Wal-Mart's food success changing industry - Wal-Mart Stores Inc

Discount Store News, May 18, 1992 by Arthur Markowitz

Wal-Mart's growing importance as a food retailer, and the awe, fear and respect it's generating among supermarkets, was evident at the Food Marketing Institute's convention, where the discounter was the chain most often cited in workshops and the FMI's state of the industry report as well as in talks among suppliers.

Here is what's behind that approbation and anxiety.

The most obvious reason is Wal-Mart's fast-track growth of Sam's Club membership warehouses and Wal-Mart SuperCenter combination food/general merchandise stores. Supermarkets view these stores as direct threats to their core food business because of these units' great attraction to consumers who are seen as first shopping these stores and then doing fill-in buying at supermarkets.

FMI's main report was its study--conducted by three different consulting firms--on Alternative Store Formats, which examined the new food shopping competition facing supermarkets. While the study looked at the overall food competition from wholesale clubs, deep discount drug chains and discounters, Wal-Mart was the only retailer cited time and again by name in the written report and oral presentations. These references noted Sam's Club and Wal-Mart SuperCenter as well as the growing food marketing in the Wal-Mart discount stores.

The underlining factor, however, is that Wal-Mart has played the leading role in changing the relationship between retailers and manufacturers. Supermarkets are beginning to learn what the new rules are in the food field and how to play the new everyday low price game.

Wal-Mart's impact includes driving down costs through the use of technology and forcing vendors to price goods on actual costs after weeding out deals and expenses for unused services. Vendors are now instituting such programs and supermarkets are faced with a dilemma: they like the actual-cost feature but also want the deals.