Wednesday, September 14, 2005

What actual space does Wal-Mart compete in?

The framework for addressing this question I believe has to be the NAICS (or North American Industry Classification System) which is used by the U.S. Department of Commerce. There is no other more complete framework that I know of.

In my post dated September 9 (below), I outline the four main NAICS categories that Wal-Mart competes in. There are specific reasons for using those four categories. However, I feel reducing Wal-Mart to that set is too limiting.

Let me list ALL of the retail trade categories that exist in the NAICS. When we zoom out to the more macro level, we only look at the first 3 digits of the codes, and those categories break down as follows: (this is the full set of retail)

441   Motor vehicle & parts dealers
442   Furniture & home furnishings stores
443   Electronics & appliance stores
444   Building material & garden equipment & supplies dealers
445   Food & beverage stores
446   Health & personal care stores
447   Gasoline stations
448   Clothing & clothing accessories stores
451   Sporting goods, hobby, book, & music stores
452   General merchandise stores
453   Miscellaneous store retailers
454   Nonstore retailers

Now while I had limited Wal-Mart to the 445 and 452 categories, this isn't exactly correct. Wal-Mart is competing in some of these other categories as well.

Eventhough a "Discount or mass merchandising dept stores" (category 4521102 in the NAICS) sells clothing, the clothes sold there are classified as being sold from a different retail industry than macro category 448 which is "Clothing & clothing accessories stores." Putting Wal-Mart in the first category but not the second is the equivalent of saying that Wal-Mart does not compete with The Gap. ..I think Wal-Mart ultimately does compete with The Gap.

So to take this to a more macro level, I suggest adding up ALL of the above categories and subtracting out "Motor vehicle & parts dealers." ..Wal-Mart doesn't actually sell cars (yet), and it is unclear to me how big they are in the auto parts business. Therefore, I am looking for Wal-Mart's competitive category to be "Retail and Food Sales (excl. Motor vehicle and parts dealers)."

If I do this, and I compare the economic census data to Wal-Mart's total U.S. sales, I find the following:

Wal-Mart's sales account for the following percentages by year of ALL retail sales in the United States (excluding auto sales and auto parts sales)

      1995    4.6%
      1996    4.8%
      1997    5.1%
      1998    5.5%
      1999    5.8%
      2000    6.0%
      2001    6.6%
      2002    7.1%
      2003    7.5%


Anonymous winddriver said...


Nice work! I just have a comment.

Wal-Mart not only compete in retail trade sector. It also compete in the whole supply chain that include wholesalers, importers, and exporters. So it might be interesting to see how Wal-Mart build up its own chain and how its work squeeze other wholesalers, importers, and exporters.

For example, Wal-Mart set up its international buying office in China by which it purchases 25 billions, 10% of China's total export to the US. In this regard, it is an exporter for Chinese. One can imagine it makes the life of traditional exporters in China very hard.

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