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Wal-Mart goes upmarket
Wal-Mart, the world's biggest retailer with annual sales of $300 billion, is being forced into upmarket expansion by lack of opportunities for growth in the US, as well as increasing competition.
Having conquered the value-end of retailing and with huge reach (80% of US shoppers visit a Wal-Mart at least once a year, while 170 million consumers worldwide shop at Wal-Mart each week), it is expanding into organic foods, better wines, high-end consumer electronics and even fashion.
The move is partly about improving its image, but the risk is that it will lose its competitive edge. The group claims it can substantially reduce the price of organic foodstuffs, but Wal-Mart's typical supply model involves pushing vendors into a centralised distribution system.
With the organic foods market made up of many small suppliers, it may have to go back to a model of suppliers feeding local stores.
Wal-Mart: is there a downside to going upscale?
Knowledge@Wharton, 14 June 2006
Review by Steve Lodge
This article was first published on World Business
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