Thread regarding Walmart layoffs

The "economics 101" seems bothered. I think it's interesting to see the different points of view. Walmart has some challenges ahead of them, for sure.

1zlz,

Once again you need to stop paying attention to analysts and pay attention to what customers are actually doing. In 2016 Quartz magazine posted data showing that Americans spent more money in restaurants than in grocery stores. That is despite the fact that restaurants are expensive and the price of dinner sourced from Walmart is cheaper. A Walmart dinner is NOT, however, more convenient for time strapped families.

Then take into consideration in 2017 that Fortune magazine is reporting Americans are eating out less. You may think they are going back to the grocery stores, but that is unlikely to happen without socio-economic changes for the customer. No, instead look at the emergence of meal kit services online through sites like a Blue Apron and Hello Fresh. Even traditional grocers are starting to do pre-prepped meal kits. Then there is grocery delivery. That explains flat traffic in the restaurant channel.

The number one reason quoted for people eating out in restaurants wasn't value or preference for experience at a particular restaurant. It was convenience. Even though it's more expensive, over half of Americans' food dollar are spent at restaurants because it is CONVENIENT.

Now enter Amazon with their own newly acquired grocery chain, logistics capabilities, tech capabilities, and Bezos at the helm. You really think he won't make grocery shopping and dinner for Americans more convenient? He's done it in every other industry he's waded into.

Look, I'm not saying that people will cease shopping at physical stores altogether. People will still go to grocery stores to shop. But what they want out of a grocery store is changing and they are going to expect more than price. Convenience will be just as important as price going forward.

How much traffic has to get siphoned off from Walmart's food business to put a major beating on the entire box? I don't think it's all that much when you have the German discounters at the low end and Amazon playing the top end with the convenience angle. Concurrently, I don't believe Walmart's general merchandise is a destination for those product categories. Therefore, as the Walmart food business goes, so goes Walmart.

@iksl, agree with you! Walmart prices are not that low anymore and the stores are inconvenient and out of stock in many areas. Convenience, stocked stores and better quality matter to shoppers. Aldi and Lidl are going to do very well. Publix, Kroger and other stores are much preferred over Walmart in many parts of the U.S. Amazon will continue to innovate and amaze us.

Walmart's main customer (in the US) is the American family. Things happen when you get married and have children. Life gets complicated and people have budgets. While the uninformed seem to think their keen sense of seeing into the future is spot on, there are some basic facts that don't change. Families need groceries and baby food and diapers and toothpaste - all those items that keep the family machine turning smoothly at home. Mothers and fathers will always cook dinners for their children. Socks and clothing needs to be bought. Clothes need to be washed. Hair needs to be combed.

The point is this - family life (in the US) has a cycle, a constant beat and rhythm. Shoppers come to their Walmart so they can see and feel the family goods and groceries they are buying. Many of us buy items online for the sheer convenience of it and when we do, we have the options to compare prices and services and select our merchant. But, none of us buy everything online, so we still need the store where that single mom can get in and get all her stuff in one trip, or where you can go at 11pm at night to get the baby Tylenol.

When the American consumer is offered more purchasing options, they have consistently chosen value first, then brand loyalty, then convenience. It will flex over time as more options become available, but, families will still need to keep the same home machine turning and operating, so, they will always need a faithful merchant, Walmart. This is undeniable. This is how the American family works.

Amazon is amazing! They are even helping Sears significantly raise their stock price with Alexa-enabled Kenmore appliances, lol. It must make the Walmart leadership sick to be in competition with a brilliant leader in Bezos, and a truly innovative, hip company in Amazon. To be the antithesis must feel pretty lousy to Walmart leaders.

1qzf,

I think you need to stop trusting what the analysts are telling you from time to time. If Henry Ford had asked people what they wanted as a mode of transportation, people would have said they wanted a faster horse. Bezos isn't trying to improve the grocery store. He's thinking past it.

The American middle class is dying and that was Walmart's core customer. Aldi and Lidl will take the work class customer. They'll siphon enough traffic to make it hurt. Amazon, Wholefoods, Publix etc will take the upper class customer. By taking traffic at both sides in grocery, Walmart gets starved out because it's general merchandise isn't good enough to get people in the door.

As for meal kits, you assume that service will stay in its current iteration and at its current cost. It won't. I bet Bezos evolves it. Lowers the price and the prep time. If you're a prime member and can get preplanned dinner delivered to your door and can order all your other consumables online, why would you ever go to Walmart? The upper class will definitely pay for such a convenience. And if someone gets scale on such a service, it'll get cheaper over time.

Walmart has to get past this mentality that value is ALWAYS low prices to EVERYONE. It's not that way anymore. People work so much that they'll pay a little more for convenience. And that's where Walmart is getting hurt.

It's prices are no longer good enough to make people shop its inconvenient stores and inconvenient website. But don't mind a customer telling you that. Go ahead and listen to your analysts.

@Anonymous What you are not taking into consideration is that the stores are now understaffed and the shelves are bare. The out of stocks are increasing. Again. If product is sitting in the back room it certainly is not making it to the sales floor. I had to stop in 2 WMs to complete my shopping list this past weekend. That pizzes me off. I want a 1 stop shop. When I can't get that, I go elsewhere.

The WM I stopped at did not look like they stocked the grocery section in days. It was 1/2 empty. Unacceptable. I regret not taking pictures for leadership to see. I will be when I see this again.

A few weeks prior another WM had not stocked the produce area in what seemed days. Talking to the associates they said all the newer hires are quitting and they had a person in that area on vacation, And yet another had to go out of state for a family emergency. There can be no excuses.

I am slowly stopping my grocery runs to WM.

Any form of an Amazon Meal Kit service would have zero impact on Walmart's business. The study has already been completed. No impact. It's not even worth thinking about. In fact, it benefits Walmart for Amazon to sink money and effort into trying to make it work since there's no revenue stream past the honeymoon period - it's just an eventual money drain on Amazon.

Retail experts don't see much impact with the Amazon - Whole Foods deal, either. It's not like the regular Walmart food shopper is going to drop everything to run out to shop at Whole Foods now, or, start buying groceries on Amazon. Basically, our research says the normal Walmart grocery shopper might go to Whole Foods for specialty items like 'Veggie Cheese' or items they can't get at the Walmart. We already know that.

We'll probably see some more thrashing in the grocery arena in the next nine to fourteen months. We're prepared for it already. One thing is clear, though, the American consumer puts more emphasis on consistently lower prices than it does on 'being trendy'.

This is basic Economics 101.