Wal-Mart set to conquer Britain
Wednesday 17 February 1999
Once there were fields of sweet Illinois corn, reputed to be the finest in America, but they have long vanished beneath parking lots the size of Wembley Stadium. This is urban development, American style - what happens when land is plentiful and cheap, the car rules and competition is cut- throat. This is the America of Wal-Mart, the world's largest, most successful retailer. Just possibly, in a not-too-distant future, it could be coming to farmland near you. In Britain we must tremble at the prospect.
"Wal-Martisation" comes at a price. Before the interstates came, when Americans still lived in cities, Edwardsville was a bustling commercial centre, a staging post along US66 as that celebrated highway prepared to cross the Mississippi and strike for the great expanses of the West. The place is still there, of course, with its county court house, its churches and public library. They've even put up new bank buildings and public offices.
But where there once was retail bustle, virtual silence reigns. The shops have disappeared, crushed by the out-of-town superstores lined along Route 159, vanquished by the likes of Dillons, K-Mart, and Toys "R" Us. But above all, by Wal-Mart.
Now Wal-Mart, having conquered America and spreadtentacles into Canada, Mexico, Latin America, Asia, and most recently Germany, is sizing up our green, pleasant and crowded little land. The question is, do we want it?
The company is monument to one of this century's most remarkable businessmen. Sam Walton started his discount stores in Arkansas in 1962, convinced that smalltown America was ripe for a discount retailing revolution. By the time he died in 1992, sales had risen to $44bn, and "Mr Sam", as he was known to his employees, was the richest man in America. His secrets were a ruthlessly efficient computerised inventory and distribution system, no-frills marketing, and prices to beat anyone.
Unusually in a land where rapacious shareholders beardown on over-worked employees, the humblest sales clerk was an "associate" who received shares in the company, allowing him too to cash in on Wal-Mart's explosive growth.
Above all, the customer was king. And Sam Walton, with a personal fortune of $23bn, lived like his customers. His frugality was legendary. He was happiest inspecting his stores in person, driving a battered Ford pick- up with his bird dogs caged in the back. Wal-Mart today has 2,700 stores in America alone, employing 600,000 people. Its global sales last year reached $137bn or pounds 84bn, (equivalent to more than a tenth of Britain's entire gross domestic product. But Sam Walton kept its headquarters in a warehouse in Bentonville, Arkansas, 50 miles from the nearest interstate. He was an American original. Which is why his methods may not flourish so easily here.
You could conclude that Britain is ripe for Wal-Mart's taking. We suffer, we are told, from some of the highest prices in Europe for groceries, car accessories, electronic goods, appliances, products which are the backbone of Wal-Mart's business. Our retailers are said to have grown fat and lazy in a protected world of high margins and low competition. So why not welcome this American invader, and enjoy American-style prices and American-style customer service?
It is no accident that Wal-Mart, driven by the ambition of chief executive David Glass to turn itself into a world brand to match Coca-Cola, made Germany its first target in Europe. The Germans, until recently saddled by laws which closed shops on Saturday afternoons, are retailers to make the even the much-maligned British look good. But in 14 months, Wal- Mart has acquired WertKauf and Interspar, two chains with 95 hypermarkets between them. Wertkauf has stores similar in size and appearance to the SuperCenters Wal-Mart is introducing in the US, emporia with 200,000sq ft of space, for the first time adding groceries to Wal-Mart's traditional range (making Wal-Mart one of the top five food retailers in the US, overnight).
Britain could be the next bridgehead. But the transatlantic invaders will not find it easy. Even in the US, where the discount market was increasingly saturated, Wal-Mart seemed to lose its way after the death of "Mr Sam". Today, with the growing success of the SuperCenters and plans for a new generation of smaller in-town stores to mop up surviving high street competitors, the company is flourishing again.
In Britain, many basic conditions which help Wal-Mart at home simply do not apply. Roads are already clogged, and new ones are harder to build. The high cost of scarce land is one often-overlooked reason for those "rip-off" prices paid by the retail customer. Planning permission is difficult to obtain, and development doctrines have turned against the type of out-of-town hypermarkets in which Wal-Mart specialises. The half-dozen operating or under construction here are likely to be the last.
Reducing traffic and reviving the inner cities are the watchwords. Another watchword, unfortunately, is recession. The US may defy gravity, but the British economy is stalling.
For these reasons, if and when Wal-Mart does cross the Channel, it is unlikely to set up from scratch, and Britain's green fields will be safe. It is likely to repeat its tactics in Germany and buy existing chains, with Asda or Safeway widely tipped. Booker is a cash and carry chain that also could be in its sights. But even then there will be cultural obstacles.
For all the current nostalgia for a smalltown America, crushed beneath the mega-stores' jackboot, not enough people are really care enough to halt the process. In Edwardsville they remember the downtown drugstores of a generation ago, and shed small tears for places like Auerbach's, the main street clothing store where the local hotshots used to go. But the suburbs, the malls and the Wal-Marts march relentlessly on. Across America there are thousands of Edwardsvilles. Britain is a nationof city dwellers, who wish we lived in the country. We moan about high prices but almost certainly will refuse to pay the price required to lower them.
For Wal-Mart and its like, Edwardsville, Illinois, may have been a pushover. Edwardsville, Mid Glamorgan, would not be.
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