Wal-Mart and Fixed Costs

We're pleased to announce we've started blogging on the Curmudgeon Report. As the name would suggest, we will use that blog to rant. Probably loudly. Comments are appreciated and invited, as they are on all our blogs.

The previous post of our co-writer got us thinking today, while we partook of services at the Church of the Consumer. Namely, we went shopping in the local Wal-Mart. Looking around, at the ruts developing in the floor, the tears in the linoleum, the spotty supply of cooking oil... we asked ourselves: how will Wal-Mart last?

Yes, we are fully aware that many have been calling for the death of Wal-Mart. In our reading experience, these run along energy-availability arguments, such as the arguments of James Kunstler. We don't dispute what Mr. Kunstler says, but we don't believe that Wal-Mart necessarily has to go under. In our estimation, it's an excellent company with a brilliant business scheme.

But, at the same time, we are certain that any one regular Wal-Mart store -- much less a Supercentre -- represents enormous fixed costs. Electricity, heating, maintaining, and cleaning the store; transportation of inventory and stocking; none of which are exactly cheap.

We fully believe that the economy in the United States is going down 50%-75%, followed (we hope) by a long, slow recovery. With this catastrophic drop in economic activity, we doubt Wal-Mart will be able to continue to serve the 25,000 or so population area. We suspect only places of 100,000 persons and up will be able to support a store. That, of course, means a lot of Wal-Marts are going to be closing... probably even the one in our town.