PhillyDeals: Wal-Mart shifts to 'e-commerce' facilities
Wal-Mart boss Carl Douglas McMillon, who took over management of the largest U.S. retail chain (and Pennsylvania's biggest private employer) earlier this year, told investors last week he will cut $850 million from his new-stores budget in 2015 - and spend $350 million more on "e-commerce" facilities, including a second giant warehouse in Bethlehem.
Wal-Mart will open 70 or fewer Supercenters next year, down from 120 this year; fewer than 200 "Neighborhood Market" stores, down from earlier projections of 350 or more; just 20 Wal-Mart Express locations, down from 70 this year; and as few as nine new Sam's Club discount outlets, which have been losing business to rival Costco, Strasser wrote.
Hammered by online rival Amazon.com, Wal-Mart is building big warehouses to ship goods straight to consumers - including two near one of Amazon's own giant distribution centers in the Lehigh Valley warehouse district, linked by toll-free interstate highways to major East Coast ports and markets.
Wal-Mart said Wednesday it would hire 300 workers for its second Lehigh Valley "e-commerce fulfillment center," in a state "Special Development Zone" (a polluted former Bethlehem Steel mill site), where Wal-Mart will qualify for a $2,100 per-worker tax break for each of the next 10 years, state spokesman Steve Kratz told me.
The company will keep more than $6 million it would otherwise have paid state government if it uses the whole tax break. Wal-Mart earned more than $16 billion in profits last year.
The company announced its "largest-ever" warehouse and 350 jobs at another site nearby in 2013. Wal-Mart says it will spend $96 million finishing the two facilities, totaling 2.4 million square feet, about the size of two of Philadelphia's biggest high-rise office towers.
Wal-Mart has also converted space at some of its biggest stores into online sales shipping operations.
The shift to fewer stores and more warehouse fulfillment centers means less debt, less capital spending, and a more stable share price, Strasser concluded. Lower spending by Wal-Mart will mean less construction and real estate spending, even if new warehouse jobs replace store jobs.
Has Wal-Mart peaked? Will it join F.W. Woolworth Stores, Sears, and Kmart among the nation's once-dominant retailers? Can it narrow Amazon's long lead and move Wal-Mart's bargain-hunting customers online?
For its part, Amazon is moving a little in the other direction: The company recently announced plans for its first Amazon-brand retail store - in New York.