Not so super centers

The Wal-Mart era, the retailer's time of overwhelming business and social influence in America, is drawing to a close.

Using a combination of low prices and relentless expansion, Wal-Mart Stores Inc. emerged from rural Arkansas in the 1970s to reshape the world's largest economy. Its co-founder, Sam Walton, taught Americans to demand ever-lower prices and instructed businesses on running a lean company. His company helped boost America's overall productivity, lowered the inflation rate and strengthened the buying power for millions of people. Over time, it also accelerated the drive to manufacture products in Asia, drove countless small shops out of business, and sped the decline of Main Street. Those changes are permanent.

Today, though, Wal-Mart's influence over the retail universe is slipping. In fact, the industry's titan is scrambling to keep up with swifter rivals that are redefining the business all around it. It can still disrupt prices, as it did last year by cutting some generic prescriptions to $4. But success is no longer guaranteed.

Rival retailers lured Americans away from Wal-Mart's low-price promise by offering greater convenience, more selection, higher quality or better service. Amid the country's growing affluence, Wal-Mart has struggled to overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives. The Internet has changed shoppers' preferences and eroded the commanding influence Wal-Mart had over its suppliers.

As a result, American shoppers are increasingly looking for qualities that Wal-Mart has trouble providing. "For the first time in a long time, quality has a chance to gain on price," says Lee Peterson, a vice president at brand consulting firm WD Partners Inc., based in Dublin, Ohio.

Now, the big-name brands that fueled Wal-Mart's climb to the top are forging exclusive distribution deals with other retailers or working to reduce their reliance on its stores. PepsiCo Inc., which favored mass-market campaigns a decade ago, recently skipped Wal-Mart when launching a new energy drink in favor of Whole Foods Market Inc. Consumer-products giant Procter & Gamble Co. gets 15 percent of its revenue from Wal-Mart, down three percentage points from 2003.

Wal-Mart's effort to expand internationally has had mixed success in affluent markets. Last year it exited South Korea and Germany after failing to adapt to local tastes and achieve economies of scale. In Japan, the company's low-price, high-volume approach has struggled in a country where low prices often equate to low quality.