GHQ Cover Story 08/05: The Target at the Top
By George Anderson
Through special arrangement with Grocery Headquarters magazine, we present these opportunities to discuss the subjects of GHQ’s monthly cover stories.
Is Wal-Mart vulnerable? Will we begin to see grocery stores recapturing market share previously
lost to the world’s largest retailer?
Wishful thinking, perhaps, but as Grocery Headquarters‘ August 2005 cover story, The Target at the Top, tells it, “There is a growing feeling among some grocery operators that if they develop a good merchandising and marketing strategy they can turn the tables on the giant retailer that has been grabbing market share from them for nearly a generation.”
Beating Wal-Mart in the competition for shopper dollars comes down, say experts, to delivering where Lee Scott and company are weak — product assortment, customer service and the shopping experience.
An unidentified food sales and marketing agency (food broker) representative operating in the southern U.S. told GHQ, “Wal-Mart will be its own worst enemy. They’re saturating the market. They’re on every corner. They lack service; especially in perishables, the service is terrible. Pricewise, on hardcore groceries, you cannot beat them, but on customer service they are poor.”
While most who have tried to compete on price have failed, some operators such as Aldi and dollar stores have found ways to attract the price-sensitive shoppers who make up the core customer group at Wal-Mart.
The sales representative noted that consumers, such as his wife, are going to dollar stores to buy certain categories of goods they see as more affordable than what Wal-Mart sells. “Dollar General is Wal-Mart’s biggest competitor coming up,” he says. “They are like Wal-Mart in years past. They are small establishments and just carry the staples, but they are much cheaper,” he said.
Candace Corlett, a principal in WSL Strategic Retail, agrees dollar stores are a threat. “One can’t overlook the growing presence of food in Family Dollar and Dollar General,” she said. “I am blown away by the aisles of food and the national brands presented in Family Dollar now.”
Even with the apparent chinks in its armor, the rep pointed out the enormity of the task for any company looking to displace Wal-Mart in this part of the country. “Most of the people down here worship Wal-Mart,” he said. “On Sunday they’ll go to Wal-Mart, go to church, then go back to Wal-Mart. It’s that kind of mentality.”
Wal-Mart is not blind to its own areas of weakness and the retailer has begun to make changes. For example, Wal-Mart is upgrading product quality in categories such as household goods and apparel in an attempt to get more affluent bargain hunters who typically buy “center store” goods at its stores to also purchase items from higher margin departments. Some wonder, however, if by going more upscale, Wal-Mart may distance itself from its core consumer.
“Wal-Mart has realized their vulnerability by having such a single-minded focus on low-income shoppers. I think they are going to stumble terribly as they launch more upscale brands because, for all of the consultants they are hiring, they don’t have the passion for merchandising–and that’s cultural.”
Moderator’s Comment: Have grocery retailers as the Grocery Headquarters‘ article suggests, found ways to “turn the tables” on Wal-Mart? What will
Wal-Mart’s strategic response be to the competitors who are looking to push it from its perch on the top of the retailing mountain?
– George Anderson – Moderator