Suddenly, Convenience Stores Face a Threat: Walmart
Monday, July 28th, 2014
I have a bias against convenience stores that started when I was seven years old, and my father and I stopped at a Suwannee Swifty to get an Icee. Afterward we drove a couple extra miles to a Piggly Wiggly grocery store to get milk. When we got home, I asked my dad why we hadn’t just bought the milk at the Suwanee Swifty. He said it would have cost us double because the store charged extra for the convenience of being closer to our home.
Well, that traditional convenience store pricing strategy is now being threatened by a large competitor: Walmart. Last month, the giant retailer gave a clinic on how to drop a bomb on an industry without making a big deal about it.
Like a large cottonmouth snake trying to quietly slither underneath a willow tree, Walmart confirmed in an oh-by-the-way tone that it is rolling out a new business model. With sales lagging, the company plans to open a number of smaller footprint stores.
Really? Walmart built an American empire on a singular mindset: Bigger is better. Roll back prices and rollover anything that gets in the way. I have a good friend who built stores for Walmart. He stopped years ago because he says the company wouldn’t allow him to leave even a single tree standing in the parking lot. Why not? Fewer parking spaces mean fewer customers. (A spokesman for Walmart said that he could neither confirm nor deny the developer’s comment.)
Bigger ruled everyday at Walmart, until now. Why is the company now thinking smaller? Because it believes it can dominate the convenience segment, producing bigger sales and more domestic growth.
Walmart said it has figured out how to hook its new smaller stores into its current superstore distribution network. That means Walmart’s deadly strike is twofold: It will offer convenience but with low prices. My guess is that the convenience store industry as we know it is over. And I say good riddance.
Convenience will no longer demand higher prices. Convenience stores have milked the premium-pricing model way too long and produced way too little innovation to show for it. Why didn’t these stores add juice bars, organic snacks, locally sourced products and produce? How about price bundling so customers do not have to pay double if they buy multiple items instead of just one?
The point is that businesses should not wait until competition forces them to change. If they snooze on fat margins, they lose.
Regardless of whether you like the fast-food industry, it has demonstrated both innovation and price leadership. Perhaps the McRib sandwich should have never have been offered for human consumption, but you have to give McDonald’s credit for trying lots of ideas.
These days, if you are so inclined, you can actually eat healthfully at a McDonald’s menu. If fast-food chains had simply followed the convenience store model, they would be serving us bad $10 hamburgers and telling us that we are paying for the convenience of getting a bad hamburger whenever we want one.
If I owned a mom-and-pop convenience store or a franchised outlet, I would be as nervous as a whippoorwill under a willow tree. Before a cottonmouth strikes, it sometimes lulls its prey by showing the white skin in its mouth. You might say Walmart has shown its cotton.
What do you think? What would you do if your convenience store suddenly had to compete with the likes of Walmart?