A map of Wal-Mart Stores Inc. (NYSE: WMT) stores nationwide shows an interesting pattern. Their concentration is heaviest near its home state of Arkansas and thinner, for the most part, in states far away. If Wal-Mart stores were more evenly distributed, its shot at larger revenue and a knockout blow to some of its weaker competitors would be better. However, store distribution is an Achilles’ heel. Location caps its U.S. sales opportunities.
Wal-Mart could argue that e-commerce makes up for lack of store concentration outside its traditional bastions. But e-commerce remains only a few percentage points of its overall total revenue.
Wal-Mart has 3,504 Supercenters in the United States, 424 discount stores and 683 Neighborhood Markets. As an example of how these are skewed by location, Arkansas has 80 stores and New York 87. Wal-Mart has 80 stores in Oklahoma and 45 in New Jersey.
From a location standpoint, even failed retailer Sears Holdings Corp. (NASDAQ: SHLD) has a better spread of stores, based on the U.S. population. It has five Kmarts in Arkansas, along with seven Sears locations. It has 46 Kmarts and 39 Sears locations in New York. In short, the map of Kmart and Sears stores spreads almost identical to population density. Even if Sears Holdings disappears, it will not be for want of good coverage of the American consumer population.
Some of Wal-Mart’s most critical programs rely on its stores. First among these is the “buy online, pick up at store” plan, which saves people shipping costs. Over much of the United States, the program cannot be effective because there are no stores. Wal-Mart also has a large layaway program, which is impractical for people who cannot easily get to a location.
Wal-Mart has the advantage over almost all of its brick-and-mortar competitors of a larger marketing budget, a powerful brand, product buying power it can pass on to customers and stores the size of aircraft carriers. None of that helps for people who cannot get there from here.