American retail giant Wal-Mart Stores, Inc. has announced that it will close 269 of its stores internationally. This closure is primarily as a result of high levels of competition from online retailers such as Amazon.com, Inc. .
Walmart’s Chief Executive announced the decision and said that he expects other firms like Walmart to also scale back their operations, due to lower levels of demand. 154 US based Walmart stores will be closed at the end of this month, with the vast majority of them being small stores. The other 115 stores to be closed are international; with Brazil being hit particularly hard by the closure (60 stores based in Brazil will be closed.) The Brazilian Walmart stores that are being closed down are all loss making.
Consumers prefer to shop online due to the greater variety of products and potentially lower prices. Online shopping can be done from the comfort of your own home, 24 hours a day. These are the advantages that online shopping has over physical stores. Therefore, it is not surprising that e-commerce has grown exponentially in recent years, with large retailers like Walmart losing out heavily on customers and sales.
It is likely that e-tailers will continue to grow, as more and more consumers use online shopping. The closure of 269 stores means that 10,000 US Walmart employees will be left without a job/unemployed, while 16, 000 workers will be adversely affected worldwide.
During November – December 2015, sales increased by just 3% (a 3.7% increase was expected.)This worse than expected performance may have been a factor in the decision to scale back operations. It is unclear how this reduction in capacity will affect the firm in terms of market share, profitability and share price. Walmart will still have more than 11,000 stores worldwide, and they will continue to open more stores (supercenters & neighborhood markets) in strategic areas in the United States. Walmart shares are currently trading at around $61, after losing nearly 2% of their value today.