The Death of Wal-Mart?

I don't think the imminent demise of Wal-Mart is near. But I do think that right now the company is at the very pinnacle of its reach and power. When business historians write the history of Wal-Mart, they'll write that the company never again enjoyed the heights of market power that it saw between 2000 and 2010.

I say that because I read an article today (no link, sorry) that Wal-Mart is going to start renovating some of its stores to appeal to a more upscale crowd and compete better against companies like Target.

Not, mind you, that Wal-Mart has anything to fear from Target, since Wal-Mart is many times bigger. But Target has managed to attract a more affluent and desirable demographic, and Wal-Mart apparently feels it needs a piece of the action.

But it is almost impossible for a company that has built its entire business on being the lowest price to move upscale. The brand will always have a taint. If you don't believe me, try saying "Luxury Yugo" without laughing. What's more, Wal-Mart has made the shopping experience in many of its stores so very unpleasant that many shoppers (myself included) won't even consider going in the door. Fancy decor doesn't help if your prospective customer never sees it.

And the simple fact that Wal-Mart wants to move upscale (despite the challenges, which should be obvious to the company) means that the company knows that it can't sustain its growth in its current niche. Competing only on price is probably just about tapped out for Wal-Mart.

So what's next? Probably decades of very modest growth, and Wal-Mart will no longer be a Wall Street darling, just another big safe company for widows and orphans to invest in. Some other company (maybe even Target, or possibly Amazon.com) will define the next era of big retail. Or they might screw up somehow and go the way of K-Mart.

But in five years I don't think we'll be hearing much about how Wal-Mart is ruining America.