Wal‐Mart's new normal is here: is everyone ready to accept the future?

Abstract

Purpose

The purpose of this paper is to critically examine the underlying reasons for the recent slow‐down in the rate of sales growth for the world's largest retailer, its implications for the economic valuation of this enterprise, and its future as a cohesive organization.

Design/methodology/approach

Wal‐Mart's comparative or same store sales growth over the last five years are contrasted with two of its key rivals Target and Costco, and the source and momentum of its core US growth record are examined over the last decade.

Findings

The results of the investigation indicate that Wal‐Mart has entered a new phase in its evolution as an enterprise, and the future rates of its growth will be limited to 3‐4 percent per annum in comp, and 10‐12 percent in total sales, excluding any acquisitions. This “new normal” is in part due to the extreme market share of Wal‐Mart in many of its trading areas, and the changing competitive landscape that was in no small part “created” in reaction to Wal‐Mart's own market power.

Originality/value

The analysis and its conclusions are of interest to retailing students and scholars who have been following the Wal‐Mart enterprise throughout the years, as well as retailing and merchandising analysts who have been struggling to define a new valuation model for the world's largest retail company. The paper is also of interest to retail market strategist as it illustrates that there are potential and natural limits to growth in all competitive arenas, and sources of new growth will always have to be sought in new product‐market spaces.

Citation

Serpkenci, R.R. and Tigert, D.J. (2006), "Wal‐Mart's new normal is here: is everyone ready to accept the future?", International Journal of Retail & Distribution Management, Vol. 34 No. 1, pp. 85-100. https://doi.org/10.1108/09590550610642837