Walmart observations

Predicting the demise of Sears & Kmart since 2017!
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Re: Walmart observations

Post by BillyGr »

TW-Upstate NY wrote: May 29th, 2021, 9:38 am Not Walmart related but along the lines of this particular aspect of the topic. I was in a local Hannaford earlier this week and noticed a rather large footprint of floor space being partitioned off with drywall. When I went to checkout I asked the cashier what was going on and was told it was for Hannaford To Go which is their online grocery ordering and pickup offering. Look at the initial upfront construction costs per store they're sinking into this while at the same time repurposing floor space on the sales floor where high volume (and high margin) merchandise once was. And this store while not small was not a large unit to begin with. Glad it's not my money these stores are spending on all of this.
Must just depend on the store - the couple most local put that To Go stuff in spots that weren't sales space before. One moved the Clynk to an outdoor shed and the single bottle machine/bag return to the other exit which only moved cart storage outside but still undercover - the other put it in a space that years ago was photo developing and had since been just walled off, though it did hold shelves temporarily while the store was being remodeled.
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Re: Walmart observations

Post by buckguy »

Wall Street's expectations (which are in line with the Walton family's) are a problem, but not the only one and some of Walmart's problems are self inflicted and some can best be described as "structural".

The structural part is that they are a mature business with few places to grow, geographically or in terms of merchandise lines. This has been true for along time and most of their sales growth in the last 20 years has been attributable to groceries, which did not help their profits. They are squeezed by the growth of dollar stores at the low end of their business model and the continued, if sometimes uneven, vitality of Target at the upper end, and they have failed to capitalize on the decline of JCP or Sears. Mature businesses survive because they generate cash. If they were a smaller operation like Dillard's, they could keep buying back stock and make the family happy with inflated dividends, but they don't have that option.

The self-inflicted part is the rigid, top-down structure of their management and merchandising. They were slow to adapt internationally and lost important ground to European competitors in China and failed to anticipate the obvious in terms of their European operations. Domestically, they failed to capitalize on their strength in logistics and build a strong e-commerce business. They are playing catch-up now, but they are way behind Amazon which is an integrated tech firm, rather than just a retailer and able to be nimble in ways Walmart can't. Amazon has lost some of its shine, but people who see Amazon as a great Satan are not going to switch to Walmart. Walmart also lost a fortune when they bought other businesses--was it being associated with Walmart or was it their meddling that caused those problems--I haven't seen a good explanation. They couldn't make small stores work, which was one of the few times where Wall Street really prodded them.

Walmart has always been bad on labor, going back to Walton's variety stores, which regularly faced legal intervention because they violated minimum wage laws. Walmart is fairly lean in terms of management and perks for managers, so they really have few degrees of freedom if they want their shelves stocked and their labor costs low. They can close stores with shrinkage problems rather than have adequate security, but really that just helps them around the edges. They need to rethink many aspects of their operating model, but it's unlikely to happen. They have fewer and fewer assets to sell without inflicting harm on themselves, although I'm still waiting to see what they do with Sam's.
ClownLoach wrote: May 28th, 2021, 8:15 am
Alpha8472 wrote: May 25th, 2021, 3:25 am Many companies are having problems keeping employees. If an employee quits, the company needs to spend money to train a new employee. This is time and money. With unemployment pay so easy to get today, many people are quitting and staying on unemployment.

Companies need to realize that a small investment in more staffing will ease the stress on overworked employees. Fewer employees will quit and you will save money on training new employees.

There will be an increase in sales as lines at checkout will be shorter. Customers will be more satisfied and they are more likely to return and buy more. A staffing increase will help sales, and not hurt profits.

Walmart of all companies is doing reasonably well. They can afford to invest in more staffing and make a difference in increasing sales.
There are three factors that are causing these issues in major retailers, and something has to give or I fear Amazon is going to be able to completely take over the world.

First, Wall Street expects that retailers grow sales and leverage payroll doing it. Payroll is a percentage of sales - that percentage cannot go up, only stay flat or decrease. And all you have to do is review the quarterly earnings reports for publicly traded retailers and you'll see that they are not spending more than they were a year ago, two years ago, three years ago. If your payroll as a percentage of sales increases then you will be beaten to a pulp by the Wall Street analysts and investors, the stock will plummet, and in many cases these retailers have been buying back their stock (investing in themselves) which means that they will then take losses on their own stock on the next quarterly earnings (usually the only way out is to cut payroll to offset the projected earnings loss). The bad earnings lead to another stock drop, and you quickly see the retailer go into a death spiral on the road to Chapter 11.

Second, the cost of labor is increasing as we all know. But despite the glossy press releases from these retailers that announce their minimums are increasing - what they don't say is that they will not spend one additional cent on payroll even with those wage increases. So if the average pay rate in the retailer went from $13/hour to a new minimum of $15/hour, about a 15% increase, they will adjust for the new higher rate with a 15% reduction in labor hours. The store must now Do More With Less. In cases where they cannot afford to reduce the hours any further (lower volume stores) then they will adjust the Management Structure of the store, eliminating higher paid Assistant Managers and replacing them with lower paid supervisors or leads. (Walmart made an announcement a few years ago that they were creating tens of thousands of new leadership positions - the reality was they eliminated thousands of salaried high paying Assistant Manager jobs and replaced them by promoting regular associates to supervisors making a few cents more per hour than they did before - ultimately cutting hundreds of millions in payroll). Again just because the minimum wage increases either by government edict or company decision that does not mean that the payroll is actually going to increase at the store level, or that collectively the employees are going to make any more money. Stores are going to have less service, lower standards, and more shrink (which most retailers stupidly try to offset by, guess what, lowering payroll!) You can see how this kind of death spiral led to Walmart closing some of their highest volume stores in the company in California because they couldn't cut any more expenses and the shrink ate then alive even in good areas. (That Irvine Store that closed that everyone figured was going to be replaced by another retailer who would pay more rent? It's vacant and nobody is going in - Walmart is paying dead rent and hasn't even liquidated the fixtures - the payroll rate required in the area was too high and the shrink was too high - it lost more money open than closed).

Now the real killer is e-commerce. With everything I stated above - Wall Street expects no additional payroll, labor costs are out of control causing less payroll hours to be spent in the stores - the customer is now demanding e-commerce such as Curbside Pickup. Curbside Pickup services in a higher service selling environment store like Best Buy, or even Nordstrom are a minimal cost, usually picking one or two items and although the store doesn't get to try to "upsell" add on items they aren't spending any more in labor to service that customer than they would in the building. But for a customer shopping online for many items, as they do at a grocery store or a mass discounter like Walmart or Target, is a completely different story. Somebody has to walk up and down all the aisles selecting everything the customer buys, then bag it up, stage it somewhere, and finally take it out to the customers vehicle. The prior service level would have been maybe 2 minutes for the cashier at the register to scan and bag. Now you are talking about 10 to 15 minutes per customer in payroll, and the customer expects the same price. Now technology helps a little bit here - the stores are now "batching" orders with special carts that have multiple dividers so they can save footsteps by pulling multiple orders at the same time if the store gets a "wave" of orders to fill - but even then they are never going to get more than 7 or 8 orders pulled in one labor hour. And the larger the store the longer it takes, which hurts Walmart more than Target or the grocery chains because they have the largest boxes overall across their chain. Walmart has stopped building 250K square foot supercenters and has built a new prototype in Lake Elsinore, CA that fits the highest SKU count in their chain into a building that has a sales floor of only about 150K, narrow aisles, "Airport style signage" so the customer can find product without help, and about 30 new self checkout "pods" but only two full service checkout lanes, one of which is always closed. The stores will continue to reduce any customer facing service area (no service deli, bakery, etc) and cut front end checkout payroll to nothing to fund these highly costly, unproductive e-commerce services. Register lines will get longer or there will be forced self checkout as we see in that new Walmart prototype. In a way it creates two classes of customers, the e-commerce customer who gets white glove service, and the in store customer who gets a dirty messy store and has to ring themselves up or wait in a mile long line but both pay the same.

Wall Street says stores can't spend more on payroll, plus the payroll cost goes up so they have to have less hours/more productivity, and now the customer demands more labor intensive service than they've ever received before. Something has to give here.
Last edited by buckguy on July 20th, 2021, 3:17 pm, edited 1 time in total.
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Re: Walmart observations

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buckguy wrote: May 31st, 2021, 6:26 am Wall Street's expections (which are in line with the Walton family's) are a problem, but not the only one and some of Walmart's problems are self inflicted and some can beset described as "strutcural".

The structural part is that they are a mature business with few places to grow, geographically or in terms of merchandise lines. This has been true for along time and most of their sales growth in the last 20 years has been attributable to groceries, which did not help their profits. They are squeezed by the growth of dollar stores at the low end of their business model and the continued, if sometimes uneven, vitality of Target at the upper end, and they have failed to capitalize on the decline of JCP or Sears. Mature businesses survive because they generate cash. If they were a smaller operation like Dillard's, they could keep buying back stock and make the family happy with inflated dividends, but they don't have that option.

The self-inflicted part is the rigid, top-down structure of their management and merchandising. They were slow to adapt internationally and lost important ground to European competitors in China and failed to anticipate the obvious in terms of their European operations. Domestically, they failed to capitalize on their strength in logistics and build a strong e-commerce business. They are playing catch-up now, but they are way behind Amazon which is an integrated tech firm, rather than just a retailer and able to be nimble in ways Walmart can't. Amazon has lost some of its shine, but people who see Amazon as a great satan are not going to switch to Walmart. Walmart also lost a fortune when they bought other businesses--was it being associated with Walmart or was it their meddling that caused those problems--I haven't seen a good explanation. They couldn't make small stores work, which was one of the few times where Wall Street really prodded them.

Walmart has always been bad on labor, going back to Walton's variety stores, which regularly faced legal intervention because they violated minimum wage laws. Walmart is fairly lean in terms of management and perks for managers, so they really have few degrees of freedom if they want their shelves stocked and their labor costs low. They can close stores with shrinkage problems rather than have adequate security, but really that just helps them around the edges. They need to rethink many aspects of their operating model, but it's unlikely to happen. They have fewer and fewer assets to sell without inflicting harm on tehmselves, although I'm still waiting to see what they do with Sam's.
I expect Sam's to go to private equity at some point unless one of the competitors like BJ's can come up with some money to buy them (which may cause a downgrade to the stores), am surprised it hasn't happened yet, but the Sam's business has been performing better as of late. The Sam's do not seem to have the various operating problems the Wal Mart Stores have with staff shortages and an inability to keep items in stock.

We will see what happens but I still find Wal Mart to be a useful source for many items at bargain basement prices and I'd say you get what you pay for but that would be a lie in many cases, these items they practically give away absolutely have value greater than what they are charging. Last week I got some kind of "performance" king sheet set regularly $49.98 for $5. Great deal, and the accompanying pillowcases with a regular of $13.98 for $1. I have no clue why they mark stuff down like this, the replacement item in the aisle looks exactly the same with a different UPC. I did notice the same sheet sets in a different Wal Mart where the markdowns were only in the $29-$37 range so it is interesting how some locations blow items out while others don't. What I notice is the messiest Wal Marts with unstocked pallets everywhere have these deep markdowns. My suspicion is they are just getting to working pallets that are six months old and the stuff on the pallets has already been clearanced and replaced by new product so the solution is to just give the stuff away.

Wal Mart pays its store managers very well but it is a tough job and they go through store managers a lot. At least three stores in my area which print the manager name on the receipt show "MGR: TBD" on the receipt and it has been that way for a few months now. These are also the messiest stores with unstocked pallets everywhere in the sales floor, literally hundreds of unstocked pallets (one in NW Reno on 7th Street may have thousands). So it appears the store manager is the fall person for Wal Mart's labor problems.
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Re: Walmart observations

Post by mjhale »

ClownLoach wrote: May 29th, 2021, 10:01 am But for Walmart, Target and others they run the risk of upsetting the customer who sees a low price online and goes into the store only to find it higher on the shelf.
This is the sort of thing that makes people either order online or go to another store altogether. Recently I was looking for a handheld vacuum for my stairs. Walmart had an acceptable model with a beater brush that I was interested in purchasing. I looked on the Walmart app simply to see which stores had it in stock and the item location before venturing out. What I noticed in the app was the $28.66 price with no indication that it was online only. When I got to the store the price was $49.00 on the shelf. Could I have asked for a price match? Sure, but who wants to wait at a place like Walmart and risk getting turned down. I ended up ordering the item online via Walmart since they did have the lowest online price. After placing the order I got an email saying that my local store had the item in stock and I would receive the vacuum early via a delivery from my local store. The next day, the vacuum was delivered to my door. I saved $20 by ordering online which is good in my book. What Walmart lost was me going in for the vacuum, seeing the same or very similar (+/- a few dollars) as the online price and browsing around an impulse buying a few more items I'd like to have or combining the purchasing of the vacuum with my weekly shopping of which I do a good bit of at Walmart due to price. Not everyone likes to shop online, do store pickup or get delivery. Certainly the pandemic will change shopping habits. However the "all in" assumption retailers are making that everyone is going to get delivery or store pickup ignores a large set of shoppers. As is discussed all the time, American shoppers are fickle. In the same way that people who want online services gravitate to where they feel those are best, in store shoppers will do the same. If Walmart biases towards online and neglects their stores they are going to wonder where everyone went. Low prices can only get you so far when the product isn't there or the experience is so terrible that the low price doesn't matter.
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Re: Walmart observations

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mjhale wrote: May 31st, 2021, 1:28 pm This is the sort of thing that makes people either order online or go to another store altogether. Recently I was looking for a handheld vacuum for my stairs. Walmart had an acceptable model with a beater brush that I was interested in purchasing. I looked on the Walmart app simply to see which stores had it in stock and the item location before venturing out. What I noticed in the app was the $28.66 price with no indication that it was online only. When I got to the store the price was $49.00 on the shelf. Could I have asked for a price match? Sure, but who wants to wait at a place like Walmart and risk getting turned down. I ended up ordering the item online via Walmart since they did have the lowest online price. After placing the order I got an email saying that my local store had the item in stock and I would receive the vacuum early via a delivery from my local store. The next day, the vacuum was delivered to my door. I saved $20 by ordering online which is good in my book. What Walmart lost was me going in for the vacuum, seeing the same or very similar (+/- a few dollars) as the online price and browsing around an impulse buying a few more items I'd like to have or combining the purchasing of the vacuum with my weekly shopping of which I do a good bit of at Walmart due to price. Not everyone likes to shop online, do store pickup or get delivery. Certainly the pandemic will change shopping habits. However the "all in" assumption retailers are making that everyone is going to get delivery or store pickup ignores a large set of shoppers. As is discussed all the time, American shoppers are fickle. In the same way that people who want online services gravitate to where they feel those are best, in store shoppers will do the same. If Walmart biases towards online and neglects their stores they are going to wonder where everyone went. Low prices can only get you so far when the product isn't there or the experience is so terrible that the low price doesn't matter.
This is not just an issue at Wal Mart. This is an issue at Target, Walgreens, Rite Aid, CVS, and various other retailers. In the case of Target, Walgreens, and Rite Aid the stated policy is that the store will match the website price no questions asked. At Target this process has been seamless whenever I've requested it. In the case of Walgreens the process went horribly but they did ultimately do it, and I have yet to try it at Rite Aid. Wal Mart has gone back and forth over the years on this policy, I haven't directly requested a price match there in a while. I will just order the item for in-store pick up via the website from my phone and pick the item off the shelf and go to a pick up employee and have them process the transaction. A few times they have at that point agreed to sell me the item at the online price then cancel my order when it comes through which is fine.
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Re: Walmart observations

Post by mjhale »

storewanderer wrote: May 31st, 2021, 4:10 pm This is not just an issue at Wal Mart. This is an issue at Target, Walgreens, Rite Aid, CVS, and various other retailers. In the case of Target, Walgreens, and Rite Aid the stated policy is that the store will match the website price no questions asked. At Target this process has been seamless whenever I've requested it. In the case of Walgreens the process went horribly but they did ultimately do it, and I have yet to try it at Rite Aid. Wal Mart has gone back and forth over the years on this policy, I haven't directly requested a price match there in a while. I will just order the item for in-store pick up via the website from my phone and pick the item off the shelf and go to a pick up employee and have them process the transaction. A few times they have at that point agreed to sell me the item at the online price then cancel my order when it comes through which is fine.
The perception of customer service being a chore is something that Walmart also needs to address.

I have a friend who does a great deal of shopping at Target as there is no Walmart near his house. I have been with him on multiple occasions at Target when he has them do prices matches when the app lists a lower price. He shows the cashier the app. The cashier verifies that the item he is purchasing is the same and then does a price override with no supervisor assistance needed. Very little delay at all. The only time he had trouble was because the cashier was new and botched up the price override somehow.

While I would like to think the process at Walmart would be similar, based on the amount of untrained, disinterested employees I've dealt with a Walmart I don't hold out much hope that needing help beyond a straight, simple checkout transaction will be worth my time to wait. Heck even that is a challenge sometimes which makes me thankful for self-checkout as long as there isn't a massive line there too. I'm not sure how you get the employees to care more in a company culture of stack it up high, price it low and roll it out the front door. Between the attitude of the employees, the pallets of stock all over (I've seen the same thing as you), the focus on online versus in store customers, I think Walmart is going to start taking noticeable hits in their sales soon. And those of us who have a choice are going to go elsewhere. This past weekend between Aldi, Lidl and Giant Food (Ahold) I managed to get my groceries for just a few dollars more than doing an all Walmart shop. And the experience and quality was much better than Walmart especially factoring in shopping at Giant in the process.
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Re: Walmart observations

Post by Romr123 »

I wonder if you haven't got something there--will tornado-hit stores at WalMart be their downfall? Aldi ran WM out of Germany--I've seen Aldi stores here decimated with shopping, but they're small enough and easy enough for the staff to rectify that half-a-day later they look presentable again. I've not been a WM shopper (haven't set foot in one in 20 years) but have spent enough time in Meijer/K-Mart/Target that if the in-store experience is too unpleasant that people will leave and not look back. Dollar General/Family Dollar need to be cautious...they can get "tornado-itis" pretty easily too and have even less to offer than WM.
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Re: Walmart observations

Post by TW-Upstate NY »

mjhale wrote: May 31st, 2021, 7:50 pm I have a friend who does a great deal of shopping at Target as there is no Walmart near his house.
I have the good fortune of having both located across the road from each other which makes for very easy comparison shopping and considering my past comments here, it's pretty obvious who gets the overwhelming majority of my business-the bullseye wins every time. Even when Target is busy, it just is such a more relaxed atmosphere. Walmart is a have to kind of place to shop whereas Target is a want to kind of place to shop.
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Re: Walmart observations

Post by SamSpade »

This is kind of cool, but also kind of "something else"
I'm assuming this will also allow them to look up items for customers to properly direct them in store, like they've encouraged customers themselves to do with the Walmart app.
Walmart gives 740,000 associates a free Samsung smartphone
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Re: Walmart observations

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Well, as an hourly employee, that phone would go in my locker in the back room prior to the moment I clocked out... and I'd pick it back up again the next time I am clocked in...

Who is responsible if you break the phone outside working hours?

Also what happens to the phone if you quit?

Do they pay you for any time you are doing those personal work related activities outside working hours? This seems to be rather questionable for hourly employees to expect them to carry a "work phone" outside work hours. I do know a number of folks who work in stores hourly who get texts/calls to their personal phone from the stores on their days off (not Wal Mart) and they are usually not real happy about it. I can't blame them. I don't see how having a work issued phone would make that any better.
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