Retail Notes

I read two interesting pieces recently in the Wall Street Journal regarding retail commerce.

On Thursday, the paper's Marketplace section reported how widely flat-panel TV retailing has spread. Companies as diverse as Office Depot, Home Depot, Costco and Kohl's have jumped into the fray. Until now, conventional local TV retailers, and big box electronics outlets like Circuit City and BestBuy have been responsible for much of the sales volume of flat-panel TVs.

As prices for the new TVs fall, and larger models hit price points below $2,000, low-price retailers such as Wal-Mart and Costco are becoming a larger part of the retailing market.

It's not surprising that so many retailers are drawn to an almost-sure thing- the rise in popularity, as prices fall, of flat-panel television. Of course, if these companies do realize tremendous sales growth from the products, then, at some point, they face a dilemma in replacing that sales growth, or lapsing back into slower-growth modes. And that type of pattern typically keeps companies from earning consistently superior total returns over a number of years.

With so many retailers entering this product/market, it suggests that the production capacities for these TVs, probably in the Far East, must be very large. It doesn't require a lot of thought to envision some pretty vicious retail price competition, as a flood of flat-panel models pour into the US market in the next few years.

On another retail topic, today's Journal catalogued a number of states and municipalities which are passing, or have passed, anti-Wal-Mart legislation.

The Journal piece quotes Boston's Mayor, Thomas Menino, as saying,

"They don't pay wages that are sufficient. Their benefit structure is poor. I don't need employers like that in our city."

Interesting that a public official feels comfortable prohibiting citizens from choosing to work for Wal-Mart, or the company for risking its own capital in opening a store in the Boston area. So much for individual liberty in terms of choosing employment options in Boston.

However, a company that has engendered this type of reaction across the country can't be in great shape. Many municipalities seem to be restricting or prohibiting Wal-Mart's entry in order to protect their locally-owned businesses.

As I wrote here, and here, recently, Wal-Mart is already tampering with the branding and positioning strategies which brought it such success over the past two decades.

These cases of governmental hostility to the company's expansion plans would seem to add more challenges to Wal-Mart's already-full plate. According to the Journal's piece, the company's sales growth has slowed below double-digits recently, after decades in the that range. Same-store sales growth is a third of what it was in 1990.

The company is targeting urban areas, finally, for its next growth spurt. But it doesn't look like that's going to be happening.

Which corresponds with what I wrote here last fall. I just don't see the company continuing its past successes in terms of both fundamental growth and consistently superior total returns for its shareholders.