Thursday, 10 July 2014

Wal-Mart Beverage Shops?

I read a lot of business news....and yesterday, there was a five-star bombshell piece quietly hidden in the Wall Street Journal.  A brief two-line piece....which described Wal-Mart's new strategy of getting into alcohol sales, doubling their stake in this one area, and possibly opening stand-alone beverage shops (beer, wine, and booze).

It's not the Wal-Mart concept that we grow up with in the 1980s, and it probably won't work in some conservative southern regions.

Wal-Mart operates with a simple concept.  You brew want to sell based on a profit margin for your product.  More is most cases.  So, Wal-Mart steps into the room and says that price per pallet isn't good enough.  So you as the beer guy....hint that if they'd buy thirty-percent more on quantity, you'd ease on the pricing of the pallet by ten-percent.  Eventually, you reach some agreement on a fantastic amount of beer that they will buy.....but it means less profit than you'd normally accept. effect.

Everyone from hair shampoo manufacturers to shoe polish dealers.....hate Wal-Mart's bulk pricing strategy.  You sell to get a big step up.....take large orders.....and then rely on making up the margin by dealing with Piggly Wiggly, K-Mart, Target, and the others....with regular pricing.

How would a Wal-Mart beverage shop (standing alone) operate?  I'm guessing it'd be 2,000 square feet.....bundled into a industrial neighborhood of some city....hoping on sales as folks get off work and want to pick up two cases of beer, and six bottles of wine for the weekend.  There would likely be eight full-time employees, and six people coming in to stock the shelves daily as a part-timer.  Somewhere near the front would be chips and dip....maybe some charcoal for grilling....and maybe every spring there would be an assortment of grills lined up for sale.

Wal-Mart's target?  All of the small convenience beverage shops that exist in most towns and cities.  You see....they can't get the special discount prices.  I'd take a guess that a southern town of forty thousand residents....will typically have eight convenience beverage shops spread out within the urban boundary.   With just one Wal-Mart beverage'd probably wipe out three of the no-name shops within three years.  Put one on the west end of town and one on the east end of town?  You'd probably wipe out seven of the eight no-name shops within five years.

The end of an era?  Maybe.

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