The New Normal Won't Emerge as a Walmart World

(MoneyWatch)  The normal is upon us, but will the new normal be a Walmart world?

A whole series of posts in this blog have discussed the recent Walmart (WMT) analyst meeting, and only covered the first 90 minutes of a two-day event and just detailed what the company planned for the United States. Yet, that's still a lot of important detail for those who want to weigh what Walmart's impact on retail is likely to be, and so were presented here.

In introducing the session, Walmart's CEO Mike Duke noted that the global economic recession, with its resulting unemployment, currency changes and deflation, has had a profound effect on consumers worldwide but one that left the company in a position to respond effectively to the emerging marketplace and the new normal as Duke himself has helped to define it. He asked rhetorically how economic change had impacted Walmart, and he answered:

I will tell you what I think it has done. It has caused us to go back to Sam Walton, really to go back to the culture of our great company, what made us as great as we are, and what's the mission of our company. It's caused us even more to be passionate about this mission, saving people money, so they can live better. Times like this have just reenergized us all to focus on that mission.

From its inception, the recession increased Walmart' influence in retail as consumers fled to the reassurance of its everyday low prices. A company that has set standards on price, Walmart has been able to broaden its influence, becoming more prominent in web-based commerce, for example, and in setting social agendas for retail, especially regarding sustainability.

Still, Walmart may have had the greatest impact in how the industry approaches the critical holiday season. The company's 100 Toys for $10 promotion has forced competitors to employ defensive tactics as they try holding on to what share they can of the product category. But, it also has helped define how retailers will maintain the attention of shoppers through the season, as its low-price product assortment changes from week to week. In doing so, it helps the retailer generate excitement without having to give away the store in lengthening, deepening discounts as the holidays progress.

Yet, for all that, the new normal isn't going to be a Walmart world. Retail by and large may have to play catch up with Walmart, but some companies have gotten an ever bigger boost from the recession than it has. Dollar stores are conspicuous among them, but warehouse clubs haven't done badly either, and, it appears that bargain grocery store chains have been having their share of success. As divisions and privately held companies, many of the best known, including Save-A-Lot, Aldi and Trader Joe's are harder to evaluate than retailers issuing stock against a single concept, but the investment made in their growth recently is certainly indicative of progress.

Even some companies that have had trouble in the recession are coming around. Target (TGT) is an obvious example. After a year of running negative comparable store sales, it just about broke even in October. Sure, it was up against a devastated October 2008. But, in the period between then and now, the retailer didn't wait abjectly for consumers to return. Rather, it launched perishable food operations to help halt customer defections to other retailers, Walmart conspicuous among them. But Target also traded on the economic climate to get designers who might never have considered providing product for its stores to put their names on the company's shelves, enhancing its prestige as a competitive tool against rivals on the upside of its spectrum, such as Kohl's (KSS) , J.C. Penney (JCP) and Macy's (M).

Walmart has gotten stronger, certainly. It will hold on to a significant portion of consumers who have turned to it in the recession and gain strength in sectors where it has recently made progress, including electronics, home furnishings and online sales. Walmart will do this because the company has lots of money it can invest to make those gains. Not only that, but the company will become wealthier doing what it does best, increasing efficiency, as advertised at the analyst meeting, by opening more cost-effective stores.

Yet, keep in mind that Walmart has limitations. Some are self imposed and judiciously so. It's Win-Play-Show strategic operational standard requires that Walmart scale back investment in those competitive segments where it doesn't enjoy a measurable advantage. The self-limiting strategy demonstrates that Walmart understands it can't be equally good at everything, whether in terms of product, as in the case of U.S. fashion, or place, as in the case of Germany.

As a result, other retailers will be able to assume their own place in the new normal. Walmart firmed up its position as king of the hill while the new normal arrived. If other retailers aren't in a position to knock it off, Walmart isn't in a position to chase them much farther from the top than they can manage to climb, as its own too-earnest pursuit of some unfortunate competitive passion is the most likely way it will stumble and endanger its paramount position.