Author Topic: WMT - Walmart Inc  (Read 55172 times)

Parsad

  • Administrator
  • Hero Member
  • *****
  • Posts: 8757
Re: WMT - Walmart Inc
« Reply #80 on: October 31, 2015, 11:42:52 AM »
I realize that this is in some sense just polite adoption of corporate framing, but this idea that Walmart is "investing" in wage increases is nonsense. Wage increases are an expense, not an investment. The fact that some $9/hr employee in 2015 will make $10/hr in 2016 has absolutely no positive impact on the results of the company in 2017. This is not a sign of strength, but weakness. And considering labor productivity is perhaps the Number 1 domain where Amazon's retail model triumphs over Walmart's, I think it should be very concerning to see them tacitly acknowledge they'll have to spend even more on labor just to tread water.

Believe it or not, I'm still on the fence about Walmart. I am considering buying it right now, but more as a trade than anything (I do think their death will be quite gradual, and their buyback plans are aggressive). I don't think it is up for debate that they are currently losing the most important fight of their existence to Amazon. That doesn't mean they can't come back, but my concern is that they seem completely delusional about what it is going to take to do that, and in projecting their delusions, are building up an equally delusional base of investors. Not you guys though, you guys are lovely. ;)

I'll watch this video and share my unappreciated notes on it later.

The "investing" word is definitely spin, but the truth is that by increasing wages at Walmart, they will reduce employee turnover.  This is a huge problem at big-box stores, especially in their distribution warehouses. 

Loblaws actually has a bounty out in Canada that if you refer a warehouse distribution employee, they will pay depending on region, anywhere from $2,000-3,000 referral fee when that employee is hired.

Big-box stores spend over $3,000-4,000 per floor/warehouse employee in training and recruitment costs, and roughly $8,000-10,000 on supervisor hires.  But they have something like 35% turnover on floor/warehouse staff and 10-15% turnover on supervisory staff annually.

Unfortunately or fortunately, another fact of reality is that big-box store employees are generally patrons of big-box stores because of the value received for their hard-earned dollars, and with increased wages will spend more of their income dollars at those stores, including Walmart.

So increased wages mean increased expenses, but the actual cost won't be as onerous as markets perceive.  Cheers!
No man is a failure who has friends!


johnny

  • Sr. Member
  • ****
  • Posts: 429
Re: WMT - Walmart Inc
« Reply #81 on: October 31, 2015, 04:29:08 PM »
Parsad: Agree totally that increasing wages is necessary for what they're trying to accomplish. I just don't like the idea that investors should adopt that spin when talking amongst each other. But I'm absolutely convinced that Walmart (and others) pushed way too hard on labor in the past to get margins where they wanted them to be, and that has helped accelerate the changes going on in retail.

rb: I didn't mean to suggest that somehow Amazon was going to get away with not raising wages. Rather, my point is that the rising cost of an input will generally be competitively advantageous for whichever party uses that resource most sparingly/efficiently/productively. Amazon's FCs are far more labor efficient than Walmart SCs, and there is a definite ceiling to how much efficiency Walmart can squeeze out of its higher-paid labor, since they are forcing employees to maximize two goals that are often in conflict (Goal 1: Maximize sales/payroll. Goal 2: Be there whenever a customer has a question, comment, or just wants to chat for five minutes about how many brands of toothpaste there are nowadays).

Amazon is able to completely segregate the vast majority of its retail workforce so that Goal 2 is nonexistent and irrelevant, leaving everybody to focus entirely on Goal 1.

I haven't finished the video yet, but here's the impression I have so far: They've got a perfectly good plan for improving the experience of Walmart stores, but they still haven't confronted the reality that a -great- Walmart in-store experience is completely inferior to the no-store experience that Amazon represents.

The Supercenter was a specific piece of technology, perfectly suited to the 1990s. Now we have a company with thousands of Supercenters run by a management facing a lot of incentives to try and argue that the Supercenter is -the- right technology for today. 3,000 supercenters, at 150,000 square feet, serving a dual-role as retail storefront and miniature-distribution center do not seem to me like the format of the future. 1 million square foot fulfillment centers, run almost entirely by software and robots, utilizing humans only for thumb-related tasks, really strikes me as the technology that is going to "win the future of retail," to borrow a phrase I have heard approximately 500 times so far in the past two hours.

There is nothing about this reality that precludes Walmart from competing effectively, except their apparent reluctance to actually acknowledge it. I can see a perfectly good strategy here, where the Supercenter business continues generating tons of cash, and that cash is then used to built out an intelligent e-commerce platform. I am just skeptical of that actually happening, and I cringe every time I hear somebody mention things like "delivering your online order to you in the Walmart parking lot".

Sorry if I sound like a broken record guys! I'm just trying to use the conversation to clean up my thinking here.
« Last Edit: October 31, 2015, 04:32:32 PM by johnny »

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1801
  • Never interrupt compounding unnecessarily -Munger
Re: WMT - Walmart Inc
« Reply #82 on: November 01, 2015, 07:00:43 AM »
Being a shopper at both Amazon and Walmart, I find some of the pronouncements about B&M stores' demise ludicrous.

I spend about $1000-2000 a year on Amazon. Of $15000-20,000 in total retail spending. I don't see this ratio changing by much for the foreseeable future. And I am a guy with 24 hour internet access, available credit, a checkbook etc.

Many folks that shop B&M because that's the only place they can. Payday loans, cash and even tax rebate checks etc. is all they ever will likely use. Wal-Mart is often the only place they go to.

They likely also don't get on this board
« Last Edit: November 01, 2015, 08:27:39 AM by longinvestor »

vinod1

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1309
    • My Blog
Re: WMT - Walmart Inc
« Reply #83 on: November 01, 2015, 10:40:53 AM »
I do not agree with folks who think Amazon would eat Walmart's lunch. There are quite a few barriers for Amazon online model as it relates to Walmart

1. The core Walmart customer - lower income level and living on paycheck to paycheck with low cash balances - buys stuff just for that week or next two weeks. These customers are not going to be Amazon shoppers for the vast majority of their purchase of essentials. As longinvestor already pointed out above, they are vastly different from COBF board members.

2. More than 50% of Walmart sales are groceries. Majority of the people prefer buying fresh produce after they look and feel them, look at expiration dates, etc. These constitute a a significant part of the grocery basket.

3. It is going to be more expensive to deliver small quantities to customers then it would be to buy them at store. So Walmart would retain a cost advantage on some of the products at least in some of the markets - rural and suburban markets.

So Walmart is going to have a segment of the market where it is competitively advantaged relative to Amazon.

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod


The fundamental algorithm of life: repeat what works. –Charlie Munger

vinod1

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1309
    • My Blog
Re: WMT - Walmart Inc
« Reply #84 on: November 01, 2015, 10:45:50 AM »
I bought some garden furniture at Walmart online and when I tried to pick up at around 6 PM on a Saturday, the said that online pickup section was closed. The email confirmation said it would be open until 10 PM. As I was talking with the store manager, one of the employees gave the excuse that the person who is responsible closed it as "no one was coming anyway" :)

Vinod
The fundamental algorithm of life: repeat what works. –Charlie Munger

ccplz

  • Sr. Member
  • ****
  • Posts: 253
Re: WMT - Walmart Inc
« Reply #85 on: November 01, 2015, 12:42:53 PM »
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?
« Last Edit: November 01, 2015, 04:44:50 PM by ccplz »

rb

  • Hero Member
  • *****
  • Posts: 2922
Re: WMT - Walmart Inc
« Reply #86 on: November 01, 2015, 12:44:24 PM »
They do have online grocery in certain large cities.

krazeenyc

  • Hero Member
  • *****
  • Posts: 715
Re: WMT - Walmart Inc
« Reply #87 on: November 01, 2015, 04:26:58 PM »
Last year, 56% of Amazon's revenues came from groceries. Do people buy groceries online? Is it even possible?

source please. this is not accurate.

ccplz

  • Sr. Member
  • ****
  • Posts: 253
Re: WMT - Walmart Inc
« Reply #88 on: November 01, 2015, 04:34:40 PM »
Last year, 56% of Amazon's revenues came from groceries. Do people buy groceries online? Is it even possible?

source please. this is not accurate.

WMT 2015 10-K p.10

"The percentage of net sales for the Walmart U.S. segment, including online sales, represented by each strategic merchandise unit was as follows for fiscal 2015, 2014 and 2013:... Groceries: 56%"

http://www.sec.gov/Archives/edgar/data/104169/000010416915000011/wmtform10-kx13115.htm

???

sampr01

  • Full Member
  • ***
  • Posts: 221
Re: WMT - Walmart Inc
« Reply #89 on: November 01, 2015, 04:38:45 PM »
Last year, 56% of Amazon's revenues came from groceries. Do people buy groceries online? Is it even possible?

source please. this is not accurate.

WMT 2015 10-K p.10

"The percentage of net sales for the Walmart U.S. segment, including online sales, represented by each strategic merchandise unit was as follows for fiscal 2015, 2014 and 2013:... Groceries: 56%"

http://www.sec.gov/Archives/edgar/data/104169/000010416915000011/wmtform10-kx13115.htm

???

Thats Walmarts revenue NOT amazon's?. You indicated 56% OF AMAZON revenue from Grocereis