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Corn+Soybean Digest

The Big Bad Wolf

The Road Warrior Of Agriculture

In recent months Wal-Mart has been denied entry into the banking world. However, what some think of as the “big bad wolf” threatening the banking industry probably will not go away.

Wal-Mart is a strong competitor any way that you slice it in three major areas: excellent streamlined distribution, strong capital or access to capital and information and technology platforms.

Wal-Mart has 3,700 stores in the U.S. and 5,700 worldwide. The retail giant employs 5% of the U.S. work force and 130 million people use Wal-Mart every week. They are in their own right the 20th largest economy in the world.

Wal-Mart, while pulling its application for entry into the banking industry, will still keep knocking on this industry’s door. Why? Their margin is 3.7% while the banking industry’s margin is 16% for selected profitable banks.

They have shown success in the food industry demonstrated by their growth from five retail stores in 1990 to currently being the largest food retailer in the world. Can banking be the next entry point?

Wal-Mart is testing and learning this business model in Mexico through its 576 stores and banking outlets there. With a U.S. society that is becoming more culturally diverse and a younger generation utilizing technology rather than face-to-face contact, could the wolf break down the back doors of the banking industry? Only time will tell.

Wal-Mart’s Strategy
Try it out, learn it and then go into it and dominate. Sounds like a tough competitor.

Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.

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