Choose Your Own Terms

On Saturday my wife and I had gone out for dinner. While we were enjoying our appetizer, I overheard the man in the next booth say, “Albertsons is closing and I'll tell you why: Walmart ran them out of business.” My first thought was that he was wrong, and I wanted to tell him so. But I made a better choice by letting it pass in favor of my date.

Since people will be people, it is possible that some Walmart managers, overcome by machismo, would agree with the gentleman. But I still think he was wrong. My position is not to defend Walmart — in spite of the fact that I love success stories (and they are one) — but to see their competitiveness from a broader perspective that can be instructive for all of us who are involved with different businesses.

The first reason that the gentleman was wrong is because managers for each company choose the terms on which they want their businesses to compete. There are, no doubt, other grocery chains that chose to compete with Albertsons on terms that favored Albertsons. Some of those that did probably lost, and someone declared that Albertsons ran them out of business. That, too, would be an incorrect statement. Any mistakes or faults or blame that may need to be ascribed should be on the management that chose to compete on terms that favored their competitor.

It could be claimed that the more powerful business moved into the market that had been served well by smaller or independent companies. That is true. But it is also true that the businesses that were in the market first have the opportunity to change the terms of competition. The fact that they may instead choose to attempt a re-enactment of David's triumph over Goliath is a management decision based on something other than an objective assessment of the environment.

A friend of mine owns an independent pharmacy. It is a single-location neighborhood pharmacy. One of those places where everybody knows your name. About 15 years ago, Walmart put a supercenter just around the corner. My friend fought it but he also did something else. Being smart enough to know that he couldn't compete on price, he didn't. He changed the terms of the competition.

He grew his closed-door pharmacy business. That is a type of business where a retailer can't compete, and now he compounds drugs for pain management, chemotherapy, nursing homes, anti-aging and just about anything else. That way his business is not dependent on winning a war against Walmart. Sure, he still has his retail pharmacy, but the terms of the competition are not based on the $4 retail customer.