Wow, no company is immune to covering up the truth. For more than a week now, Wall Street has speculated about Wal-Mart discontinuing their Video download service and while many have accepted Wal-Mart’s public statement that the reason is Hewlett Packard’s lack of supporting the software anymore, we have to ask, who is kidding who?

Wal-Mart’s technology infrastructure has been compared to that of the Pentagon, so it’s rather surprising that they would cite technology as an excuse for dropping a potentially lucrative business unit. The truth, however may be that Wal-Mart in all it’s money, resources, and power, lacks one thing–high profit margins. These razor-thin margins don’t allow Wal-Mart to do the one thing many retailers can and that’s subject themselves to the fraud rates otherwise common with online retailers. After all, when you earn an average of 3 cents for every dollar you sell, what happens when your fraud rates are as high as 5 percent, and how long can those losses last? Well, I guess according to Wal-Mart, not long at all.

It seems that Wal-Mart may lack the risk management tools to support an endeavor like Video Downloads. It’s no surprise, have you ever tried ordering an something as trivial as an MP3 player from Wal-Mart Canada? It’s virtually impossible, as many products have been deemed “too high risk” even for Wal-Mart’s comfort level.

The reality is that if you are going to play in the high risk world of video downloads, you need to be able to subject yourself to the trials and tribulations of high fraud rates, which Wal-Mart simply can’t subject itself to. The fact is that they have attempted to play in the Video industry before but once again as they have learned with banking, when it comes to the merchant industry, it’s just too much of a challenge even for the once almighty Wal-Mart.