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?
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.
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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.
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!!!!!
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.
in line with no lines being opened.
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"!
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.
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!
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.
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The US isn't strong enough not to care about them now. But one day it will be.
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