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Wal-Mart Returns from Cannibalism

Wal-Mart may be the biggest retail seller in the US, however, the way business is moving these days, it seems that their biggest competitor, Target, may come out on top. Why the recent drops in sales? Perhaps this has to do with the fact that until recently, Wal-Mart`s business plan focused on a "self-cannibalization" strategy. This strategy essentially lowers sales from older Wal-Mart stores by opening newer and better venues. However, it seems that they plan is backfiring.

The "self-cannibalization" method works as such, if there are two stores in an area that can potentially support three stores, Wal-Mart would open that third store, thus lowering sales in the other two venues, in order to ensure that where ever people are, they will always be near a Wal-Mart. This is far from cost-effective, especially when you consider the cost of employing new sales people and stock people and everyone else you need to run a business. Why over saturate the market in such a way?

Executives at Wal-Mart have noticed that this self-inflicted business cannibalism far from the perfect business they imagined. As a result John Menzer, vice chairman of Wal-Mart Stores has said that they are now waiting to begin building that proverbial third store, stating that "we want to let the first two stores develop and pick up [sales] volume to get the best returns on our investment". Menzer also noted that the business empire would like to slow down its square foot growth over the next couple of years.