Peak Wal-Mart?

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Walmart's growth model may be peaking due to structural declines in miles driven, income of its customer base and rising competition from dollar stores.

Structural declines in miles driven, middle and working-class income and rising competition from dollar stores may be leading to Peak Walmart. Walmart's model of superstores built on the edge of town with an inventory/distribution system based on high turnover may have reached the point of diminishing returns.

There are various signs of this, for example: Wal-Mart Nails The "Consumer Recovery" Coffin Shut (Zero Hedge)

Correspondent Mark G. ties together the long-term dynamics in this insightful analysis:

The proliferation of Walgreens & CVS standalone pharmacies, plus new construction standalone Dollar General and Family Dollar stores is reaching something of a critical mass. The only real difference between the first pair and the second pair of chains is Walgreens & CVS have a prescription drug department. Otherwise all four are nearly identical in format and product lines, including complete small grocery departments of dry goods and dairy products. These product lines are so low margin they haven't interested the Brown Truck Store (UPS) so far.

I've observed a rising number of young mothers pushing strollers in the neighborhoods where these standalone dollar format stores are appearing--in other words, car-less consumers.

I also note that all four chains prefer to build new stores in or on the edge of downscale neighborhoods. They do this rather than occupy the rapidly rising number of empty units at strip centers. And in point of fact Walgreens actually vacated a long-time unit at a local shopping center. CVS had built a standalone store on the corner across the street. Walgreens did the same a few miles down the road and also directly across from a Walmart Supercenter. The older Walgreen unit was then closed.

As Orlov and I learned in the USSR, you collapse with the infrastructure you have. Since consumers are having more trouble now getting to the stores, the stores are physically moving back to the consumers. Here we have stores proliferating that can be patronized and staffed by people without dedicated autos who instead walk or bike.

Car-less lower income consumers (and workers) look like major trouble for Walmart. A couple weeks ago in Fort Myers (FL) I noticed another of Walmart's "neighborhood" grocery store size format stores located in a strip center. The thought occurred to me that Walmart is doing poorly in an increasingly diverse array of activities. What's the point of moving into strip centers if Walgreens and CVS are moving out to be closer to their customers?

This theme also suggests a different angle for interpreting Walmart's tentative moves into Internet ordering and home delivery. Under this theory Walmart is principally worried about the proliferation of walking/biking distance neighborhood dollar stores.

Taken as a complete group these stores constitute a "Second Walmart" emerging to directly compete with the first Walmart at the bottom rung of the income ladder.
This makes more sense than imagining Walmart trying to compete with Amazon's wide inventory of high margin and low total national turnover items. That product array demands a compact warehouse distribution network to minimize inventory costs. Walmart's warehouse distribution network is instead optimized to throughput high turnover items.

The neighborhood dollar store story is ominous news for Walmart. The "Dollar Store" story suggests the bottom 25% of Walmart's demographic are losing their cars by force of economic circumstances. This is not something Walmart can do much about, if anything. As a result, Walmart is having its middle-class cream skimmed by Target while its base is being drained by car loss and the "Neighborhood Dollar Stores".

The question is not whether Walmart can survive another downturn but whether it can survive highly skewed recoveries like we're having.

Walmart's rise paralleled the rise of the one car per person household.The fundamental proposition of the Supercenter is you have to drive to get there. Therefore Walmart's decline will undoubtedly parallel the End of Driving.

I prepared the following spreadsheet to highlight the size and growth rate of "the second Walmart":


Company Ticker Price Employees Stores Annual
Quarterly Growth
Target TGT 63.24 361000 1856 $73.48 2.00%
Walmart WMT 74.65 2200000 10800 $473 2.30%

"The Second Walmart"

Company Ticker Price Employees Stores Annual
Revenues (Billions)
Quarterly Growth
Walgreen WAG 54.85 171000 8117 $71.35 3.20%
CVS Caremark CVS 57.78 203000 7458 $123.63 1.70%
Rite Aid RAD 4.89 50730 4615 $25.26 0.80%
Dollar Tree DLTR 57.44 15380 4700 $7.69 8.80%
Dollar General DG 57 90500 10866 $16.80 11.30%
Family Dollar FDO 72.57 33000 7600 $10.25 9.00%
Big Lots BIG 37.19 13100 1514 $5.42 0.60%
      576710 44870 $260.40  

Look at the revenue growth rates of the three non-pharmacy "dollar stores" in particular. (Big Lots is an older chain, and the ones I know of are all located in strip centers.) This is what is handicapping them. The three boldfaced "Dollar" stores are all opening standalone stores in residential neighborhoods. The first three drug store/variety store chains are also fairly included since Walmart also has pharmacies in most of its stores now. 

For Walmart, peak driving means very serious trouble ahead. The "dollar stores" have four times as many outlets, and they're opening more at a far faster rates.

Thank you, Mark, for an insightful analysis of primary trends in miles driven, income, demographics and retail. Peak Walmart may also presage Peak Mall Shopping and Peak Retail in general. The poaching of competitors' customers appears to be replacing real growth, and perhaps the impending demise of JC Penney is simply the first of many such victims of the retail shark pool.

Here are two charts of the structural declines in miles driven and household income:

Vehicle Miles Driven: Population-Adjusted Fractionally Off Its Post-Crisis Low (Doug Short)

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hedgeless_horseman's picture



Shop "true" local.  Keep as much of your capital in your town as possible, so that it has a chance to come back to you. 

Stop shipping your capital to Wall Street, Wal*Mart, and The Great Wall.

Read The Geography of Nowhere.

Grow something!  Make something!

Yes, we even grow bananas, which are Wal*Mart's top selling item.

BobPaulson's picture

Step 1: make lots of friends. Preferably not on the internet, but ones that live close by.

hedgeless_horseman's picture



The best way to do that is by conducting honest business with your neighbors.  If you live in NYC, Chicago, Washington, D.C., or London, then good luck with that!

The Big Ching-aso's picture

I think the drop in customers is due to not enough of those rider lawn mower shopping carts.

FEDbuster's picture

Dollar General is stocking more EBT items, too.  As we approach 50 million on food stamps, this too nibbles away at Walmart's EBT sales.

I look to Goodwill becoming the nations largest clothing retailer (by volume not revenue).  

Rantabulous's picture

I am not US. Goodwill from my brief Google does appear to be clothing donations or 'thrift shop' etc (what we in Aust generally call an Opp (Opportunity) Shop). I think you may be correct, but only for a short time.

I have been tracking this for a number of years now. I could probably write a book on it. (and I would if I thought I could make some money on it :) )

To summarise (at least the Melb/AU experience); we have had 'peak thrift shop'. quality, volume and range of choice are all dropping. Many shops still look full, but if you look closer at the shelves you will see less common sizes, XXXL shirts etc and lower quality - more wear/damage etc.

The number of new thrift stores opening is now less than the number closing (my best guestimate).

I am not sure about the numbers of people using thrift stores. My best guess is that there is a slight increase in number and this would be consistent with general trend going back at least 5 years.

As the consumer bubble has now popped, I believe in time we will eventually see thrift shops that are small, few, with limited range, and high wear that most people will choose as a last choice.

EDIT: if anybody is interested I would be happy to share some 'expertise' on thrift shopping and long term storage of clothing


Ying-Yang's picture

Good comments Hedgeless...

Walmart has reached it level of incompetence.

Go local every way you can, starve the beast.

DaddyO's picture


Great words of wisdom!

I have been saying exactly that for quite sometime.

It's the best way to starve the beast.

I finally got the bulk of my garden planted yesterday, onions, carrots, radicchio, 3 different varieties of cabbage, cauliflower, broccoli and beets.

I'll plant some tomato and pepper plants in moveable buckets to move them inside from frosty weather as it appears.

When you walk into a WalMart, have you ever noticed the chemical smell in the produce section, any grocery store or produce stand for that matter.

No funny smells eminating from my garden, nothing but the rich, aromatic smell of healthy earth, composted with maure from my horses.

WalMart is the new soup kitchen of this depression, that's what has supplanted the long souplines of the last depression.



Oracle 911's picture

I hope you live in tropics (Puerto Rico) or in sub-tropics (Florida) or in Australia, because planting in autumn is really bad idea.

Believe me, I live in Europe and my family has a kitchen garden for at least for 50 years.

pepperspray's picture

Maybe once we learn the rules of Obamacare I can hire an employee

akak's picture


Yes, we even grow bananas, which are Wal*Mart's top selling item.

In a banana republic, is that not only fitting?

SheepDog-One's picture

No shit story....a local burger place that's been here since the early 50's went out of business, just saw yesterday what's going up in it's place....a Dolla-Holla Genral.


Grande Tetons's picture

Back to the days of the cart and buggy. 

What the fuck...maybe another Gold rush. 

SheepDog-One's picture

Today's 'gold rush' is taking place on reality TV...junk pickers.

Grande Tetons's picture

True. What a commentary on how far this society has gone down the shitter.  I do not know about you..but where I live...pawn shops and WE BUY GOLD shops are springing up all over the place. 

idea_hamster's picture

Maybe those AAA Buggy Whip company bonds that were the subject of so many derisive comments will turn out to be the real "long-term" winners!

Disenchanted's picture

Long horse whips...and sharecropping!

Shad_ow's picture

Peak America is the real story. 

michael_engineer's picture

Here is a new term for you : Peak Decline

gnomon's picture

No, Peak World.  Just waiting for somebody to strike a match in this tinderbox.

michael_engineer's picture

Peak Spoiled. So many people are so set in their ways and naive about what is happening around them and to them. You could say that they are in denial but I doubt they are even aware of enough details to be having doubts about the correct things. Peak Numb. Or Peak Comfortably Numb. As the level of comfort heads south I suspect the level of numb will head south too.

Totentänzerlied's picture

To my mind, "peak access to credit" adequately explains it, going back through all of (agricultural and industrial) civilization.

And that's the real difference between the truly wealthy and everyone else: when the credit supply disappears, how much wealth, capital, hard assets, real resources, do they have left?

America is, and was, the richest nation in the world only if you ignore the distinction between credit and wealth. That paradigm is failing, the distinction cannot be ignored and hidden anymore. It was all bullshit. The only difference was access to credit. (Cheap energy was the key to getting this scam off the ground - there had to be things to buy with all that credit, or the jig is up, and making/selling/buying things requires lots of energy. From here it's but a hop, skip, and jump to peak spoiled - peak consumerism).

The sequence is more like: ignorance, apathy, denial, numbness. Very few have reached numbness or beyond, yet, but it's best to get it over with sooner rather than later.

michael_engineer's picture

I see you got the cheap energy causality correct, as driving or leading into the creation of the credit bubble, and not the other way around as a typical economist might think.  But actually, we are still pretty rich in Peak Stuff.  Just having hammers, nails, screw drivers, tools,  clothes, shoes, etc has more value than what most people in the world have at their disposal.  But the credit genies and demons make it hard to put those things to productive use in this economic malaise.  

akak's picture

Peak 'americanism'.

Which is really peak "US 'american' citizenism".

It's the mattering thing.

TheFourthStooge-ing's picture

Funny how this peak something has much easened acception when Chinese citizenism citizens are heavily invested in this something, with the opportunity of speculating about that something.

Not many who stand up against the possibility that US 'american' citizenism has peaked for the matter of peaking. Most Chinese citizenism citizens in here are heavily invested in US 'american' citizenism.

Change the wordings US 'american' citizenism to Chinese citizenism and a river of denial is cried.

It is Chinese citizenism game to claim that peak US 'american' citizenism already happened when actually too little data to infirm or confirm.

Chinese citizenism has a dimension of dementia, it exposes so much Chinese citizenism citizens and their eternal Chinese citizenism citizen nature.

A. Buttle's picture

So, short retail. 

Got it. Thanks,

Sudden Debt's picture

it all started when they stopped selling bullets...

stant's picture

secular rise in rates will blow out that biz plan. goodbye big box 

Grande Tetons's picture

I fully support a smaller box. 

Bobbyrib's picture

I will repeat myself like a broken record: WalMart is a "victim" of its own success. Cheap forein made products will only take you so far.

With the Fed printing it won't matter, the Walton's can just rely on their stock holdings for wealth.

earnyermoney's picture

Might as well change the name to EBT Mart.


Walton's sucking on the .gov teat.

pasttense's picture

This "second Walmart" has very few SKUs compared to Walmart. So while one might do "one stop shopping" at Walmart, you are going to have to visit multiple stores besides a Dollar General. I think any recent declines at Walmart are due entirely to incompetent management rather than the superiority of very small format stores.

adr's picture

Dollar General and Big Lots are awesome. You can buy surplus product from Mexican and Chinese stores.

You can be happy to buy your kid a toy even Mexican and Chinese children didn't want.

My favorite thing about Five Below is that the entire store is stocked with inventory that didn't sell elsewhere in Big Box America. There is so much excess merchandice in US commerce that multiple publicly traded 500 store chains can be made out of the unsold inventory of publicly traded retailers. They can make a profit off selling a product for $5 that retailed at Walmart for $20. Tells you how much Walmart paid for it, and how much the product is really worth.

Long-John-Silver's picture

They don't stock 25 flavours of Pasta Sauce or Peanut Butter. They have everything you need, just not the huge selections available in Wal-Mart. I like shopping in Dollar General. When the wife asks me to stop by and get something on the way home like Pasta and Sauce I never get harassment about what brand I purchased. She notes the Dollar General Bags and immediately knows I purchased what they had. It makes my life so much easier.

pasttense's picture

The primary reason people make so many grocery shopping trips is perishables: fruits, vegetables, meat, dairy, bakery--and the Dollar General type stores are particularly miserable in this area.

Spastica Rex's picture

If consumers don't "want" more stuff every year, capital doesn't "need" two labourers from each "middle class" family anymore.

Beware of impending redefinitions of "middle class."

Bobbyrib's picture

That's great! Which country's middle class are you talking about? China or India?

Two labourers from each middle class family? Not in the US anymore..

Totentänzerlied's picture

I have a very hard time believing that the demand (desire) on the part of humans is ever the limiting factor in this equation.

As I wrote above, the limiting factor is (access to) credit. It works in many ways, as regards dual-worker households. Gotta have a job to have income (suckas allowed income to redefined) and qualify for various types of credit (this is going back to the early days, 50-100 years ago). Gotta pay off your debts, so better keep that job. The wife wants shit you can't afford either, and presto-changeo women entering the workforce in droves (telling them not to becomes regarded as bigoted, sexiss, rayciss, chauviniss, etc.), not so much for meager income (about which the complaining endures to this day, hmmm...) but the access to credit it grants and the increased consumption it necessitates (many women - and now men - spend more on work than they receive from work, when you net out the all-in cost of education/training, business attire and equipment, second car, daycare, taxes, etc.). I could go in...

The redefinition of middle class which I eagerly await is: "a curious, transient socioeconomic phenomenon resulting from capital's intentional transformation of the merchant and artisan classes into a vanguard/buffer class (the bourgeoisie and petite bourgeoisie) wedged uncomfortably between it (capital) and the poor (mainly the urban laborers/so-called proletariat, but also rural "peasantry"). Born circa 18th century. Died circa early 21st century due to exhaustion of its food supply - credit-money, a synthetic asset derived from crude oil."

Spastica Rex's picture

Not bad! I used "want" in an abstract fashion.

However, a desire-based, rather than a needs-based economy (at least for the lower classes) is a fairly recent innovation. Tying consumption to self-worth was great for growth - while growth has been possible.

Dr. Engali's picture

Walmart is becoming a victim of their own success. Their constant squeezing of manufacturers to cut costs, and their drive for efficiences have driven all the good paying jobs overseas and now there is nobody left to shop their disgusting stores except for those dependent on the government for survival.

adr's picture

But if they show revenue growth and the stock goes up, you can make money off shares you buy with Benny Bux. 

Isn't that all that matters?

imapopulistnow's picture

They are following the footsteps of Kmart.  When sales growth began to fade, they raised prices and selectively ripped off their customers.  Now folks are looking elsewhere for bargains or just shopping at a closer store for convenience.  Perhaps the auto thingy is adding to their woes, but they were going down regardless.  They are a victim of pushing short term profit margins over long term customer loyalty.  Now they cannot break out of this downward spiral.

MachoMan's picture

JFC, Walmart wishes it was that successful...  Walmart didn't cause these trends, rather it took advantage of them.  If you traditionally have a % markup on your items, then why would you give a shit where they're sourced?  Walmart simply followed consumers all the way down to their level of purchasing power.

Aside from the fact that you're complaining about walmart squeezing manufacturers to cut costs, but isn't that literally the definition of competition?  More specifically, fair competition (there have been more than a few public outcries with manufacturers telling walmart to eat a bag of dicks)?  It would seem that consumers benefit, no?  While many complain of the products being of cheaper quality, I'm not sure that's particularly quantifiable, especially when items cost fractions of their previous costs (although likely failing more).  Anecdotally every time my plastic cookware breaks (sometimes it actually gets a single use), then "I hate walmart, it's so fucking cheap bullshit rawrrr" pops into my head...  but not so much when the $10 dvd player or radio I bought lasts for a decade.

The other issue is that whatever source of products is cost competitive, walmart can push in its stores...  What many people don't realize is that walmart can lever up and sell higher quality/more expensive items, but competitors can't lower prices and develop as low cost leaders, but for walmart's abandonment of a particular market.  I also dispute the "amazon prime" model in that the fuel costs for J6P to go to walmart (especially in between home and work, leaving a marginal cost of $0) are less than the shipping cost of purchasing those goods over the net from an e-warehouser.  I'm not sure amazon has made a dime from this process, but I do appreciate the subsidy (poor speculation).

Debt_Slave_093824's picture

Brawndo, its got what plants crave. Its got electrolytes.

q99x2's picture

They could always convert the stores to local dumps. The first time I walked into one that is what I thought it was anyhow.

Spastica Rex's picture

Turn them into public schools. Fill them with computer terminals and enforcers armed with cattle prods.

akak's picture

I am proudly Wal-Mart-free since 2001!

Freeing onself of Wal-Mart is a twelve-step process --- or it used to be. 

Today, it usually takes more than twelve steps to walk around all the rabbit-breeding third worlders with their 18 kids and all the Jabba the Hutts in their fat transporters waiting for their rides near the exits.

MachoMan's picture

C'mon mate, you don't like to go on safari every once and a while?

akak's picture

Not really --- and I have seen enough whales in Alaskan waters to last me a lifetime already.  The Walmartian land versions are much less awe-inspiring.