Saturday, September 17, 2005

Wal-Mart U.S. Store Count By Type

Note the ramp up of the Supercenters in relation to the decline of the Discount Stores. Many Discount Stores have been converted to Supercenters. This conversion process, which will continue in the future, can add to "cannibalization" (a term used by Wall Street analysts to refer to one store taking sales away from another). Wal-Mart itself prefers the term "market development."

Cannibalization, it should be noted, does not refer to the conversion process itself. Cannibalization is a new store taking sales from another still existing store, a phenomenon one would see once a retailer had started to saturate a certain geographic area. A Starbucks opening across the street from another Starbucks would presumably take sales from the original Starbucks. This is called cannibalization because it's a store gobbling down sales from another of its own kind. [...In the Houston Starbucks example, by the way, apparently sales at the old location went up after the new one opened across the street. And yes, they are both doing strong sales. You know you've got a good business when this happens.]

When a Discount Store is converted to a Supercenter, this itself is not cannibalization. It is just conversion from one store type to another. But, due to the conversion process, Wal-Mart experiences a big increase in sales at the new location. SOME of the increase in sales will be from customers NOT shopping at other nearby Discount Stores and instead taking their business to the Supercenter. This shift of shoppers from surrounding Discount Stores to the Supercenter is cannibalization.

The cannibalization process may have a lot to do with the Comparable Store Sales figues decline (see below). If a Discount Store is converted to a Supercenter, both the Discount Store sales (now zero) and the new Supercenter sales are not included in the Comparable Store Sales statistics. But surrounding Discount Stores (open at least a year) are included in the Comparable Store Sales statistics and may face sales loss due to the cannibalization.


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