Grocery Wars: Wal-Mart, Target, and Costco Duke It Out
Do you remember a time when Wal-Mart (NYSE:WMT) steamrolled mom and pop shops across the United States by undercutting their prices and putting them out of business? This was the first reason people began to hate Wal-Mart. Though it might sound harsh, this is capitalism at work. However, it might not be as fair this time around, since Wal-Mart is attempting to do the same thing north of the border. Yes, that would be Canada. Only this time, Wal-Mart is taking a different approach than in the past.
Spotting a trend
The following is a telling statement made by Shelley Broader, the CEO of Wal-Mart Canada: “I’m not stopping until I get food in every box in Canada.” She wants fresh food in every store. This makes sense, considering Wal-Mart Canada enjoyed market share gains in the third quarter for food. If you want to know what Wal-Mart Canada is trying to become over the long haul, see if you notice a pattern below:
- 2008 percentage of sales from food, consumables, health, and wellness: 30.6 percent
- 20011 percentage of sales from food, consumables, health, and wellness: 41.7 percent
- 2013 percentage of sales from food, consumables, health, and wellness: 43 percent
Victims (and victor) of the north
Loblaw — the largest grocer in Canada — cut 275 employees late last year, which followed 700 layoffs in its head office one year earlier. Loblaw is clearly trying to cut expenses. The reason? Increased competition, which has a lot to do with Wal-Mart.
The competitive environment has forced Loblaw to lower its pricing in order to keep its customers, but this has hurt margins. To make matters worse for Loblaw and other Canadian grocers, Wal-Mart is investing $91 million in its distribution network because it wants to close the time gap between source and shelving for food products. This will expand margins and improve food freshness.