The world’s largest retailer, Wal-Mart (NYSE:WMT), is on a mission. It wants to ensure that, irrespective of what you want, if you walk into a Wal-Mart store, you should be able to find it. To be able to do that, if Wal-Mart has to compete with just about any kind of retailers, it is prepared to do so. To be honest, it’s not Wal-Mart who should be afraid of competition, but the other way round, as whichever new product line this company lays its hands on, it is sure to dominate.
The latest companies that are now under fire are video game specialists like GameStop (NYSE:GME).
Wal-Mart’s Foray into Video Games
Last week, Wal-Mart officially announced its new Video-Game Trade In program, which will enable customers to walk in to a Wal-Mart store and exchange their used video games for gift cards that can be used to purchase anything from the store. Depending on what they exchange, customers can get up to $35 worth of gift cards.
- Warning! GuruFocus has detected 2 Warning Signs with WMT. Click here to check it out.
- WMT 15-Year Financial Data
- The intrinsic value of WMT
- Peter Lynch Chart of WMT
These games will then be revamped and sold at lower prices. This business model replicates that of GameStop, whose stock almost immediately took a 6% hit, and which is sure to have its long-term viability threatened. Customers of Wal-Mart though aren’t complaining, as they have one more reason to visit their stores.
Wal-Mart’s committed efforts to offer more to its customers continued to show with its plan to experiment with different formats of stores to give more options to its customers.
Dollar Store and 7 Eleven in Radar
Like GameStop, 7 Eleven (NYSE:SE) too could face some serious competition, as Wal-Mart recently introduced its first convenience store in Arkansas. At the grand opening of the “Wal-Mart To Go” store, Deisha Bernett senior director of corporate communications said it was a “test concept,” but the company would surely think about it seriously if it is a runaway success.
Wal-Mart has already opened its smaller Wal-Mart Express and Wal-Mart Neighbourhood Market stores, which are far smaller than the supermarkets yet larger than convenience stores. With plans to expand these smaller formats, the company aims to target the market that Dollar Store (NYSE:FDO) currently dominates.
Future Looks Bright
The business of retail has huge potential in the largely unorganized retail industries of emerging markets. Governments like those of India, are finally welcoming foreign players and are prepared to offer them a level playing field. The kind of infrastructure and supply chain process that Wal-Mart has in place is so far unheard of in these markets. Wal-Mart’s entry into these markets will surely be a success. However, it will be better positioned to capture the deep geography if it were to operate with supermarkets as well as smaller format convenience stores.