What's Bad for Walmart Is Good for Small Business

The mighty come in two types: Those that have fallen and those that will fall. Walmart confirmed this truism by reporting a seventh straight quarter of declining sales among U.S. stores that have been open a year. While it was once said, perhaps with some truth, that what was good for General Motors was good for America, the same can't be said of Walmart and small business. To a considerable degree, what's bad for Walmart is good for small business.

Sure, Walmart is the world's biggest retailer and most of its business is in the U.S. To some extent, then, its sales performance is a reflection of the overall American economic climate. But only to an extent. Walmart doesn't sell much to some segments of the population, including the affluent shopper and those residing in a few areas of the country, notably New York City, where Walmart stores have yet to penetrate.

The best news about Walmart's sustained sales slump is that it's not invincible. There have been times, during the company's climb from small-town discounter to the top dog of the retail planet, when it seemed Walmart could do no wrong. Or at least if it did do wrong, its impressive combination of size and agility would allow it to recover without harm. What this reveals about Walmart's weakness is:

Pricing. Even though Walmart proclaims itself the home of everyday low prices, it's possible for prices to be lower elsewhere. Specifically, dollar stores have been cited in trade publication Retail Traffic as offering more attractive prices on some items than Walmart stores.

Convenience. As Walmart has built more and more super centers across the country, including converting existing stores to the mega-sized format, it has become less and less convenient to shop at Walmart. Parking in an airport-sized lot and walking the length of a football field to reach an item in the back of the store is too much hassle for time-starved shoppers only interested in picking up a few items. The New York Times reports that some of these shoppers instead are probably going to convenience stores, depriving Walmart of an important revenue stream in the form of impulse items.

Selection. One of the ways dollar stores and other discounters beat Walmart on pricing, according to the same Times report, is by offering packages containing smaller quantities of products such as soap. Buying smaller containers may cost more per ounce, but the lower price tag may appeal to shoppers on extremely tight budgets. The lesson here is that Walmart can be beat on selection even with products it already carries. And you can extend that lesson to products and services that Walmart doesn't carry, such as antiques, liquor, medical care, spa treatments, gyms and the like.

Not that Walmart has toppled just yet. The sales news also reveals some of the company's strengths. Specifically, overseas sales were strong. Despite being nearly ubiquitous in the U.S., Walmart still has tapped only a few of the globe's other markets. The company has a long way to grow globally, and that can support softness at home while it cleans up its act.

Walmart's Sam's Club warehouse concept also showed comparative sales growth. That means the company is tapping more affluent customers that those it attracts to the regular stores. Thus far, higher-end retailers have been relatively insulated from Walmart's clout. If the company finds a way to extend Sam's reach into the upper-income strata by offering more luxury goods, it could mean Nordstrom's is as worried about Walmart coming in as your local hardware store.

Probably the best thing a small retailer can do at this point is watch how Walmart responds to its worrisome U.S. sales slide. If the company starts stocking more small-quantity containers, that could mean an opening will arise on the big-quantity side. And if Sam's leverages its new-found appeal to the well-off, well, there may be some opportunities to rent a former Nordstrom's store cheap.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.

Image courtesy of Flickr user Mike Licht, NotionsCapital.com, CC2.0