Even Your Exit Strategy Merits Attention

The recent press around Wal-Mart closing a lot of their stores in smaller communities (story here and here) raises the question of “How much civic responsibility is appropriate these days for major companies in our communities?”  This is a topic where my worlds collide – my role as economic development coordinator for a small community vs. that of a facility strategy consultant helping businesses identity which facilities to keep, renovate, acquire, or close for efficiency.

Let’s set aside any discussion of whether or not you like Wal-Mart, their business strategy, and the various community issues associated with big-box/chains vs. local merchants.  For this discussion, let’s assume:

  • There is a reasonable business reason why Wal-Mart wishes to exit these locations.
  • Over 100 stores will be closed, mostly smaller ones in smaller markets or not too far from other stores.
  • Wal-Mart is always a major retail presence wherever it is located, and more visible than many companies in general.
  • Wal-Mart in not in contraction mode (they in fact announced the intent to open many new stores in other locations).
  • There will be an impact upon the local communities, some of whom are upset because the establishment of the local store displaced local merchants and now there will be little or no local options.
  • There has been no transition plan yet announced (beyond the intent to place employees at other stores or provide severance support).

Could this situation have been approached in a kinder, gentler way?

Why not broker a deal to backfill some or all of these locations with a retailer who can operate in a smaller market – say someone like Dollar General (as an example for discussion, but probably not the best example).

Yes, I know, it is blasphemy to suggest handing over store locations to a competitor.   

Still, some reasons to consider it….

  1. Salvage some property value – once a store closes, the value of the real estate typically drops. If a new owner/tenant for the property is identified the value of the property is likely to be higher.  This lets Wal-Mart extract more value from the property and a bulk deal may provide a quicker deal with lower transaction costs than site by site sales.  (Where they lease, this benefits the landlords or allows early termination.)  Nearby properties should them hold their value better, maintaining the communities’ tax base.
  1. Avoid some employee transition cost/pain – Wal-Mart is going to incur expenses associated with the employees’ transition. If even a portion of the employees are placed it is less expensive to Wal-Mart and appreciated by the employees.
  1. Show customers they still matter – in some of these communities, Wal-Mart undoubtedly displaced local merchants, and closing the store will leave a gap for local consumers. A local option for convenience items shows your customers they matter even when you cannot provide a local presence and that you are willing to help their transition.  The market that drew Wal-Mart there in the first place still exists so some merchant is likely to fill this void anyway.
  1. Show community good will – showing some concern to plug the gap created by their exit is just good branding. A graceful track record might even help discussions in the communities where new stores are proposed?

I understand that executives have to do what is right for their company.  In the big picture, this means doing what is right for their employees and customers too.  Make no mistake, I am not advocating things contrary to an organization’s best interest, just advocating a broad view of  this interest where possible.   Some of these concepts may apply to smaller, less noticeable exits, worth consideration in your exit strategy planning.

For all I know the Wal-Mart folks considered an approach like this, or one that is even more sophisticated and did not find any willing partners.

Or maybe this is just a crazy idea…