Wal-Mart Receives Cheers and Jeers
By George Anderson
No matter what Wal-Mart does these days, it appears as though its actions are going to get some groups annoyed with the company, even as others applaud.
The most recent example comes in response to the retailer’s announcement that it would stop selling guns in about 1,000 of its stores.
Chris Cox, the chief lobbyist for the National Rifle Association (NRA), told The Associated Press, “We’ve been told by Wal-Mart that the decision would be made on a store-by-store basis based on demand. The NRA and our members will be watching closely to make sure they stay true to their word.”
Guns right advocates and sporting groups are concerned that the retailer’s decision could make it more difficult for consumers in underserved areas such as rural locations to find firearms and supplies. Wal-Mart is the largest seller of rifles and shotguns in the U.S.
Jolanda Stewart, a Wal-Mart spokesperson, said the retailer’s decision to stop selling guns in some locations was simply business and not a statement on a change of position on selling firearms. “As with all merchandise decisions that we make, our decision to remove guns from Wal-Mart locations is simply based on the lack of customer-purchase history of firearms in a given community,” she said.
Wal-Mart’s CEO Lee Scott said the company would replace the space given to firearms with products that better serve local demand. The company’s recently upscale unit in Plano, Texas, for example, will not sell guns but will expand the amount of space devoted to home-fitness and exercise equipment.
Perhaps those with the most reason to cheer about Wal-Mart’s announcement, said Steve Wagner, spokesperson for the National Shooting Sports Foundation, are smaller stores selling firearms that have been hurt by the retailer’s success in the category.
Moderator’s Comment: What impact will Wal-Mart’s decision not to sell guns in roughly one-third of its stores have on the company’s market share in the
firearms category? – George Anderson – Moderator
We would have to know the exact volume WM generated in firearms in those locations to calculate the market share impact. However, I don’t think it’s relevant. By emphasizing or de-emphasizing products or categories, WM, by virtue of it’s size, is going to have an impact on market share. Period. The question will always be what the overall impact on store level productivity and profitability are, as well as long term impact on customer satisfaction.
Certain product categories, by virtue of their importance in the psyche of high value customer groups, warrant store presence in excess of their contribution. Nordstrom, for example, has always had too much space allocated to basic furnishings. It’s a strategy thing. My hunch is that the de-emphasis of firearms is simply a logical extension of the courting of a specific customer group.
Again, without data, and only on supposition, I think we’ll find that the customer group WM is after in fashion apparel, better home, and higher end electronics is not a typical firearms customer. While this may not be true, and in fact may be wrong in certain geographical locations, in general, I think it’s right.
The only thing of note here is that I think WM intended to get a positive PR bounce out of the announcement. And the result is something we retail pundits have been warning WM about from moment one of the repositioning campaign: be very careful not to alienate your base. Like it or not, firearms are probably highly associated with that base.
This outlines the dilemma WM faces: you MUST tell the target group (no pun intended) that you’ve changed, and how you’ve changed, but do it in a way that doesn’t threaten the core customer you simply cannot lose.
You’re right–no matter what Wal-Mart does, it gets it from both sides. No biggie on this one; as with any product, if they aren’t earning their keep on the shelf, get rid of them! I’m sure in my neck of the woods, in Northern NH and VT, where about half the people I know are hunters, Wal-Mart will still be the place to buy guns and ammo.
If Wal-Mart isn’t selling guns in the stores where they are making the moves, it shouldn’t have any real effect on their overall share of the firearms business. If anything, you would think by switching over to products that will sell in these locations that Wal-Mart will actually improve the overall performance of its sporting goods departments.
One more point. We’re talking about a basic category management decision here, backed up by the best retail sales database around. A few sales may be left on the table in the stores where the decision could have gone either way, but overall, when you factor in the costs of operating the category, I’ll bet all those stores were losing money on guns & ammo. Does anyone remember DPC and DPP? One positive aspect of all this publicity is the possible recognition by other retailers that category rationalization is a smart business practice.
It’s likely that no one other than Wal-Mart understands their market share on any product, guns or otherwise. Their decision, if based on the terms they state, is likely based on good judgement of space usage in the stores.
It does seem odd, however, that there would be criticism on both sides for their decision. On the one hand, if they are the largest seller of firearms, why would they back off in any way? Prior to Wal-Mart’s entry into rural areas, I don’t think there was a shortage of access to shotguns and rifles. But then again, the NRA says ‘they will keep them to their word’? I am confused by the whole discussion. If it was most any other product, would there even be the discussion in the first place?
Like many in the country, I believe in the right to bear arms. Yet, even so, I don’t and will likely never own one myself. While I believe in the right to do so, I do believe it should be the most difficult purchase that could possibly be made. If, in fact, this hurts availability and makes acquisition slightly more difficult, I am all for it. I wish them all the best in the expansion of their exercise equipment.
Surely this is a no brainer. If something doesn’t sell, it should be taken off the shelves to make room for what customers really want. Why are guns different? If they really weren’t selling well in those particular stores, it shouldn’t have any impact at all on the company’s market share in the firearms category. Although a year or so from now I’m sure there will be those who say market share in other categories has been affected by this decision (more people buying some things, fewer buying others as a direct or indirect result of their views on the guns decision). As George says, there are always going to be people in both camps.
The “targeted stores” approach is obviously the key to any market share gain or loss for Wal-Mart — the supposition being that WM is discontinuing firearms where they don’t sell well anyway. But if they do leave the market in rural or even suburban areas they will leave market share on the table for other firearms retailers. The interesting test here is definitely the Plano store. I lived in Plano for many years and despite gentrification and explosive growth, love of the shooting sports definitely lives on there. Perhaps it is that Wal-Mart is not doing a good job of serving some market’s needs in the firearms category anymore?
This will certainly decrease Wal-Mart’s share of the retail gun industry, and will change the purchasing patterns for many Americans. Good or bad, Wal-Mart is simply running its business the way it should be — based upon ROI per category, and per square foot. If other categories have a greater demand than the firearms in a store, then they should have the floor space. This is a critical lesson for Wal-Mart to vocalize, since it reflects their flexibility to respond to market pressures, and this is a key component to adapting to foreign needs as they place more of their stores overseas.
Wal-Mart will probably not lose much market share. They are not going to discontinue gun sales where sales of firearms are brisk, unless it is in a sensitive area. I recently visited a newly reopened store in New Orleans. The employees were quite vocal about how the looters after the hurricane went for the guns first and left the food alone. In difficult areas such as this, it is probably a good idea not have firearms that could easily wind up in the hands of the wrong people during civil unrest.
The obvious answer is that Wal-Mart’s share will decline. However, with Wal-Mart, one must always look deeper. Wal-Mart doesn’t make political statements. Wal-Mart doesn’t act unless it is their best interest. My guess is that whatever decline in market share Wal-Mart concedes in the firearms industry, they will more than make up in another genre.
I think Wal-Mart makes a decision that something is not selling and they decrease the overall space allocation…something every retail segment (except of course the American car industry) does during every product review. What is more interesting to me is the changes that Wal-Mart is making in a category they have been so closely identified with for so long. With the Plano store, Wal-Mart is beginning to address retail opportunities with a different view. Could prove to be an interesting challenge to their competitors.
Any mass merchant is smart to reduce its exposure to firearms sales. Firearms are a security headache and a liability lawsuit just waiting to happen. Using the “slow sales locations” as the rationale to cut back is smart. Perhaps it will be one of several steps in a prudent direction. Furthermore, does anyone believe there’s a place in America where access to firearms depends solely on Wal-Mart?
The answer to the question is fairly obvious. If they stop selling guns in roughly a third of their outlets, their share of the total firearms market will decrease.