Two Great Companies That Have Probably Seen Their Best Days
1) Wal-Mart
Sam Walton started Wal Mart in 1945 in Bentonville, Arkansas. I highly recommend his autobiography “Sam Walton: Made in America”. On his weekends he would jump in his two seater airplane and go scout for new locations. SW really loved what he did and in the process I learned that I never wanted to open up a retail shop. The thing that stuck with me the most was something along the lines of “if you want to do retail, you give up your weekends.” I’d rather not live such a life as time is something valuable to me and I’d rather not spend it in a retail shop if I can avoid it. He targeted small towns where there was less competition rather than enter the highly competitive big cities where people knew there were lots of shoppers. If you go to where there is little to no competition your odds for success will be much higher.
I feel that Wal-Mart have seen their best days and their primary model of business will slowly wane. The last place where internet commerce will take over will be small towns, but the transition is already happening. Less people are going to physical stores which thus means less impulsive buys. Companies whose primary business is in shopping malls are already in massive trouble (e.g. Sears, JC Penney’s)
We have less reasons to walk into a Wal Mart these days. We don’t buy DVD’s and CD’s anymore. We are slowly buying more clothes online. As the speed of delivering things increases the desire to wander down to Wal Mart to buy things like a basketball lowers. That leaves large appliances and groceries as the last major reasons for going to a physical store. WM doesn’t sell large appliances. Why buy diapers at Wal Mart when you can have them delivered to your door with Amazon Prime for the same price? It makes no sense.
I’m not super bullish on online grocery shopping takeover royally in the next five years, but a takeover is inevitable. Buying the core things such as milk, bread every week will be delivered to us by companies like Instacart, Amazon Fresh etc. That transition has begun, but the issue is we like to make impulsive buys and that’s harder to do with food than other online purchases. When we see juicy apples we may decide to give it a try and till we find a way of replacing that online, the total transition won’t happen. However, when it is only $5 more to hit a bunch of buttons online and food turns up at your doorstep a change is coming. The main question here is not Wal-Mart, but are business models like Instacart sustainable without massive venture capital being pumped into the business. If the answer is yes, then mass online grocery shopping is very close. If not, when there is a contraction these businesses may struggle to reach their lofty goals in the near future.
The rural, poorer areas of society where Wal Mart’s dominate will be the last places to predominantly use things like Amazon Prime, but as the younger generations come through Wal Mart will probably become increasingly less relevant to the point where buying groceries in a physical store will be a thing of the past.
Wal-Mart are probably not going to win the online battle.
They have enough capital to try things like buying Jet.com which is a smart move, but they will probably lose to Amazon and other companies in that space. I’ll always bet on a founder led company versus an older legacy based business when the fundamentals of the business are/have changed due to technology.
As long as Jeff Bezos is at the helm of Amazon they will probably take Wal Mart to the cleaners.
The only constant is change.
Time will tell how wrong I am on this…
2) Apple
Apple with Steve Jobs boomed from 1976 till 1985. Apple without Jobs from 1985 to 1997 was a catastrophe. Apple with Jobs 1997 to 2011 boomed. Some people are irreplaceable, it seems Steve Jobs was one of those people.
They have stumbled badly since 2011 in my opinion. It’ll take a long time for them to disappear due to having more money in the bank than any other company, but the signs are there. The products are becoming more complicated to use. The watch hasn’t been a hit. It is a feat of technology, but they probably released it too early. WWDC is no longer something that the Apple fans look forward to like they did in the past. Most of them have been jaded by the disappointment of products such as the Apple TV. They lack that special leader who can guide them. They are stuck incrementally improving what they have rather than making few but massive monumental improvements, which are a necessity to survive in the technology business.
The lifecycle of a technology company is short, and Apple has no monopolies within their business. Google is taking them to the cleaners with the Android operating system. I contribute this largely to the founders of the company still being heavily involved. Founders aren’t as important in businesses such as Coca Cola or a water utility company where they have won their space and the industry doesn’t change quickly. Apple is in the technology business which means that the incumbents can attack and make them irrelevant much faster than anyone could attack a company like Coca Cola.
The quirkiness that some technology company founders possess is remarkable in terms of being able to constantly make monumental improvements to their products in order to survive. What Mark Zuckerburg has done with Facebook is incredible. Their product has drastically changed at least 10 times in their short history and at any moment if they got it wrong people would leave. If he was suddenly not at Facebook, I think the company would probably be in trouble.
Tim Cook is milking their current existing portfolio of products, which I don’t blame him for doing. After Job’s departure it seems they are out of phenomenal ideas to execute on. That task is almost impossible and most of the people capable of replacing him are doing their own companies. You either have it or you don’t and Jobs seemed to have it and that is irreplaceable.
I could be totally wrong on this. The future is weirder and less predictable than most think, but thinking about it is fun.
The only constant is change in this world…
Best Wishes and Stay Pathologically Optimistic
Tom
