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 Jeanine Poggi, TheStreet
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.
Post continues below:
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.
Let's go back to American made products.
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.
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.
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.
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.
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!
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....
Copyright © 2014 Microsoft. All rights reserved.
An interest rate tease in The Wall Street Journal sends the market into an optimistic tizzy -- but one that doesn't end quite at the top.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.