scale, efficiency, product, retail, Wal-Mart, Sears, K-Mart

Is bigger better in the retail world? Sometime yes - if you're a giant firm like Wal-Mart. Sometimes no--when you're anyone else in the field, and it may be impossible to get large enough. The time is getting close when consumers will find out the answer. Sears and K-Mart, who many years ago were the two largest retailers in the country, have been struggling of late. They have just combined forces to battle the current two largest retailers: Wal-Mart and Home Depot. The new Sears-K-Mart combination will be the third largest retailer in the country with combined sales of $55 billion (in 2003, Wal-Mart had $256 billion in sales; Home Depot boasted $65 billion in sales).

K-Mart Chairman Edward Lampert argues, "It is pretty obvious that scale is important to compete effectively." He is determined that the new combination will have a sufficiently low cost structure to allow it to compete with Wal-Mart. Part of the plan is to rename some K-Mart stores as Sears, and allow brands to be sold at one another's stores. For example, Sears' flagship brand Craftsman tools will be sold in K-Mart, while Martha Stewart Living products, formerly exclusive to K-Mart, can now be sold in Sears' stores.

Other industry analysts, aware of the two companies' historic inability to compete with Wal-Mart, are not so sure. They are concerned with the fact that Wal-Mart is so big, no other firms can compete with it, short of everyone else in the market joining forces against Wal-Mart. Given Wal-Mart's head start in databasing and arranging volume discounts from manufacturers, can any entity compete effectively?