Wednesday, October 7, 2009

Will Weak Dollar Destroy Wal-Mart?

Peter Schiff made an interesting correlation between the weak U.S dollar, the Chinese and the future of Wal-Mart (NYSE:WMT).

Schiff asserts that the days of Wal-Mart being able to buy up cheap products from the Chinese like they've done in the past are over, he even said Wal-Mart could become the next Saks Fifth Avenue, meaning their prices will only rise, taking away their unique competitive advantage.

Of course if that were to become a reality, Wal-Mart would struggle, so would their competitors who rely on Chinese products as well.

Wal-Mart could of course go to other countries providing cheaper prices like China currently does and take advantage of that, but it would take a lot of workers to make up the difference, seeming to imply they would have to enlist a number of countries to meet the low price demand behind the reason people shop Wal-Mart in the first place.

If Wal-Marts' competitors are better positioned than they are in getting their products from other countries, then this really could make things interesting, and bring the price differences between them and their competitors much closer.

Maybe this one of the reasons Wal-Mart has been working hard at attempting to bring in higher end clothing to the stores, other than attempting to reach people at higher income levels.

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