To use a popular business euphomism, the shit hit the proverbial fan in Wal-Mart land. Last week my ears perked up and a smile crossed my face as I learned that Wal-Mart Stores, Inc reported “weaker-than-expected first-quarter profit”, and warned that second quarter results would likely miss the mark as well.

Wall Street’s answer? Wal-Mart stock lost nearly 4 percent in trading. J.P. Morgan said the company’s second-quarter forecast “is the largest negative revision in recent memory.”

Wal-Mart’s spin - er, I mean public relations - department cites rising fuel costs as the cause for their slump, but I believe there’s far more to it. In fact, as I see it, Wal-Mart has three weaknesses that will spell their decline (I don’t dare anticipate their demise just yet).

Low-Dollar Focus
The first, most obvious weakness is Wal-Mart’s focus on bottom dollar bargains. Product quality has never been a concern for the behemoth — they’ve only every worried about making a product cost less in their store than it does anywhere else.

Wal-Mart’s shirts begin to fall apart after their first run through a washing machine. Their pants feel like wearing a cardboard box. Their shoes are so ugly that no self-respecting person would dare to be seen in them. Their picture frames are ugly, their furniture doesn’t fit together properly, and their bedding is rougher than sandpaper. Ah, but it’s all less expensive than what you’ll find anywhere else.

Naturally this strategy has attracted the penny pinchers, and judging by Wal-Mart’s success that’s no small group. However, the penny pinchers are the group most affected by fluctuations in economy. Rising gas prices, rising healthcare costs, and rising unemployment, for example, have a direct impact on the disposable income of Wal-Mart’s core customers. It is a form of tunnel vision that’s hard to imagine happening in one of the world’s largest corporations.

Reputation
Wal-Mart has made it quite clear over the years that they really don’t care about anyone. They sell crappy products that fall apart. They move their supercenters into small towns and drive out the local businesses. They cheat employees of their overtime, they build their stores on burial grounds, they kick people out of their homes, and they discriminate against women.

There are hundreds of lawsuits being filed against Wal-Mart right now as you read this. There are unions forming, protests forming, and citizens organizing, all in the name of fighting Wal-Mart. Does this sound like a caring, community-friendly organization to you?

Competition
Third, Wal-Mart has always had a monopoly. That is, the current Wal-Mart has always been a monopoly.

Sam Walton cared about his customers. He gave us clean stores. He gave us policies like his promise to open a new register if there were more than three people in a line. Shelves were neatly organized. Sales staff were friendly. It wasn’t such a bad place, really. And then Sam Walton died.

Since Walton died, Wal-Mart has drastically increased the size of their stores, adding auto service and full-service supermarkets within the store. They have reduced employee benefits. They have reduced training. They have even ignored such basic concepts as cleaning, and straightening the products on shelves. All of this in the name of cutting costs.

Meanwhile, Target revenues have continued to rise. While they’re one-twentieth of the size of Wal-Mart, Target is on an excellent pace for continued growth. And they’ve done it with clean stores, curteous and helpful employees, and quality products. Their clothing and home furnishings are fashionable and stylish, and feature designs by Cynthia Rowley and Izaac Mizrahi, rather than bottom-dollar Chinese imports.

Additionally, the approval of the merger between Sears and K-Mart will create a superstore entity large enough to compete with Wal-Mart. Not only will this new Sears and K-Mart combination have a market presence capable of taking people out of Wal-Mart stores, but it will also have a bargaining power capable of negotiating prices on a similar scale. And they’ll have the luxury of starting with Sears’s access to higher quality merchandise.

What Does This Mean For Wal-Mart?
It’s still too early to spell out the end of Wal-Mart, as much as I would love to see that day come. But the playing field is changing fast, maybe faster than Wal-Mart is capable of adjusting.