Walmart Cites Gains, Cuts Prices, Faces Amazon
In three different news accounts, Walmart is seen as making strides in its U.S. business, continuing its cost-cutting ways to outlast its many competitors, and looking for technological answers to address the growing challenge it faces from Amazon.com.
Reuters reported that Walmart has made small gains in same-store sales over the past two quarters, reversing nine straight quarterly declines.
"I’m happy to tell you that strong momentum that we closed the year (with) continues in our new fiscal year, throughout February and our current month of March," Duncan Mac Naughton, chief merchandising officer or Walmart U.S., said at a conference in Toronto.
Walmart has reemphasized price in recent quarters and added items previously delisted in a SKU optimization exercise that failed.
The company also seems committed to outlasting its competitors with price cuts. According to a Dow Jones Newswires report, Walmart intends to cut $1 billion on grocery items this year. Management is hoping that consumers dealing with high gas prices and other financial challenges will turn to the chain in increasing numbers. The sacrifice of some margins, it is assumed, will be made up by greater traffic to its stores and weakened competitors unable to keep up with Walmart on a race to the pricing bottom.
One competitor Walmart might find it difficult to outlast is Amazon.com. According to analysts at Kantar Retail, a growing number of Walmart shoppers are making purchases on its online rival’s site. Five years ago, about one in four Walmart shoppers also bought goods on Amazon. That number has since jumped to one in two.
"If the trend continues, with Amazon up and Wal-Mart down, by the 2012 holiday season Amazon could well be the most shopped retailer," Anne Zybowksi, an analyst with Kantar, told MSNBC.
Walmart has responded with the creation of WalmartLabs and a more focused effort on its online business along with steps in the social and mobile realms.
Still, Walmart will need to effectively up its game to stem the Amazon tide.
In 2009, 59 percent of online holiday shoppers had Walmart as their top destination, according to Kantar’s Retail ShopperScape data. Last year, the number was 53 percent. Amazon, during the same period, grew from 38 percent to 46 percent.
- Wal-Mart Plans To Reduce Grocery Prices By $1 Billion – Dow Jones Newswires/Fox Business
- Walmart U.S. sales stay strong despite gas prices – Reuters
- Walmart U.S. sales stay strong despite gas prices – MSNBC
Discussion Questions: Will continued price cutting work to Walmart’s advantage in the brick and mortar world? What will Walmart need to do to achieve the same type of dominance in the e-commerce arena?