Retail

Limit on Customer Traffic Likely to Undermine Walmart's Success

Douglas A. McIntyre

Published: April 5, 2020 9:46 am

Last Updated: April 6, 2020 6:49 am

Walmart Inc. (NYSE: WMT) is among the few huge American companies which have found a measure of success as COVID-19 spreads across the country. Its 4,756 stores have stayed open. Its Super Centers are among the largest in the country by square footage. It allows people to order online and pick up at stores. This gives many people a measure of safety, or at least that is their perception. It has the second largest online traffic level, behind Amazon.com Inc. (NASDAQ: AMZN) Now, however. Walmart has started to limit how people can shop at locations, which is bound to undermine store use.

Walmart has several other advantages as a retailer. It has a wide variety of inventory, from food to pharmacy operations, to clothing, house good, and sports sections. It also sells garden products like shovels and rakes. As important as any other factor is that 90% of its stores are within 10 miles of America’s population.

A new rule sharply hurts the ability of Walmart to serve store customers. It announced that

Starting Saturday, we will limit the number of customers who can be in a store at once. Stores will now allow no more than five customers for each 1,000 square feet at a given time, roughly 20 percent of a store’s capacity.

This compares to the earlier policy that anyone could enter a Walmart, but that people should follow CDC rules which include social distancing. This has not been aggressively enforced.

No one has made an estimate of how much this policy will affect Walmart store sales, but certainly, shoppers had taken up much more than 20% of store capacity before the decision.

A sign of how well Walmart has done in its capacity to produce revenue and profits is the movement of its shares. Over the last month, the S&P 500 has fallen 20%. Walmart shares are up 2%. Wall St. sees Walmart as a financial success well into the future.

One likely trigger of Walmart’s decisions is complaints by large numbers of store employees who say Walmart has been careless. These workers claim that they have not been given adequate masks, gloves, or hand sanitizers.

Another reason for the cutback is that infected customers can infect other customers. Walmart does not want its locations to be viewed as dangerous places.

No matter what the trigger was for Walmart to limit customer use of its stores, it cannot escape the fact that it will undermine sales.