August 10, 2011
Walmart calls it quits: Why throw good $$ after bad?
I applaud Walmart. The company admitted failure today by calling it quits and terminating its digital download store effective August 29, 2011. After briefly looking over Walmart's 2011 Annual Report, I am generally impressed with the company that holds the #1 position on the Fortune 500 list. The retail industry is challenging, highly dependent on economic conditions, but the company appears well positioned. Admirable and refreshing is the frank commentary in the Annual Report "We were simply not satisfied with our net results in Walmart U.S. this year." LOVE IT. How refreshing. Not a common sight in Annual Reports of U.S. companies. Japanese organizations seem to be more frank about missteps and admission to shortcomings. Humility is a virtue...
In terms of today's news, it must have been a hard decision to table the digital download store, but why throw "good money after bad"? Walmart initially succeeded in building a strong position in the space, but clearly took some missteps from the beginning. Competition has become intense and the rise of Apple was clearly underestimated. There is a great piece of news that outlines the history of WalMart's digital download store. I repeat in a nutshell:
2003: Start selling digital downloads in WMA format (not usable with iPod).
2007: Start offering DRM-free MP3s for iPod users.
2007: Start offering DRM-free MP3s for iPod users.
2008: Start offering downloads directly to Mac computers and cutting prices to roughly $0.80 per track.
But by the end of the year iTunes surpassed Walmart's initiative. Walmart states that it is placing a greater emphasis on streamlining videos and is investing in advertising of the 2010-acquired vudu.com business. This time, "Apple-compatibility" is immediate, not through an app, but through a Web site that can be accessed via an iPad. The promise: movie streamlining available the day of release on DVD. The eCommerce effort remains front and center for Walmart. In the past year, Walmart consolidated its eCommerce initiatives under the Global eCommerce Division; a more cohesive effort is expected.
Walmart is staying innovative, trying to stay ahead of changing trends, emerging technology, and carefully reviewing ROIs, as President and CEO Michael T. Duke talks about "building the next-generation of Walmart". Decisions are clearly based on their financial impact. Risk is taken, but enough humility exists to admit failure before a greater financial impact is felt. In the U.S., where the performance fell below expectations, new formats are explored to spur future growth. In fiscal Q2:12, Walmart is expected to launch its first Walmart Express convenience formats. Stay tuned. Walmart currently generates $260 billion in annual net sales in the U.S. and has roughly 3,800 stores.
As with most organizations, growth is pursued through global expansion. Walmart has acquired chains n Europe (i.e., the U.K.) and is seeing momentum in most BRIC markets as well as Mexico.
Hard to say what truly goes on inside an organization. How much is done to create a certain image for stockholders. How it treats its employees...I have no idea. I can say that commentary on ongoing litigation is limited to one page. In either case, I can also appreciate Walmart for publishing its first Global Responsibility Report. Quite common for organizations in Europe, still a rare sight in the U.S. Walmart has made a commitment to the environment and in October 2005 launched a sustainability program with three goals:
1) Be supplied by 100% renewable energy.
2) Create zero waste. 3) Sell products to sustain people and environment.
Go Walmart! The company also claims a special emphasis on women leaders, though I only saw three women in the picture of the 15 board members!!! Hm... [Let's hope my snapshot portrait of this conglomerate does not crumble. The danger of doing only limited research.]
Image: www.understory.ran.org
While Apple's market cap has been up and down over the last few days, giving it the title of highest-valued company, Walmart gained more conservative publicity. Question: Do conservatives fall as hard as risk takers? I think not….
So, some did not like this post... too much legal history surrounding treatment of employees and too many Mom & Pop shops that have gone out of business because of the conglomerate. Agreed. Nonetheless, some good business sense present at the company.
ReplyDeleteSeems like Walmart has its hands full. Today, some reorg was announced with two executives of its eCommerce business leaving. Also some rumors about an acquisition of Brazil-based Carrefour as Walmart is "revamping its Brazil operations", though vehement claims are made that these rumors are not true.
Looks like the rumors about Walmart's acquisition of Carrefour are not that far fetched after all. Yesterday's Financial Times reported that Walmart had retained UBS "to examine a potential bid for the Brazilian business." It is Carrefour that "insists that the business is not for sale."
ReplyDeleteHm. Who is going to win here? If Walmart pursues a hostile takeover, there could be an initial backlash. Locals may not respond that favorably to the takeover. But Brazil is clearly appealing as an investment area for everyone (see Brazil: Hot or Too Hot? That is the Question.)