John Rand's prediction might be even more prophetic -- and Walmart will disappear altogether.

For more information on the death of Walmart, click here for a free copy of The Motley Fool's research report on this trend. Motley Fool analyst Adam J. Wiederman owns no shares of the stocks mentioned above. Motley Fool newsletter services have recommended creating a diagonal call position in Walmart Stores.


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Donna Kling

Have you ever tried to buy something at Wal-Mart that doesn't happen to have a barcode on it? The cashiers are rude and act as if it's your fault the silly thing is missing. The other morning I had to stop on my way home from work to get a few things we were short on at home. One thing was a gallon of milk. When the cashier got to the milk, she informed me there was no barcode on the jug. My first thought was "So?" She stood there dumbfounded as if she expected me to produce one or go back and get another jug of milk. There were several cashiers standing around doing nothing but she didn't ask one of them to get the replacement. I told her to set it aside that I was not going to walk back and get another gallon of milk. As I reloaded my cart, she took the milk to the service desk. I just wonder how long it sat there before someone took it back to the cooler and how many other jugs had the same error since the labels are printed with the code before it reaches the dairy processing plant.

I just stopped at the Dollar General near my home and got the milk.

More than once I have wound up leaving a cart full of items at a Wal-Mart because they didn't have enough registers open and when I asked if they couldn't open another one, I was told they would not open a register.

I avoid Wal-Mart entirely at the beginning of the month and on Saturday mornings

June 10 2012 at 5:21 AM Report abuse +2 rate up rate down Reply
Hey Bitch ;)

I 100% AGREE that walmart employees SUCK! They are rude and never around when you need assistance. I actually enjoy shopping at wal-mart from time to time (they do USUALLY have better prices on their groceries). But they are shooting themselves in the foot by NOT doubling coupons. If they started doubling coupons they would get my grocery business again. But when you have Kroger, Giant Eagle and Meijer doubling coupons you have to shop there. I hope they take heed to this :)

June 10 2012 at 2:41 AM Report abuse +2 rate up rate down Reply
Fred Stocking

I won't miss Walmart but I do miss all the downtowns it destroyed, and the local Mom & Pop stores the died with them.

June 10 2012 at 1:54 AM Report abuse +3 rate up rate down Reply
HAT1701D

Back when Sam Walton was still alive and running the show, it was a whole different situation. He looked at quality. He looked at all attempts to insure bringing American products into Wal-Mart's stores nation wide. He would work with regional distributors for products when possible. That went out the door when he passed and the "kiddies" took over. I bet he would be rolling over in his grave if that were possible.

June 10 2012 at 12:02 AM Report abuse +2 rate up rate down Reply
evd10

The two Walmart's where I shop are located in more upscale areas and I think that makes all the difference. They are clean, well-organized and the employees are accomodating. I think that the managers know that their customer base will not tolerate any less.

June 09 2012 at 9:13 PM Report abuse +1 rate up rate down Reply
Denese

I am not a Wal Mart shopper, but in a pinch I have gone to Wal Mart and each time have been treated so badly by employees that on two occasions I spoke to the Manager and they were just as rude as the employees. I would never support having a Wal Mart in the area where I live, as with some of the comments I have read I would rather pay more for items to a small shop owned by locals and get the personal treatment from the employees.

June 09 2012 at 8:17 PM Report abuse +2 rate up rate down Reply
Sonja Dunbar

It's hard lesson to learn - bigger is NOT always better. I have not shopped at Walmart much at all since they built the supercenters - just too big for me and, as was said, they can't leave the layout of the store alone, they have to be constantly changing it and I'm not going to run my legs off looking for what I want to buy. And, even though the stores are huge, they really don't have that great a selection. I often find the shelves empty of what I want or they've dropped it from their inventory. I do most of my shopping at our local grocery chain and at Target. I get 5% off everything I buy at Target when I use their debit card and since they've expanded their grocery dept. I find most of what I need for very good prices. Target has also recently completely rearranged their stores and I don't like it! But, I still like it better than Walmart.

June 09 2012 at 8:01 PM Report abuse rate up rate down Reply
rich lapinski

bring back the mom&pop stores.

June 09 2012 at 7:14 PM Report abuse +5 rate up rate down Reply
Woody

Target is also on the dartboard , both of these tired lions face distinction.

June 09 2012 at 7:11 PM Report abuse +1 rate up rate down Reply
jhrochesterny

I work at Home Depot. Its like night and day next to Walmart, true we dont sell food and TVs, but we DO treat our associates with respect, pay a decent wage, and try and put customers first. Sure, we miss our goals sometimes, no one perfect. But at Walmart, do they even try? Ive been there late night because I really needed something right then and they were the only 24 hr. place around. Unfortuantely, at shift change, they all just go and take break, hell with any customers in line. A customer in my line who happened to be an employeee as well told me this was normal, and acted fine with it. 5 lines of people stood in line 20 or more minutes while they did 'shift changeover' at 11 pm. What, they couldnt leave ONE self checkout open? And the manager just strared at everyone with this dumb look, didnt even try to do anything.
At my HD, if a customer comes to our door even when we have just closed with an emergency, we let him in and do what we can to help, and if the registers are closed we might even give the customer a part to hold him over, trusting he will come back and pay, or if not, pass along the good word that we are there to help, and hope we made a new 'customer for life' as we say.
Try that at Walmart!

June 09 2012 at 6:54 PM Report abuse +4 rate up rate down Reply