Walmart may seem like one store that would never take a hit, but even they have been struggling in recent years. With the rise of Amazon and other online companies, as well as cheaper grocery stores, Walmart has struggled to adapt. Stores are closing down, and even though there are plenty of people who still shop there on a regular basis, it just isn't the number it used to be. Their image has never been great, but it's only gotten worse in recent years, and tariffs are hurting them as well. Let's take a look at the real reason why Walmart is closing down stores.
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00:00For a long time, Walmart seemed like the unstoppable juggernaut of the retail world.
00:05But things haven't been looking so great for the retail giant.
00:09In fact, they just announced another round of closures.
00:12So what's going on with Walmart, and will it get better or worse?
00:16In 2016, Walmart purchased Jet.com and began aggressively expanding their online presence.
00:22Why?
00:23Because Amazon, that's why.
00:25The online retail giant was figuratively eating Walmart's lunch, so Walmart had to shift gears
00:30from a brick-and-mortar retail world to a digital one.
00:34CEO Doug McMillan told Business Insider that the resulting downturn in profits as they
00:38refocused their business was, quote, "...planned and expected."
00:42But it hasn't been all sunshine and roses.
00:45Industry experts say that Walmart has had issues figuring out how much to keep in stock
00:48to satisfy both online and in-store orders, often resulting in physical locations being
00:53either overstocked with unwanted merchandise or understocked on key goods.
00:58And considering the whole point of going to Walmart is to get all the vital supplies in
01:02one place, not having those items when customers need them is a big problem.
01:06"...Amazon is now worth more than the nation's biggest retailer."
01:10You know why?
01:11"'Cause they sell sex toys, and Walmart can't or won't."
01:15"...nobody else will tell you this, but that's the reason."
01:18Okay.
01:19According to Forbes, Walmart's image has been a major problem for them.
01:23Sure, they're known for low prices, but they're also known for leaning on small retailers,
01:28dirty, messy, and disorganized stores, a complete lack of training for employees, management
01:34that are out of touch, and some of the worst customer service this side of S-Smart.
01:38"...Lady, I'm afraid I'm gonna have to ask you to leave the store."
01:41"...Who the hell are you?"
01:43"...Name's Ash.
01:45Housewares."
01:47In 2018, the U.S. government and President Donald Trump leveled a ton of tariffs on goods
01:53coming into the country from China.
01:56Hundreds of affected businesses appealed to the government for relief, but it's arguably
01:59Walmart that has been affected the most, as they import a slew of goods from Asia.
02:05According to The Washington Examiner, Walmart responded by absorbing as much of the cost
02:09as possible in order to keep their prices relatively level.
02:13That's good news for consumers, but bad news for Walmart's bottom line.
02:17With supply costs up 3.2 percent, their profit margin had declined severely.
02:22With so many of their brick-and-mortar locations struggling, Walmart has turned to rebranding
02:27and reformatting in order to try to find a more profitable business model.
02:31In 2011, for instance, they rolled out Walmart Express stores in urban markets across America.
02:37By 2014, though, the experiment was over, and those locations had instead been replaced
02:42by a new brand, Neighborhood Markets.
02:45Designed to compete with chains like Trader Joe's, Neighborhood Markets primarily sell
02:49groceries.
02:50But while Walmart had close to 700 Neighborhood Markets locations by 2019, they had also already
02:55closed more than 130 of them, with more closures announced.
03:00Maybe it will work out in the long run, but considering the massive costs associated with
03:04opening and closing store locations, trial and error seems like an expensive way to do
03:09business.
03:11Walmart isn't just closing down stores, though.
03:13Another metric of how much they are struggling is the fact that they aren't opening many
03:17new stores, either.
03:18According to Yahoo Finance, Walmart had more than 3,500 supercenters in the U.S. at the
03:23beginning of 2019.
03:25Only 15 of those, though, opened in 2018, and only 10 new stores were planned for 2019.
03:31It seems that Walmart has reached market saturation, as every location that can support a store
03:36seemingly has one already.
03:38It's no wonder, then, that Walmart is reportedly focusing on overhauling, or simply closing,
03:44their existing locations.
03:45And they are also looking for different ways to expand.
03:49According to CNBC, Walmart has been buying up brands like Flipkart, Bare Necessities,
03:53and Eloquii, as well as partnering with corporations like Advance Auto Parts, MGM, and Humana.
03:59It's all part of a push to produce products in-house to reduce costs, just like their
04:03store closings.
04:05It's a tough call, but you know what they say.
04:07The hardest choices require the strongest wills.