Wal-Mart no longer viewed as cheapest retailer

The discount giant is losing its reputation as the low-price leader. If it doesn't stand for bargains, what is the company's strategy?

By TheStreet Staff Aug 15, 2011 11:19AM

By Jeanine Poggi, TheStreet

 

Wal-Mart's (WMT) crown as the low-price king has been tarnished.

 

The discount giant, which prides itself on its motto of "Save Money, Live Better," appears to have lost its price perception among consumers. According to a survey conducted by WSL Strategic Retail, 86% of Wal-Mart shoppers no longer believe the retailer has the lowest prices.

 

"Every brick-and-mortar retailer lowered prices and shouted sales throughout the recession, while the Internet became the go-to place for shoppers in search of the lowest prices," the report said.

 

This raises a serious conundrum: If Wal-Mart no longer stands for everyday low prices in the eyes of consumers, what does it stand for?

 

This is something Wal-Mart needs to figure out quickly, as it is poised to report its ninth consecutive quarterly decline in U.S. same-store sales.

 

Bloomberg leaked an internal memo earlier in the month, which revealed that Wal-Mart's traffic declined 2.6% at U.S. stores open at least a year from February through June. Those stores had 82.8 million fewer visits during the period than the same time last year, according to the memo.

 

Wal-Mart's image erosion started earlier in the year when rival Target (TGT) narrowed its pricing gap with the retail behemoth.

 

Target has reduced its prices on key items shoppers remember most, like milk, cereal and diapers, said Customer Growth Partners president Craig Johnson. The "mom shopper," Johnson said, knows the prices of these products down to a penny and can see they are saving money at Target.

 

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So while Wal-Mart is struggling to woo shoppers, Target has seen its traffic improve for six consecutive quarters.

 

Johnson said Wal-Mart has regained its pricing edge, but it is becoming increasingly clear that shoppers haven't noticed.

 

In another study, conducted by Morgan Stanley in July, 60% of customers said they no longer believe Wal-Mart has the lowest prices.

 

"Our late July grocery pricing survey shows that Wal-Mart has yet to make any significant moves to widen its price lead. As Wal-Mart's core lower-income customer is struggling in this weak economy, we remain skeptical about prospects for a same-store sales turnaround," Morgan Stanley analyst Mark Wiltamuth wrote.

 

Morgan Stanley's survey also found that Wal-Mart is still passing through inflation and its relative pricing gaps versus the grocers are largely unchanged.

 

Wal-Mart is also trying to make up for its failed Project Impact initiative, which removed from shelves thousands of products that management deemed unprofitable. It resulted in an outcry from shoppers who could no longer find some of their favorite products and brands in stores.

Wal-Mart has been working on restocking about 8,500 of those products, but clearly it has yet to bring shoppers back.

 

While it appears Wal-Mart's U.S. same-store sales are still on a losing streak, Johnson said he is still optimistic heading into second-quarter results. Johnson predicts Wal-Mart will beat estimates, as it has for the past two quarters, on strength at its Sam's Club division and international segment.

 

And Wendy Liebmann, the CEO of WSL Strategic Retail, said Wal-Mart has a real opportunity to regain shoppers if markets remain as volatile as they have been in August.

 

Wal-Mart succeeded amid the crux of the recession, capturing shoppers who were trading down from department stores and specialty retailers. While many of those customers have returned to their favorite stores, they could come back to Wal-Mart if the economy sees another dip.

 

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48Comments
Aug 15, 2011 1:01PM
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The funny thing is that about 30 years ago when I worked for K-Mart the then giant of the discount industry Walmart was the up and coming challenger.  K-Mart never looked over their shoulder, never made tecnological changes or updated their stores and Walmart passed them by.  It appears to be happening again only this time its Walmart that's looking to get passed by Target.  Targets is still more expensive but the stores are less busy, cleaner and nicer to shop in.  Watch out Walmart what you did to K-Mart is getting ready to be done to you.
Aug 15, 2011 1:10PM
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I seldom shop at WalMart because I do not like the environment there. It seems that every time I go in to find some thing WalMart doesn't have it or it really hard to find and the quality isn't there. They made be low priced but you are getting what you pay for. WalMart product don't last long and are made cheap so you are looking for a replacement soon after your purchase.
Let's go back to American made products.
Aug 15, 2011 12:59PM
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Wal-Mart keeps narrowing the usual stock of items so that there are few choices, their employees are some of the rudest and ill-trained ever, and management doesn't give a hoot

about any of it.  So when you live in a small town with few grocery shopping choices, you're stuck, especially when the only other grocery store burned to the ground!  I use the dollar and private "mom and pop" stores as much as possible.   

Aug 15, 2011 1:16PM
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Let's face it, you will find more WM's in more low $$ areas and thus more of the shoppers that use the electronic welfare cards to pay for their overstuffed shopping carts. It would be interesting to compare a day's receipts at any WM store to see what percentage of their $$ comes from the welfare shopper. An interesting side note, it certainly seems that the red, white, and blue flag design electronic EBT card users don't seem to have the $$ to pay for basic necessities, but they almost to the person have $$ for cigs and phones. Very confusing to me, since some of my $$ is in their card. Also, as you see the young moms with toddlers, infants clinging to them and wailing in the carts, do you ever wonder if they have heard of birth control, or do they just have more kids as a means of getting more welfare money???
Aug 15, 2011 12:48PM
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i seldom shop at walmart because i do not like the environment there.  last week i went there to pick up a few things that i thought would be cheaper there before i went to my regular grocery store.  well i compared the prices of the things i purchased at walmart to the same items at my store and they was higher.  will not be shopping at walmart any longer
Aug 15, 2011 12:37PM
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It's interesting to me that people buy the idea that Walmart is the cheapest place to shop. There are many ways to buy cheaper: watch for sales, which Walmart rarely has; coupons-the biggest way to save in some of the larger retailers is through the use of coupons. Many items can be bought cheaper some place else if you watch the ads.
Aug 15, 2011 12:53PM
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Finally, people are waking up. Lost leaders don' t make a store cheap. Walmart relies on a few items priced at wholesale to bring customers into the store with the hope they will buy higher priced items. It's the same scam used by car dealers. It only takes the weak-minded a while longer to discover that they are being taken!
Aug 15, 2011 12:22PM
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Wal-Mart and Sam's Club have started to bring back items made in the U.S.A. while target continues to add more items made in china and vietnam. Maybe that is why they are a little higher, but think about this, if we buy an item made in the U.S.A. we are supporting an American family whereas if we buy an item made in china or vietnam, we are supporting a chinese or vietnamese family. You choose, but as for me I  choose the American Family.
Aug 15, 2011 12:32PM
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They're still viewed as the lowest.

In quality that is.

Aug 15, 2011 1:07PM
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Wal-Mart  doesn't always have the cheapest prices, especially in groceries. Fry's and Safeway have better prices than Wal-Mart does. I, personally don't like shopping at Wal-Mart.
Aug 15, 2011 1:18PM
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WalMart stands for inferior junk. Homeland China!!!!!
Aug 15, 2011 1:40PM
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wall-mart has usually 25 check out lines  only a very few  open  you stand in line forever . there  checkers are rude at times. was told once if i was in hurry  go someplace else.. those lines could be opened up and a few more jobs created  which would help the economy. we need to get our things made here in america  and quit buying from overseas  if each country work for thier self  everyone be better off . its just money grabers, well you cant take it with you, america open your eyes.
Aug 15, 2011 12:20PM
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Wal-mart is not the lowest on a lot of things. It would be nice to see Target give them a run. Target is starting to carry produce and more groceries. Their clothes are still cheap though.
Aug 15, 2011 12:27PM
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Walmart still has the lowest prices on a bunch of items, but I find shopping at Walmart unpleasant.  First, at most Walmart stores I've visited, many people fail to take the little amount of time & energy it takes to return the carts to the storage areas, increasing the possiblity of car dings.  It irritates me when people don't respect others' property!  Second, the experience feels very much like the "budget" experience.  There aren't the niceties that are experienced at other discount retailers like Target.  It's what they say, you get what you pay for... 

 

Sometimes, I go to Walmart anyway because the prices are just too low to resist.  They had the best deals on school supplies this year.

Aug 15, 2011 2:30PM
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I hate shopping at Walmart and I used to work there for years. My mom worked there for over 20 and my brother for a couple years too. My favorite saying about Walmart is that they never have exactly what you are looking for- whenever you are looking for it. Its very true.

 

As for prices, I have found Kroger to be much more reasonable than Walmart, especially when you include their Kroger card, and their coupon policies. Walmart can be very difficult when it comes to coupons and price matching- trust me, I know- I used to be a Customer Service Manager there.

 

As for the employees there- perhaps when the company pays a living wage to its staff they will see an increase in the quality of their employees that gets passed onto their customers. Staffing issues on the registers is a big deal as well, you dont know how many times we were denied hiring additional cashiers as it would affect the stores bottom line. Only day of the year when they ensure that all registers are even close to full is Black Friday, and good luck doing real shopping then.

 

In the end- I vote with my wallet, which is all I can do, and actively seek to avoid shopping at Walmart.

Aug 15, 2011 1:34PM
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when i haVE TO GO TO WALMART, i FIND  a lot of people standing in thye center of an asile talking to there next door neighbors. They block the asile don't move are rude and have nowhere else to go . After they have spent the day shopping they leave at 6 P M and have bought $8.00 worth of something they did not need . i now go to walmart as a last resort. and it is not a resort area.  Most time I just say i didn't need it or I can do with out it.
Aug 15, 2011 1:59PM
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They NEVER were the cheapest. It was a slogan. How could they be the cheapest and always advertise falling prices?

 

Perhaps they meant their product quality was the cheapest.

 

Sam Walton knew retailing. Too bad he passed away.

Aug 15, 2011 1:19PM
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WalMarts are inconvenient as well as not the best prices ; never though my better half would become a dollar store shopper, but at least once monthly she'll pick up brand name bar & liquidsoap, detergent. tissues, hair spray, etc, etc.

Why not, it's only a buck, covnenient, quick in-and out!

Aug 15, 2011 12:57PM
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Depends on what you need - I have certain items buy at Wal-Mart, because it's the only place I can get them.  The rest I buy at grocery stores (check weekly ads, you can always find whose got what on sale).  If you live in an area with a Kroger, I highly recommend them.  They send me coupons every couple of months, geared specifically for items I have purchased from their stores, i.e., my brand of dog food, my brand of coffee,  my brand of paper towels, fresh produce, etc.  Saves me money on the things I actually buy, they are always good for a couple of months and all I have to do is my usual shopping.  Plus they have the self-checkout stations and I love them.
Aug 15, 2011 1:51PM
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Wal-Mart finally has competition considering they killed so many others in retail, good.

I always known Wal-Mart's price are not the lowest, but the decline in retail sales has to do with this economy; not the competition between the two stores. People are shopping around for the best prices.

All I can say is good for Target....

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