It occurred to me a few years back, that big box stores were Ponzi schemes.
If you were a hedge fund, and you were only making money from new clients; that is, you were losing money with old clients, but paying off the bills with new clients -- what would you call that?
And yet, that is exactly the position that Walmart is in. It has lost money in existing stores for 8 straight quarters -- but, is still turning a profit from 'new' stores overseas.
Same is true of Home Depot and Lowes and, I suspect in the long run, every other chain whose model it is to open new stores. Bigger stores.
They are trying to get around this by building smaller stores -- but, a smaller big box store is just a "Store" and loses the supposed big box advantages. In other words, they have to compete on the same terms.
But that isn't the point, I think. The point is that a new store will always earn more at first. (As long as you don't have to account for the cost of paying for the infrastructure.) Meanwhile, you stress the old stores by raising 'productivity' -- that is, getting more work out of fewer workers. Which is a great short term strategy, but a lousy long-term strategy if you are trying to satisfy the customers.
But it can continually be short term, as long as you keep opening stores. More stores. Don't look at that ten year old store.
It seems all phony to me. As if you put together two money losing operations and claim, "Look, our sales just doubled!"
I was just watching a documentary on Sears; and it showed how 70 years or so ago, they bought corner lots on the outskirts of towns and created huge growth for themselves as the towns grew up around them. 50 years later, these stores were old and tired and supplanted by a new chain of stores who got the bright idea of buying corner lots on the outskirts of towns....
1 week ago