Wal-Mart Taking Hits Over Price, Selection
Two separate articles conclude that Wal-Mart Stores is having a tougher go
of it since the economy began to rebound, in part because it has gone too far
with its SKU reduction efforts and because a wide variety of competitors have
found ways to beat the world’s largest retailer on price.
A Bloomberg article cites a number of product categories, including
cereal, health and beauty care products, laundry detergent, pet treats and
soda. According to the piece, Wal-Mart cut inventories in its U.S. stores by
7.6 percent while increasing sales by 1.1 percent.
“Wal-Mart cut too deep and now they’re going back to manufacturers,”
Michael Kantor, chief executive officer of the Promotion Optimization Institute,
“In some instances, we are returning SKUs to the floor; it is evolutionary
and ongoing,” said Linda Blakley, a Wal-Mart spokesperson. “Based
on customers’ response, we may return an item to the shelf. At the end of the
day, we want to have what she wants at a good price.”
Having a “good price” may not be good enough for consumers who have come
to think of the chain as having the best price and now learn that others may
save them more money.
Kantar Retail’s Management Ventures has been tracking prices on 40 items
sold in Wal-Mart and Target stores. Target has beaten Wal-Mart in two of the
three surveys taken to date. In the latest comparison, Target came in 2.5 percent
lower than Wal-Mart or $7 in real money.
Interestingly, 71% of respondents to a RetailWire poll last month said
their perception was that Wal-Mart’s prices were somewhat or much lower than
Target. Only two percent believed Target had better prices while 27 percent
thought the two chains were evenly matched.
Target isn’t Wal-Mart’s only concern. A recent survey by WSL Strategic Retail
found three-quarters of shoppers in dollar stores believe they are getting
better prices than if they shopped at Wal-Mart.
Burt Flickinger, principal of consulting firm Strategic Resource Group, said
he also saw Wal-Mart losing ground to conventional supermarkets who offer superior
selection and cut prices in key categories to drive traffic.
“The consumer has figured out that Wal-Mart’s prices are too high in key
categories. … The consumer is confused. When Sam Walton and Doug Degn [who
formerly ran merchandising for Walmart’s grocery products] ran things, the
consumer understood she would save in every category every day,” Mr. Flickinger
told Advertising Age.
Discussion Questions: Do you see Wal-Mart as being more vulnerable to
competition today than in the past? Where is its market share most at risk
and what will it need to do to address its weaknesses and the strengths of
- Wal-Mart Brings Back Goods as Shoppers Turn to Lowe’s – Bloomberg/BusinessWeek
- Stuck-in-middle Walmart Starts to Lose Share – Advertising Age