Even if you’re a “whale” … there is no safe place in retail
At $450 billion in annual revenue, Walmart became the “whale” that has dominated retail. And, even though Walmart has posted comp store gains, there are indicators that Walmart is starting to lose share. With the advent of “dollar” stores, Walmart now finds itself squeezed in the middle. Recent share shifts indicate that there is no safe haven in retail anymore, even for the whale that used to dictate the rules.
Share shifts indicate Walmart is NOT invincible Walmart has had an amazing run in annual growth and profitability. In tough economic times, Walmart has traditionally thrived by virtue of its low prices value premise and sheer traffic of over 135 million consumers going through its doors every week. But, recent share data in the US indicate that some of those core consumers are shopping elsewhere, especially at the new discounters with prices even lower than Walmart. The “dollar” type store formats traditionally post prices much lower than even Walmart for many commodities. And, some of the retailers like Dollar General or Dollar Tree are becoming more sophisticated in assortments, supply chain and logistics – Walmart’s traditional strengths. Excludes fuel sales Source: Kantar Retail-Management Ventures Inc., Advertising Age research Walmart now finding it tougher to be in the “middle” Walmart is not only finding it difficult to compete on price with the “dollar” stores, the share data indicate pressure from traditional competitors, like Costco, traditional grocers, and even Target and Kmart. Recent tracking studies indicate that Target beat Walmart by 2.5% on prices for core items tracked. Traditional grocers are also becoming more price competitive, especially in profitable areas like health and beauty. Precarious Balance of Efficiency vs. Consumer Value Walmart has always been the leader in the “science of retail” via applying metrics to increase efficiency and profitability. But, one only needs to scan the headlines to see some of the consumer backlash to Walmart’s SKU rationalization to remove key brands to reduce inventory. Walmart benefited from the recession by bringing in more “affluent” shoppers that discovered value pricing. But those new customers, as well as many core customers, also value choice of brands they prefer and trust. In a recent Ad Age, Jack Neff astutely points out that Walmart’s “arrogance” cost them share in both traffic and sales for the first time in many years. Walmart’s reversal in bringing back brands is a sign of victory for consumers. The Number 1 Rule of Retail is still #1 – Even for Walmart The number one rule of retail has always been, and still is: The consumer is always right! The corollary rule is also true: Consumers vote with their wallet, plastic, or mobile phone. Walmart’s dominance in retail volume is not in jeopardy anytime soon. Recent stats and trends indicate that Walmart is no longer invincible. It does NOT make all the rules. Walmart now has serious competitors on all sides. And to continue to be successful, Walmart must now practice both the art and science of retail. In IMS Retail University I always conclude the review of retail channels by saying: “Walmart didn’t get to where they are by following status quo”. In short, they are not stupid! Case in point, the following quote: "We did discontinue some things that people didn't buy very often, but were aggravating [consumers]", Bill Simon, chief operating officer at Walmart U.S. told a Merrill Lynch investor conference March 10. "And, you know, [former CEO and current board member] Lee Scott told us recently, rule No. 1 in retail, don't aggravate your customer."
Walmart, welcome to finally being in the middle of retail like everyone else … where consumers can be very fickle, and always vote at the cash register, and increasingly at the internet shopping cart checkout.
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