Walmart's Huge Overseas Expansion Distracts From Its Domestic Saturation Problem

Last Updated Apr 23, 2010 8:30 AM EDT

It's a big anxiety moment for every fast-growing, publicly traded retail chain when they start running out of places to put new stores. In the U.S., Walmart's moment is nearing, so managers are playing up the still wide-open spaces abroad. But the company's mammoth expansion push overseas -- 1,100 planned stores between last year and this one -- just diverts attention from the big question: What will Walmart (WMT) do to keep growing its domestic sales in the future?

There's lots of excitement at Walmart about its international prospects -- the company cracked $100 billion in sales abroad last year for the first time, after adding 500 stores. By the end of this year, its foreign store-count should also exceed that of Walmart U.S. Its biggest foreign markets are currently Mexico, Brazil and the UK.

This year, Walmart says it plans 600 more international stores, while in the U.S. they'll add perhaps 160. For perspective on that international expansion drive, Walmart has added barely more than 400 net domestic stores in the past five years. Its Sam's Club chain is already at a standstill on unit growth.

The writing's on the wall: Walmart is fast approaching the point where it'll be a mature chain in the U.S. But so far, there isn't much of a battle plan for how to keep the growth going. They've been remodeling stores for three years...but sales at established stores still went down last year.

The company's recently released annual report plugs the 15 percent growth of its Site-to-Store online-shopping program, which lets customers find items online and pick them up at their local Walmart store. It's hard to tell how much that really adds to sales though, or if it's just a shopping convenience. Walmart.com is growing, hitting a billion visitors last year.

But what will Walmart do in terms of growing its physical store presence? In the annual report, the company offers only a vague comment about "additional penetration into metropolitan markets, as well as from new formats and stronger integration with the online business." There's a huge focus on making the supply chain ever more efficient, but very little energy seems to be going into envisioning a big growth strategy here at home.

What new formats would that be? Walmart isn't like Starbucks Corp. (SBUX), which can keep growing by adding kiosks inside grocery stores. There isn't a point to a mini-Walmart -- the whole reason to shop there is because it's so vast and all-encompassing. Tinkering with the product mix to sell higher-ticket items is probably one of the best avenues open, but it's unclear what pricier things Walmart shoppers would buy. It might better leverage the rent on its cavernous store spaces by leasing mini-store space to other retailers, as it does with fast-food purveyors such as Subway. But there's no sign of this kind of retail creativity right now.

Solving the puzzle of future domestic growth may be tough for Walmart. Their unavoidable reality: There are only so many logical places to put enormous retail stores where there's real estate still available and enough nearby population to make it worthwhile. Investing more energy into thinking about this issue now might prevent stagnation in U.S. sales a few years down the road.

Photo via Flickr user Andrew Turner

  • Carol Tice

    Carol Tice is a longtime business reporter whose work has appeared in Entrepreneur, The Seattle Times, and Nation's Restaurant News, among others. Online sites she's written for include Allbusiness.com and Yahoo!Hotjobs. She blogs about the business of writing at Make a Living Writing.