2/8/2011 11:55 AM ET|
Rivals exploit Wal-Mart's missteps
The king of discount retail has given competitors an opening with store renovations that backfired and less-aggressive pricing. But Wal-Mart has a plan to get its growth back.
Dollar stores beckon, their small size ideal for quick shopping. Target (TGT, news) offers 5% off if you pay with its store-branded card. Costco (COST, news) tempts with high-end, brand-name food and designer clothes at competitive prices.
Bernadette Clark used to visit Wal-Mart here twice a week. Now it's twice a month. She got fed up last year when Wal-Mart stopped stocking some of her favorite brands and she couldn't count on low prices.
"It gave me the opportunity to look elsewhere," she says. "I shop around more."
Three years ago, Wal-Mart ruled for convenience, selection and price. But today it is losing customers and revenue, and smarting from decisions that backfired.
Wal-Mart is not in danger of ceding its place atop the retail world. But competitors have begun to chip away at its dominance.
Over the last year, revenue at Wal-Mart stores open at least a year has fallen by an average of 0.75% each quarter, according to the International Council of Shopping Centers. Revenue rose by an average of nearly 1.7% at Target, 8% at Costco and 5.9% at Family Dollar Stores (FDO, news).
The comeback plan
To fight back, Wal-Mart is again emphasizing low prices and adding back thousands of products it had culled in an overzealous bid to clean up stores. It's also plotting an expansion into cities, even neighborhoods where others dare not go.
"We are running a better business because our competitors cause us to raise our own game," Wal-Mart CEO Mike Duke says. Wal-Mart says it expects to halt the decline in revenue when it reports results from its fourth quarter this month.
Unlike most stores, Wal-Mart thrived when the Great Recession struck in late 2007. Its core customers -- households making less than $70,000 a year -- bought more. For many, it became the only place they shopped. Affluent shoppers became price-conscious and discovered Wal-Mart's prices were hard to beat.
All of Wal-Mart's $27 billion in revenue growth for the year ending in January 2009 came from greater demand for basic items -- food, pharmacy and household goods. Shoppers spent 13% more on basics at Wal-Mart that year.
Shoppers also liked that Wal-Mart's stores looked neater. The company was finishing a major renovation to address complaints that its stores were messy. Wal-Mart widened aisles, eliminated clutter, improved lighting and lowered shelves.
Family Dollar and Dollar General (DG, news) posed little threat. Their stores generally were dingy, and their shelves were filled with low-quality clothing and housewares. The groceries weren't major brands.
Target, meanwhile, struggled with the perception that its prices were high. And stores filled with nonessential items -- think brightly colored, decorative pillows and kitchen accessories -- didn't appeal to shoppers focused on making ends meet.
So Wal-Mart had a competitive edge. It lasted until June 2009, the month that economists would later determine was the end of the Great Recession.
Missteps drove customers away
Around that time, Wal-Mart's renovation started to backfire. As part of its store overhaul, it had removed thousands of products from its shelves. Gone were top-selling toothbrushes and other things that people counted on Wal-Mart to stock, like handkerchiefs. Wal-Mart got rid of 20% of its groceries, about 10,000 items in that area of the store, says Burt Flickinger, who runs the consulting firm Strategic Resource Group.
Shoppers began complaining that Wal-Mart no longer had items they wanted, even some of their favorite brands. Revenue began to decline.
"We cleaned the stores up, but we cleaned them up too much," says Duke, who had become CEO just months before, in February 2009.
Wal-Mart's next mistake was pricing. Over the past year, it had strayed from its "everyday low prices" slogan, the bedrock philosophy of founder and namesake Sam Walton. Wal-Mart was less aggressive about being the low-price leader. Instead, the company slashed prices only on select products, and the deals were temporary. The idea was to draw customers into stores for the bargains and hope they would also pick up other, more profitable items.
Last Memorial Day weekend, Wal-Mart advertised dramatic price cuts on 22 items, including a 40-ounce bottle of Heinz ketchup for $1, less than half price.
But the strategy failed. The economy was still weak. Customers were scrutinizing prices as many had never before. They discovered that Wal-Mart couldn't be counted on to have the lowest.
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Ahh there is some justice in the world. The nastiest dirtiest most crooked company in the world finally getting a taste of their own medicine. I love it.
I hope sales continue to decline. Would be nice to read an article online in 10 years that Wal Mart has filed for Chapter 11 protection. That would surely turn the American economy around getting rid of this unemployment making company.
Wal(China)Mart has done more to damage the middle class and American manufacturing than any other domestic company.
Remember to those who shop and make purchases at Chinamart, you are empowering communism. We fought the Communist Chinese twice in the last sixty years, Korea and Vietnam.
Me, nor my wife will shop at this anti American manufacturing company. I am now convincing my friends to shop else where and avoid this despicable company.
Boycott this company and demand they ask for their suppliers to return American manufacturing jobs to our country. ChinaMart is destroying this country.
Up until a year and a half ago I went to Wally World each week for the items that were the best priced. An example would be bananas. They were 34 cents. One week a sign went up with a .42 cent price and the sign said Used to be .49 cents. Out and out lie. Where? This irritated me so much I walked out of the store. We have little choice in my area so I still go to WW, but once a month. If they raise a price by a high percentage, I stop buying that item and go without if I have to until a sale somewhere else. Pure stubborn attitude.
I can smell a game of greed a mile away. These people want to run the entire economic system. That is their goal. If they own the money, they owns us, in all aspects. Keep an eye out for these people.
It's good to see Americans are smarter than the Waltons.
Walmart is a nightmare! It"s as if IQ's drop sharply when you walk in the door. I find the worst part of the Walmart experience is not just the lack of higher quality goods on the shelves( the meat and seafood are appalling) but it ALWAYS takes longer to get out of the store because of the lack of checkout cashiers, than it takes for me to fill my cart. The Walmart tagline should be
"Profits before people". You know, like the health insurance scammers..errr...companies.
Anyway, I avoid going there at all costs.:(
Up until this year I have been a loyal Wal-Mart customer. Always thought the prices were great. But I have decided that I will no longer wait in their ridiculous long lines to pay for my purchases again. Ever. And I refuse to do the self check out! That should be someone's job not mine. I am not a Wal-Mart employee.
But what burns me up the most is to pay for my goods and as I'm trying to leave the store a Wal-Mart employee standing by the door wants to see my receipt! Happens to me almost everytime I shop there! Sick of it. Will not deal with it again.
I think I'm being profiled.....
I, personally, overheard a major meat product sales rep ask a Walmart dept. head why the price on a package of bologna was so high. Walmart was given a "special price" on the product. Dept. head said they used the "special price" product to make up revenue on "lost leaders". The sales rep said that in the future "special prices" would not be offered if the saving wasn't passed on to the consumer. Walmart always figures a way to "get theirs".
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