Major Flaws Uncovered in Study Claiming Wal-Mart Has Not Harmed Small Business

The Hometown Advantage

The jounal titled Economic Inquiry reported August 30, 2007 published a paper titled HAS WAL-MART BURIED MOM AND POP?: The impact of Wal-Mart on self-employment and small establishments in the United States by Russell S. Sobel and Anderea M. Dean of West Virginia University..

Stories were printed about the research including a Q&A with Russell S. Sobel in US News & World Report.

Even more convincingly, the CATO Institute’s publication titled Regulation ran a cover story in its Spring 2008 edition, which subsequently gave Wal-Mart fodder to create a so-called “fact sheet” that was reportedly distributed in communities where it planned to open new stores.

Prevailing Wisdom?

Please pardon this rather long posting on the Christmas Economy of 2008 today. I think it is worth the time and space.

The majority of the news reports, ads, and word of mouth about shopping these days is all about the shopping deals and discounts. While this would qualify as “prevailing wisdom” in the greater retail world is it really so wise? And who is it wise for?

The need to feed shareholders and Wall Street is so great for public companies that they are often compelled to drive the business at all costs in order to bring in the quarter as expected, otherwise, sell orders and sell-off ensue. Their executives receive performance bonuses that reward them for very narrow and short-sighted outcomes. Many of them will come out on the other side in better shape than they deserve because they have superior retail locations and traffic. But the reactions of these retail giants saturate the news and get too much attention from the local-owned independent retailer who is looking for answers and direction.

Smaller privately held companies often fall victim to the aggressive price and discount schemes in the marketplace in two ways. First, there is an adjustment to inventory demand in response to the aggressive discounts of competitors. Second, lacking any different marketing disciplines the easy thing to do is to do what seemingly everyone else does and popular opinion around the water cooler and dining table demand. In other words, it takes a bold and disciplined approach to get through all this with some sense of accomplishment.

One thing for sure is that it will be foolish to approach Christmas ’09 as if things would be normal again. I’ve put together a list of five things to be thinking about Christmas now and in the future. But first, click here to read what the experts on Retail Wire are saying on both sides of the equation.

Here’s my list of five things to consider about retailing Christmas:

1. Commoditized trim-a-tree is d_ _ d. It’s ubiquitous and deeply discounted everywhere it is sold, and it is sold in too many places. The growth trend of these items may have peaked last year, although inventories peaked this year. The profit of handling these goods even at inflated regular prices that are aggressively discounted but still yield good margins is gone. You have to really pick through the non-plant lines to find any “keepers” to sell next year.

2. Consider storing traditional permanent Christmas products that you know you can sell during Christmas ’09 rather than selling out below cost. However, if your projected cash flow demands the money you may have to sell it out at any cost. Traditionally, we’d like to see zero inventory of all Christmas categories, but this is one year where it may make sense to hold onto some of it rather than sell below cost. You can be assured you’ll be paying more to replace it with new inventory for next year, unless you stock up at your competitors below your cost 80% off after Christmas sales.

3. Resist the urge to discount all the way to Christmas on items where your inventory is close to the amount you’ve sold in the past. Protect the value of your core product lines. You will normally put more margin dollars in the bank if you sell what you can at full retail, even if that means throwing the rest in the dumpster.

4. Get creative so you don’t run out of your “never outs” and erode your core customer base in the process instead of getting excited that you’re out and turning your hard earned regular and loyal customers away at a time when they need you most.

5. Review each week of the Christmas season now to determine what went well, what has not gone well, and what you might do to improve results week by week next year.

Click here to read an article about a Seattle retailer in another industry who took a different approach to Christmas. Be sure to give some thought to how you might use some of her thinking in your approach to Spring business in case the “prevailing wisdom” and faulty thinking that you’ll only have sales if you do the discounting is still around.

So with that let’s wrap up this Christmas season and settle in for a long-winter’s nap. What’s that you ask?

Fast Forward to Uber-Cocooning

Consumers get better and better at it. They’re sure getting a lot of practice. John Naisbit first predicted “high-tech/high-touch” in Megatrends. Faith Popcorn predicted “cocooning” in The Popcorn Report. She’s now updated that with “uber-cocooning”. Certain things aren’t changing so much as they’re getting deeper and richer. The consumers have become more sophisticated cocooner’s with outdoor living, outdoor living rooms, and even those televisions that pop up out of the hot tub or outdoor kitchen (thank’s Dawn Gower at Ferda’s). Have local owned garden centers kept up with this really, or is the consumer bypassing the local-owned retailer for the greater garden center world? What are we going to do about it now? Are we going to try to play the discount , lower price, smaller size game and hope to keep the volume, or are we going to get serious about this, take the high road, and provide the total value of great product, shopping environment, and service that is becoming of the customer’s desire to “uber-cocoon”?

Read more and see what Faith Popcorn said about cocooning and uber-cocooning by clicking here.

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