Price Isn’t Everything
By George Anderson
In the December 2004 Harvard Business Review, Darrell Rigby and Dan Haas of Bain & Company’s Global Retail practice discuss how some retailers are Outsmarting Wal-Mart.
According to the authors, HEB, Publix, Target, Walgreens, Best Buy and PETsMART have all found a way to “co-exist and even thrive” with Wal-Mart by excelling in areas the world’s
largest retailer doesn’t.
Retailers up against Wal-Mart need to segment the market by convenience, price, quality, selection and service. In most instances, Wal-Mart comes out the winner in price and
it occasionally stacks up in the area of selection, write Messrs. Rigby and Haas, but “nowhere else.”
“Price isn’t everything,” write the authors. “Two-thirds of shoppers find Wal-Mart’s assortments, middling product quality and limited services not worth the savings. That means,
regardless of Wal-Mart’s proximity, there are plenty of customers looking for alternatives.”
Bain & Company’s research has found companies that do well with a Wal-Mart presence in their market have done four things.
- Built market share by grabbing it from retailers that have not adapted to Wal-Mart’s tactics. For example, Target was able to capture customers of other discounters that have
gone out of business trying to do essentially the same thing Wal-Mart does.
- Identified important customer segments and bent over backwards to cater to their needs.
- Sharpened pricing policies and trained local managers to identify and react to opportunities and threats as they arise.
- Reduce extraneous costs wherever possible.
Moderator’s Comment: What is your list of dos and don’ts for “outsmarting Wal-Mart”? –
George Anderson – Moderator