Sears/K-Mart Merger

[JSngry]

The more I find out about Wal-Mart, the more I realise that my "Wal-Mart is Evil" slogan of the last decade or so isn't just sloganeering. It's the TRUTH! So I hope that something good in terms of stopping the beast's devouring of the soul of America comes of this merger.

BUT...

To me, it seems akin to the Expos and the Royals combining teams and expecting to win the World Series because they have twice as many players now. Mediocrity + Mediocrity ≠ Excellence...

But hey - I'm no "business analyst" or such, so let somebody who really knows something come on with it!

[Dr. Rat]

I'm not so sure an Expos/royals combo wouldn't be pretty damn good.

Anyhow, I think the writing is already on the wall for Walmart--decay. Aside from the serious image problems they've got, the next decade is probably going to be marked by a significant decline in the discretionary spending power of the American prole (even when measured in terms of stuff rather than in dollar terms).

The gravy in this market is going to be with the middle & upper middle classes, and Walmart is very poorly positioned to get much market share there. Walmart/ Sears? Maybe.

Thus the move to food markets. Walmart is really good at working small margins into bigger ones--just what you need in the grocery store market. I wouldn't be surprised if Walmart weren't essentially an enhanced grocery store chain in ten years, with other players dominating the "department store" market.

I'm not a business analyst, either, btw, but I don't let that stop me!

--eric

[JSngry]

Anyhow, I think the writing is already on the wall for Walmart--decay. Aside from the serious image problems they've got, the next decade is probably going to be marked by a significant decline in the discretionary spending power of the American prole (even when measured in terms of stuff rather than in dollar terms).

Well, see, that's what I've always maintained has been the fallacy of modern American business, that a consumer economy needs consumers. You know, what if the gave a store and nobody came cause they had no money?Radical notion, I know, but when you look at the ripple-effect of cost-cutting, the jobs lost and only sometimes replaced (often with lesser paying ones), what are you doing to create more and/or stronger consumers? And Wal-Marts led/leads the way in all this.

But anyway, I don't wwant this to turn into a bash Wal-Mart thread, at least not primarily so. I'd rather talk about what, if any, advantages will come of the Sears/K-MArt merger.

[Dan Gould]

Its way too early to even begin to guess how K-Mart/Sears will compete with Walmart.

But Rat's assertions are pretty ludicrous on their face:

The gravy in this market is going to be with the middle & upper middle classes, and Walmart is very poorly positioned to get much market share there. Walmart/ Sears? Maybe.

Walmart STARTED in the hinterlands. For many years now, they've moved very aggressively into the suburbs where the middle and upper middle classes are. And they get a lot of their dollars already.

Thus the move to food markets. Walmart is really good at working small margins into bigger ones--just what you need in the grocery store market.

"Thus"? Walmart leveraged their big boxes to apply the same concepts to food shopping. It had nothing to do with being "poorly positioned to get" the market share of the middle and upper middle classes. You make it sound as if they were in a weak position and just trying to find some new way to hang on.

I wouldn't be surprised if Walmart weren't essentially an enhanced grocery store chain in ten years, with other players dominating the "department store" market.

Yeah, a company that's a bigger economy than a lot of countries is just going to be a grocery store chain.

Edited November 20, 2004 by Dan Gould

[vibes]

Mediocrity + Mediocrity ≠ Excellence...

That pretty much sums it up for me. When I walked into the office the morning the merger was announced, my boss asked me if I'd heard about it. I simply replied:

Two wrongs don't make a right.

I don't think this merger is about beating Wal-Mart. For the foreseeable future, no one is going to out-Wal-Mart. That's why Kmart has had so many problems in the last decade or so. They were on top, got arrogant, got lazy, and then when Wal-Mart passed them by, they went into catch-up mode by doing a lot of "me too" sorts of things. It didn't work, obviously.

Target has done a very good job of finding its own place in the market place, especially with its "cheap chic" strategy. Kmart is working on similar sorts of things, but again, it seems more like "me too" than something original.

There are definitely positive things about the merger, however: the potential to significantly reduce costs and increase efficiencies by reducing corporate, regional and distribution headcount; leveraging the buying power of two companies instead of one when negotiating with suppliers; expanded retail space for Sears' appliances; the opportunity to create a more efficient supply chain network.

If the new CEO and board of directors are smart about this merger, they'll hopefully dump a lot of the Kmart corporate employees and transfer their functions over to Sears. Kmart is widely hated in the industry for being difficult to work with and for always trying to throw their weight around, as opposed to partnering with suppliers.

Edited November 20, 2004 by vibes

[Jazzmoose]

For me personally, I don't like it at all. I shop at Sears occasionally, maybe once every month or two. Not exactly my favorite store, but I still drop a few bucks there once in a while. You couldn't pay me to go into a K-Mart; if I want the experience of buying cheap crap with poor customer service, I'll go to a flea market and piss off the sellers before buying. K-Mart's management couldn't run what they've got, so now they take over another business?

I'd say this mediocre plus bottom of the heap, not mediocre plus mediocre. And since it's the bottom of the heap in charge, I can't see it as hope for improving the mediocre...

[JSngry]

Sears = Craftsman & Kenmore, two very solid brandnames. but what else? Ain't no more Silvertone gitars, alsa...

K-Mart=???? Blue Light Specials?

[Guest Chaney]

I'm guessing that China will be very happy over news of this merger as SearsMart will now probably follow the Walmart model -- or at least accelerate their current model -- and make greater low cost demands of its suppliers, demands that can't be met without looking to create more low(er) paying jobs for the likes of the citizens of China.

Good for America? I think not. Just a greater availablity of cheaper crap.

[vibes]

I'm guessing that China will be very happy over news of this merger as SearsMart will now probably follow the Walmart model -- or at least accelerate their current model -- and make greater low cost demands of its suppliers, demands that can't be met without looking to create more low(er) paying jobs for the likes of the citizens of China.

Show me ONE company that does not do this. I can't think of one.

Some companies just have greater power to do this than others. People look at Wal-Mart and criticize them for squeezing suppliers, but rarely do people look at the good that this does. It forces everyone from suppliers to transportation companies to eliminate waste, refine manufacturing processes and create efficiencies in their businesses. It's quite ironic that people criticize Wal-Mart for giving them what they want - lots of cheap stuff. I may not shop at Wal-Mart and may have some concerns about certain things they do, but I admire the business and brand they've created.

[JSngry]

Some companies just have greater power to do this than others. People look at Wal-Mart and criticize them for squeezing suppliers, but rarely do people look at the good that this does. It forces everyone from suppliers to transportation companies to eliminate waste, refine manufacturing processes and create efficiencies in their businesses. It's quite ironic that people criticize Wal-Mart for giving them what they want - lots of cheap stuff. I may not shop at Wal-Mart and may have some concerns about certain things they do, but I admire the business and brand they've created.

This is all well and good, but when does it reach the point of diminishing returns? And what does it mean when said point is not recognized as such?

Stocks? Yeah, ok, so Mr. and Mrs. Normal American have a portfolio. Right on? But when they lose thier gigs and can't get comparable salaries, and they need some buckage? What're they gonna have to do? sell the stocks, right? And what are they left with then? Shit for money and NO portfolio. Let the good times roll.

This whole cost-cutting and efficiency shit can't go on forever w/o eventually becoming counterproductive. It just can't.

[vibes]

This whole cost-cutting and efficiency shit can't go on forever w/o eventually becoming counterproductive. It just can't.

It can go on forever, and it will go on forever. Guaranteed. There comes a point where you can't squeeze suppliers any more, so you have to look at yourself. If necessity is the mother of invention, and there is a need to cut costs, then ways will be found to cut costs.

This may hurt people, but that's inevitable and unavoidable. Private companies do it just as much as public ones. The way I see it, it's just another incentive to keep educating yourself and to remain competitive in whatever your field may be. That way, when changes are made and efficiencies are found, a person can still remain valuable in some way or function.

[wesbed]

When I heard of the KMart/Sears merger, my first thought was that I'd be able to purchase Craftsman tools at KMart. Other than this, no other thoughts. The only items I purchase at either store, when needed and not often, are the tools.

I haven't been to a Sears or KMart store in quite some time. The Target stores fufill my Wal-Mart/KMart needs. I haven't been in need of any new Craftsman tools.

Which causes me to wonder if anybody else still makes purchases at Sears and/or KMart? Maybe this is one of the reasons the two corporations decided to merge?

Edited November 20, 2004 by wesbed

[JSngry]

This whole cost-cutting and efficiency shit can't go on forever w/o eventually becoming counterproductive. It just can't.

It can go on forever, and it will go on forever. Guaranteed. There comes a point where you can't squeeze suppliers any more, so you have to look at yourself. If necessity is the mother of invention, and there is a need to cut costs, then ways will be found to cut costs.

Note: bold added

Ah, there's the rub. The cult of suicide and cannabalism, eating yourself just to stay alive. Doesn't that creep you out just a little?

Cost-cutting is always good, no matter who or how many people it hurts? That's a totally arbitrary value-judgement that has been made, and can just as easily (well, not in practice, but in theory) be unmade.

If you need more consumers, you need more jobs. Jobs cost money. But they also create spending power, which means making some of the money back, right? Like an old poker buddy of mine says, "You gotta spend money to make money".

Look, I'm all for efficiency, making a good profit, keeping your skills at a level of desirability and all that. That's just good old-fashioned smart. But what I'm not all for is this totally arbitrary decision that "there's always more", that you can cut and cut and cut and never bleed. It defies all logic. It's "true" only because "we" have decided that it is. There's no model whatsoever for it actually being true.

In that regard, we're our own worst enemies, victims of a self-induced hypnotic trance. It's time to wake up and restore some semblance of sane balance (hell, even semi-sane semi-balance would be good enough) to the equation. Too skinny can kill you just as bad as too fat.

[Guest Chaney]

(...)

Which causes me to wonder if anybody else still makes purchases at Sears and/or KMart? Maybe this is one of the reasons the two corporations decided to merge?

When I need a major appliance, I go to Sears.

My mother needed an air conditioner and I took her to Sears.

My lovely 19 year old niece -- suprisingly, to me -- has a Sears credit card and buys clothing there.

I don't shop at KMart.

Edited November 20, 2004 by Chaney

[vibes]

This whole cost-cutting and efficiency shit can't go on forever w/o eventually becoming counterproductive. It just can't.

It can go on forever, and it will go on forever. Guaranteed. There comes a point where you can't squeeze suppliers any more, so you have to look at yourself. If necessity is the mother of invention, and there is a need to cut costs, then ways will be found to cut costs.

Note: bold added

Ah, there's the rub. The cult of suicide and cannabalism, eating yourself just to stay alive. Doesn't that creep you out just a little?

Cost-cutting is always good, no matter who or how many people it hurts? That's a totally arbitrary value-judgement that has been made, and can just as easily (well, not in practice, but in theory) be unmade.

If you need more consumers, you need more jobs. Jobs cost money. But they also create spending power, which means making some of the money back, right? Like an old poker buddy of mine says, "You gotta spend money to make money".

Look, I'm all for efficiency, making a good profit, keeping your skills at a level of desirability and all that. That's just good old-fashioned smart. But what I'm not all for is this totally arbitrary decision that "there's always more", that you can cut and cut and cut and never bleed. It defies all logic. It's "true" only because "we" have decided that it is. There's no model whatsoever for it actually being true.

In that regard, we're our own worst enemies, victims of a self-induced hypnotic trance. It's time to wake up and restore some semblance of sane balance (hell, even semi-sane semi-balance would be good enough) to the equation. Too skinny can kill you just as bad as too fat.

I consider it to be neither suicide nor cannibalism. If creating efficiency requires a reduction in the workforce, then the workforce is reallocated elsewhere. That is always a gradual process, and that process has been going on for hundreds of years. There has never been (and probably will never be) such a drastic reduction in the workforce at any given time that it would hurt the very companies that caused those workforce reductions in the first place.

Efforts to reduce headcount and create efficiencies can often go to far. Just like markets, companies will often swing the pendulum too far in one direction, and then correct themselves over time. This happened at my own company: people were laid off in order to create efficiencies, but then we were hiring more people again in six months, and many of those jobs were extremely similar to the jobs that were eliminated during the workforce reduction. However, those resources were reallocated to new projects and initiatives. Companies always do this.

[wesbed]

When I need a major appliance, I go to Sears. My mother needed an air conditioner and I took her to Sears. My lovely 19 year old niece -- suprisingly, to me -- has a Sears credit card and buys clothing there. I don't shop at KMart.

My last appliance, a refrigerator, was purchased at Cirtuit City. The Circuit City stores in my area no longer carry appliances. It seems like Best Buy still has an appliance line (I think?). Does Home Depot carry appliances too? I can't remember.

I purchased a washer/dryer set a few years ago. The set was purchased from a local appliance dealer who beat the hell out of Sears on pricing and service.

I do hope Sears & KMart survive. More stores provide more competition which results, hopefully, in a better experience for the consumer. We don't need no Wal-Mart monopoly.

[vibes]

It seems like Best Buy still has an appliance line (I think?).

Best Buy does have appliances in most of its stores. It's been a relatively tough business for them to crack, however. Best Buy just isn't the first place you think of going when you need a new refrigerator or washing machine.

[JSngry]

I hope you're right, vibes, but as long as Wal-Mart's the proverbial 500 lb. gorilla, I can't see America becoming anything but a Third World country in another 25 years or so. Something's gotta give somewhere along the line.

Time, as they say, will tell.

Edited November 20, 2004 by JSngry

[Tjazz]

Well, let's see, is the cup half full or half empty?

[JSngry]

Depends on how thirsty you are.

[vibes]

I hope you're right, vibes, but as long as Wal-Mart's the proverbial 500 lb. gorilla, I can't see America becoming anything but a Third World country in another 25 years or so. Something's gotta give somewhere along the line.

Time, as they say, will tell.

I wouldn't worry too much about Wal-Mart. No company is capable of being all things to all people. Wal-Mart's "stack it high, let it fly" model only appeals to certain people. Everyone knows that if you want service, you don't go to Wal-Mart. Wal-Mart also has a very "cheap" image which will be extremely difficult for it to shed, if it ever tries to...so, the segment of the population that needs style and name brands won't go there. You get the point. Like I said before, you can't out-Wal-Mart Wal-Mart, but that doesn't mean there aren't other things you can do.

Edited November 20, 2004 by vibes

[Guest Chaney]

I consider it to be neither suicide nor cannibalism.  If creating efficiency requires a reduction in the workforce, then the workforce is reallocated elsewhere.

(...)

But where? As we get more and more efficient, there's less need for the type of production jobs that many folks rely upon. Face it: not everyone has the natural ablilties to survive in anything but a blue collar type job. Not everyone has the abilities to find a place in the high-tech sectors of the economy or as doctors, lawyers, indian chiefs...

[wesbed]

as long as Wal-Mart's the proverbial 500 lb. gorilla, I can't see America becoming anything but a Third World country in another 25 years or so. Something's gotta give somewhere along the line.

I have a friend who does all his shopping at Wal-Mart. Clothing, housewares, and food. He invited me to his house for dinner once upon a time. I advised him that I'd bring the meat for the grill. He couldn't get over how good the steak was. He asked if I'd purchased the steaks from a specialty store. I replied, no, I purchased the meat from a grocery store. Remember those?

I've never had a good cut of meat from Wal-Mart. When I look at the slection of meat offered by Wal-Mart it looks cheap to me. I'd much rather shop for groceries in a grocery store, even if it does cost a little more money.

I hope the non-Wal-Mart grocery stores find a way to survive. I will miss them if they go.

[Guest Chaney]

I had no idea that Walmart sold meat.

[Dan Gould]

What surprised me was reading very recently, in passing, something that said that in five years, or maybe 10, Walmart won't "buy" anything that it is stocking. There'll be no inventory. Everything will be "owned" by the distributors/producers until the moment its pulled from the shelf and run through the check-out scanner and paid for. The suppliers say this isn't what they want, but its what Walmart is heading towards, and what can they do?

To me, the big threat is the cultural impact. The stocking only of CDs that don't carry a parental warning. Not stocking Maxim or magazines of that type. Its the application of their own corporate sense of morality on such a wide scale that it will have a measurable impact on what gets sold in what quantity.