WalMart is an amazing company.  From a small rural store a behomoth of retailing emerged in just a few years.  No one seems able to compete with WalMart in discounting.

Despite its success, WalMart is now struggling to grow.  Poor revenue growth has stalled the share price.  Now, more than at any previous time, WalMart needs to find new ways to grow.  Its Success Formula has worked so well that no one can outperform WalMart at being WalMart.  But, it’s unclear that there’s a need for more WalMarts.  And foreign markets aren’t nearly as excited about WalMart as Americans.  So, how is WalMart to grow?

WalMart needs White Space projects that can launch new revenues.  Just as Sam’s was once a new project that became large.  But WalMart has become so focused on its retail store strategy that it’s lost the ability to do new things.  Last week WalMart gave up on its effort to rent videos on-line, handing that business to NetFlix.

Amid the announcement WalMart pointed out that its stores sell more in one day than NetFlix does in a year.  But the real story is that WalMart can’t figure out how to compete on-line.  At WalMart, it’s all about the stores.  How to drive more revenue to the stores.  And that’s getting increasingly difficult.

There was another retailer that never rose to this challenge.  Once the biggest innovator in retail, they were the first to capture the rural customer (with mail order) and they became a powerhouse across the country.  But, when they couldn’t adapt to changing times and learn to do new things they fell to an acquirer’s axe.  That company was, of course, Sears. 

So, it may seem silly to think that WalMart’s failure to sell videos, or anything else, on-line is a serious concern.  But people thought Sears’ on-line failures were no big deal 6 years ago.  It’s actually a very, very big concern when any company becomes so locked in that it can’t undertake new projects.  It portends very bad things ahead.

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