Walmart lost $21 billion in market value after it forecasts drop in 2017 earnings resulting in the steepest decline of the company’s stock in 25 years.
In layman’s terms: Because Walmart said it’s expecting to earn less in 2017, lots of their shareholders sold their stock and lots of potential buyers said they weren’t willing to buy unless the asking stock price is lower.
Why
- Amazon.
Amazon is crushing pretty much every retailer (except some custom designers; however with Amazon Local they are partnering with may of those product/service providers). Amazon sells practically everything you can put in a box and ship. At extremely competitive prices. Free overnight/2-day shipping in some cases.
Walmart offers very very competitive prices and has locations pretty much anywhere in the US. However, they are still a brick and mortar business so there is a limitation on floor space thus a limitation on product offerings. I say brick and mortar instead of ‘click and mortar’ because even though they have an online store, it sucks. Last year, I purchased a product online and selected in-store pick-up. 5 days later it was available for pick-up at he Walmart that is down the street from my office. Walmart’s supply chain management system is one of the best in the world. However, somewhere down the road there was an implementation issue of the online business with the existing business.
Walmart’s situation has similar elements to that of Blockbuster. They have a size and first mover advantage. However, over time they lost their position. I doubt Walmart will face the same fate as Blockbuster but with a $21 billion dollar loss, it is not nothing. You can read about Netflix/Blockbuster here.
2. Other competitors
- Dollar stores: Walmart is known for low prices but no one goes lower than dollar stores. Furthermore with the long-going Great Recession and great income disparity dollar stores enjoyed great profitability.
- Grocery stores: Walmart has Neighborhood Market stores in some markets and super stores (all encompassing stores) in other markets. Nonetheless, companies that are just grocery stores are a big and aggressive competitor to Walmart.
Other Factors
Walmart is also facing PR issues: 1) It is considered low-class. There is a search term “people of Walmart” which shows rather uncouth individuals shopping in Walmart stores. 2) Also, Walmart is criticized for killing off small, independent stores.
Walmart is doing many things to try to turn their path around. We’ll see how effect these efforts are.