In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
What went wrong at Walmart? How did this seemingly unstoppable retail machine suddenly sputter to a halt after years of relentless growth? The once feared company is actually closing more stores than it plans to open in the United States for the first time in recent memory. In January, Walmart announced plans to close 154 stores in the U.S. and open 135 in 2016; it also announced plans to close 145 additional stores in other countries.
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The factors driving Costco’s success in Canada also push it forward at home in the United States as well. The median U.S. household income has stagnated in recent years. According to U.S. Census Bureau data, it was $53,657 in 2014, just a few hundred dollars higher than $53,105 in 2013 and $52,970 in 2012. That gives most Americans, like most Canadians, a strong incentive to shop at deep discounters such as Costco.
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A side of effect of shrinking incomes is the dramatic increase in aggressive discounting. Discounters grow because they can offer lower prices. When they reach a certain size, discounters get enough leverage to force suppliers to lower costs, which makes even deeper discounts possible.
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Aldi is a potent force that is already changing the American grocery business. It may not threaten the big guys, but Aldi will certainly change how and where Americans shop for milk and potato chips.
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What this seems to indicate is not that Amazon is stealing business from Walmart but instead it is stealing revenue growth. Basically, the additional revenue in the economy that would have normally flowed to Walmart and other big box retailers seems to be flowing to Amazon.
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