In a world where most retailers are categorized as having a monopolistic competition market structure, Wal-Mart Stores Inc. appears to have an oligopoly market structure. Nevertheless, because there are far too many retailers to deal with, then they also have a monopolistic competition market structure. Regardless, Wal-Mart would rather have it this way because it has not hurt them at all by having competition.
When Wal-Mart Stores Inc. opened its doors to their first discount store in 1962, Sam Walton had no idea his business would take off like it has to this day. The reason for Wal-Mart's success has been their ability to create a basic structure for their very own business ecosystem. Wal-Mart came to the conclusion that if they offered a variety of well-known brands and sold them about 15% cheaper than other retailers, then this would make them a powerful force in the retail business.
This business ecosystem may be similar to what other retailers may use, such as Kmart, but Wal-Mart did not follow the norm by opening stores in the suburbs where the money was.
Wal-Mart decided that it was in their best interest to stay put in rural and small-town markets. They felt that the people from the suburbs would come to them, which is exactly what ended up happening. Their simple strategy worked; one store would cater to several different towns.
In less than three decades of existence, Wal-Mart grew from a single small discount store in Rogers, Arkansas, to the largest retailer in the nation. This title was previously held by Sears Roebuck and Co., but during the early 1990's they were surpassed by Wal-Mart and Kmart. Sears has since regained the number two spot as the nation's leading retailers, but it appears that Wal-Mart may never be caught.
A prime example why they may never catch Wal-Mart is by looking at their sales volume over the years. In 1994, Wal-Mart sales volume exceeded the combined sales volume of Kmart and Sears, the number two and three retailers in the nation, respectively. By 1996, Wal-Mart sales volume exceeded the combined sales volume of Sears, Kmart, and Target. Wal-Mart's stranglehold on its competition has continued to grow constantly over the years.
Wal-Mart is the world's largest retailer and is constantly impacted by government regulations. Wal-Mart faces currently faces 80 class actions lawsuits with many related to Wal-Marts alleged poor labor practices such as off-the-clock work, not paying over time and a whole host of other wage and pay disputes (Wal-Mart 2008). Government regulations will force Wal-Mart to comply, and pay damages to their workers affected if they are found guilty in their lawsuits. Since lawsuits take months and even years to complete this could be a market trend for Wal-Mart for the next few years. Not only has Wal-mart been hit with lawsuits, they have also been employing illegal immigrants. Lawsuits and employment of illegal immigrants could possibly be a market trend for Wal-Mart since they are the world's largest retailer.
Wal-Mart has created a different and new market trend in retail competition. The new trend is called big-box retailers, which include Wal-Mart competitors such as Target, Kmart and Sears (Organic Consumers Association, 2008). The big-box retailers received their name mainly because of their gigantic layout, which looks like a huge box. The large design of these box retailers are created to encourage customers to buy additional products creating an increased sales per square foot (Topix, 2008). In addition to the design, many of Wal-Mart competitors such as Target have expanded their stores to included grocery sections to compete with Wal-Mart.
Wal-Mart has been leading the way with their point-of-sale (POS) terminals and RFID's. These planning tools have helped Wal-Mart comply with their supply and demands. Wal-Mart has set a market tend by adjusting distribution and manufacturing amounts based off of data received from their POS system alerting them on what and where items are being sold. Many of Wal-Mart's competitors have followed Wal-Mart and developed their own POS tools. Major retailers such as Target, Home Depot, Best Buy, and Lowe's have all installed POS tools. This market trend will only help consumers and Wal-Mart was the first retailer to use this type of tool to deal with their supply and demand needs.
As if Wal-Mart's domination of discount stores was not enough, they are looking to take over the grocery retailing industry. Wal-Mart has gotten into the grocery industry by opening stores known as Supercenters. Supercenters are simply the original Wal-Mart discount stores, but now they contain a grocery store as well. The first Wal-Mart Supercenter was opened in 1988.
By combining the two, Wal-Mart had done something no other retailer had ever fathomed doing. They made their stores more convenient to its customers and, while, they made a business move that could possibly keep them on top of the retail world for years to come. Wal-Mart has gotten a 40-50% cross shopping rate from its customers because of the one-stop shopping center, even though their food has been "mediocre" at times. Also, they have received a 35% increase in general merchandise sales because of the Supercenters. These impressive numbers have Wal-Mart predicted to be the leading grocer and retailer in the nation.
At the end of 1996, Wal-Mart Supercenters had a 62% share of total supercenter sales. The sales for 1996 totaled $17.78 billion, up from the $11.51 billion for the previous year. These numbers, and Wal-Mart's other numbers continue to grow year after year, and at this rate it may be hard to maintain a monopolistic competition market structure. They may have no choice but to consider themselves an oligopoly.
Reference:Organic Consumers Association (2008) Organic Consumers Association website Retrieved May 10, 2009, from http://www.organicconsumers.org/corp/walmart102303.cfmTopixStores, Inc. (2008). Wal-Mart Annual Report, 2007 website. Retrieved May 10, 2009 from http://walmartstores.com/Investors/2.MarketLLC. (2008) Topix: Big Box Retailer New 2008 website. Retrieved May 10, 2009 from http://www.topix.com/news/big-box-retailers