Wal-mart's $2 billion plan to win back shoppers

The world's largest retailer is working to broaden its product offerings and 'invest' $2 billion over 2 years in lower prices. Will this be enough?

By The Fiscal Times Mar 30, 2012 12:09PM
Walmart By Suzanne McGee The Fiscal Times

At Wal-mart (WMT), the lowest price is once again the law.

After its advertising drifted away from reinforcing that pledge -- over and over again, to the point where television audiences were ready to scream for mercy -- its customers also began to drift away. Many opted to shop instead at "dollar stores" like Dollar General (DG), which continued to make explicit "lowest price" promises. Others began shopping online, even for staples like cat food, shampoo, jeans and sneakers -- the kinds of things they would have grabbed at Wal-mart. And they started streaming video from Netflix (NFLX) and Amazon (AMZN), rather than buying DVDs.

The folks over at Motley Fool took note of this trend recently, suggesting that investors might prefer to snap up stock in Amazon or Costco (COST), instead, as two of the companies that have won the allegiance of customers who typically did the vast majority of their shopping at Walmart. Owning Amazon may be a bit of a stretch -- the company's stock price growth has outstripped the earnings growth that many analysts expect the online retailer to be able to deliver, as illustrated by a recent earnings "miss" -- but the underlying point is valid.

As the retail world has evolved, and as the recession took its toll, shopping habits changed in recent years. In the same way that television broadcasting has changed dramatically over the last decade -- with cable channels now challenging the NBCs and CBSs of the world by offering original shows and miniseries -- so retail has morphed and fragmented. If you want cheap shampoo, you can go to a dollar store or buy in bulk at Costco; if you want great produce, you can join a local CSA (community supported agriculture) program for a nominal annual fee that is adjusted based on income levels. Consumers may want to save money on t-shirts in order to spend more on a pair of designer jeans that Wal-mart is never likely to stock. At the same time, shoppers across every income bracket have become more accustomed to buying online.

The era of the megastore offering one-stop shopping for a consumer's every need may be drawing to a close. The question now is whether Wal-mart's plan to broaden its product offerings and "invest" $2 billion over two years in lower prices -- especially in food and other "consumables" like health and beauty products -- can help it battle back. The store is introducing more high-end food and trying to tailor its offerings to appeal to groups like Latinos, Asian-Americans and African-Americans, who may avoid Wal-mart today simply because it doesn't offer particular products. Tell those groups that they can get everything they want there and won't have to make an extra trip, the thinking goes, and brand loyalty to Walmart will follow.

Nutrition conscious? Wal-mart will now offer you beef rated USDA choice -- and match low prices advertised by competitors. Duncan MacNaughton, the company's chief merchandising officer, told a recent investment conference that while steps like this will put a dent in Wal-mart's margins in the short term, the company expects to make up for this through higher productivity.

Wal-mart is a giant company with a still-enviable brand name -- but it can't change on a dime. To some extent, it is gambling that the economic outlook remains uncertain enough that consumers will stay focused on low prices and respond favorably to the company's attempt to woo them away from dollar stores with higher-quality but still bargain-priced merchandise. At the same time, Wal-mart hopes the economy strengthens just enough for those consumers to gradually increase the amount they spend on each visit to a Wal-mart.

Yes, it's all a gamble. But it's one that Wal-mart will need to win. The company isn't about to vanish into the ether any time soon, but if it is to avoid the fate of Sears (SHLD), Kmart or any of the other formerly dominant retailers who have watched as their pre-eminence has been eroded, it needs to find some kind of magic bullet. A more coherent ad campaign, low prices and a better product mix may be the solution, but odds are that it will take more innovations to convince shoppers that Wal-mart offers not only low prices but a unique shopping experience.

Related Links:
7 Grocery Store Items Americans are Blowing Money On
Walmart to Applebee’s: The Untold Secret of American Food
Should Mighty Walmart Be Regulated Like a Bank?


19Comments
Mar 30, 2012 12:49PM
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Want to make America "happy"?

 

Stop buying from China and do business with AMERICAN companies for products you sell "here".

 

Stop contributing to horrible working conditions for the world's most poorest of the poor and pay them a living wage to make product to sell in THEIR country.

 

While you're at it, start paying a living wage to American workers so that they don't have to go on welfare, medicaid and foodstamps to support their families. Your failure to pay American workers a livable wage amounts to a Walmart "tax" on working people who have to pickup the tab.

Mar 30, 2012 1:06PM
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I did start shopping at the dollar stores, I went to Walmart to buy a cheap set of measuring cups, their price $5, the dollar store $1.  Most of their housewares are way over priced for a Walmart, I do not care who's name is on the items.
Mar 30, 2012 4:27PM
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When Wal-Mart learns that the customer wants service, not price, then they might, just might, get customers back.  I walked out of Wal-Mart this past Wed. with almost 50 dollars in the buggy because they had 3 registers open with about the same number at the 20 items or less area.  This store serves an area of approx. 100,000+ people in N. central Florida.  Also, one of the items I wanted was Fruit of the Loom boxer shorts and they did not have them.  I left there and drove about 10 miles to a Kmart and got all the items I wanted and was No. 2 in line when I checked out.  Was the price higher, I don't know and don't care, my time standing in line has a value to me and I won't give it away standing in line!!!!!

Mar 30, 2012 10:14PM
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Do you have a job? Is it an American company? What happens when other people buy your competitor's products from China? Right! You lose your job!

 

Buy American, and insist that Walmart and other stores you shop at stock American goods.

Mar 30, 2012 4:45PM
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I think all stores as large as a big box store should have to sell a larger percentage of their stuff thats made in America. The internet would also fall into the big box category. The small stores would not have to comply for a while and the big box stores would have to increase their percentage over a period of time. The USA would have to open FACTORIES do to increased demand and stores would have to reopen and hire employes to staff. Wal-Mart use to sell all america made. What Happened?????
Mar 30, 2012 5:37PM
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I just love it when I see an old pickup truck in a Wal-Mart parking lot with  a "Buy American" bumper sticker on it.  That's something my trailer park relatives would do.  Ha!
Mar 30, 2012 2:03PM
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Walmart executives, chock on a bugger, you should be ashamed for ripping off poor people. Hui..Rah for the Dollar Store.....at least they have cheaper made in China "stuff". 
Mar 31, 2012 3:52AM
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What a blight on America's landscape if Wal-Mart had to close shop....all those non-descript plain 4 wall boxes that have no architectual style.   They already litter the coiuntry with small closed units they made superstores down the street.  Some are now junky flea market palaces
Mar 31, 2012 8:23PM
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Walmart needs to have more employees to help customers,lower prices on name brand items,not off brands you have never heard of. I agree about cashiers, nothing worse than waiting
in line with no lines being opened.

Mar 31, 2012 8:21AM
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SmileWe are in a global economy now, even mighty John  Deere puts contracts out for the cheapest bidder,  like it or not that is the way business is done in 2012,      I do  not why people say Wal-Mart  is declining, if you go into a Wal-Mart on a Saturday afternoon, it is so busy you can barely  find a parking spot !
Apr 2, 2012 4:09AM
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Daniel,

       As a seasoned Wal-Mart employee. I must say you have just stated something incorrect. The point about the cheap help and the employee leaving their ethics at the door.

That is correct in one respect. The termed employee is now more, they are getting rid of them in droves. They have no respect for the little man at all. They want to be the controller of all. Well they cut back on Termers and hire the Rookies and they will see that they will fail also. So when you go into Wal-Mart, Remember the Termers are few and far between and the ones helping you are new and unknowledgeable and dont really care about anything.But they are the ones they want to keep around, (they are what they call the "KEEPER").  SO,  the only ones that really had any ethics about them anyway are the Termers, and they are thinning away. That may be why they dont want anyone with the years of service on their badges any longer.

You cant keep treating people like they dont matter and be on top forever. Your demize will come. And there will be alot of people standing back saying "I TOLD YOU SO"!

Apr 1, 2012 2:42PM
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Wal-Mart's problems start at the top. They are cheap, disrespectful, and borderline crooked in their dealings with contractors and suppliers. It's their way or the highway.

 

They employ people who are willing to leave their ethics at the entrance door and are rookie's in their field. That's gets them cheap help who don't even understand how much damage they do to the people they deal with.

 

It is catching up with them. Society does not need a cutthroat organization like Wal-Mart anymore. The future is on line retailing where respect to all involved is is standard operatiing procedure.

 

Apr 2, 2012 10:30AM
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I have nearly quit shopping WallyWorld, as they continue to bring in more 'junk' from imported sources, mainly China!  Sam Walton started these stores as boasting selling 'American Made Products', and since his demise, the new CEO's and boards look only towards $$ anyway they can increase it.  We all like money, but there is a thing called 'quality product'. and that is NO longer happening at WallyWorld.   Sure, they offer some jobs, at the same time outsourcing for merchandise that is killing USA manufacturers and their workforce!  Is this helping our 'Economy' here in the U.S.?  I'll spend a little more for American Made products somewhere else... 
Apr 2, 2012 4:00AM
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Get a life, Wal-Mart is going under for not selling certain items, or having to spend money for advertising.

Their demize will be due to them getting rid of the help in their stores. When you go in, you cant find anyone to assist you. They dont even have enough registers open to accomindate the purchases.

They have gotten rid of so many jobs lately, info via news, that they are just asking for customers to be dissatisfied. They have no greeters, they have no one in the areas that you need assistance. So what is the issue here. Spending money to get costomers to shop with them: Keep your employees and have ample amount of registers open to keep the customers coming back.  You go to other chain retail stores and they have no one to assist you. What was Wal-Mart founded upon. We all need to take a step back and consider that our forefathers might have known more than we do!

Mar 31, 2012 1:58PM
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I actually thought Walmart was doing well. Every time I go there it always seems busy. Maybe they think there already long cashier lines aren't long enough (theres always long lines when I'm there anyway atleast) lol
Apr 2, 2012 11:06AM
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I only go to walmart if it's a last resort.  HATE the place.  Dirty, noisy, slimy low life people who don't care....and pure crap for products. Hate, Hate HATE walmart!
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I HATE TO SAY THIS IF YOU VETO WALMART AND YOUR STUCK WITH ALL THE REGULAR GROCERY

STORES YOU WON'T BE HAPPY PAYING THE HIGH PRICES.

Mar 30, 2012 5:28PM
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bobby1957  Walmart's pay is comparable to ANY other retailer out there. 
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