Slogans only convince people when there is something substantive to back them up. Despite its long-standing reputation for everyday low prices, modern savvy shoppers have realized that Walmart is no longer the least expensive place to buy some of the products they need. And thus, the retail giant has suffered two straight years of sales losses in the United States.
A recent survey showed that 86 percent of shoppers believed Walmart did not have the lowest prices. They mentioned finding better pricing at Dollar General, Aldi, and Amazon for example. In many cases, their perceptions were accurate. In the mid-2000s, Walmart tried a new strategy, in which it condensed its offerings, cleaned up the stores, and offered more planned sales (or in Walmart terminology, “rollbacks”).
Consumers largely rejected these moves. They liked finding lots of options and hated the lack of selection. They saw tidy stores as signals of higher prices, whereas messy stores implied that the retailer was not spending resources to keep things clean. The shifted business strategy provoked consumer perceptions that were not favorable for Walmart.
Yet some of those perceptions were not quite accurate. In particular, price reviews show that Walmart’s prices still are the lowest on a lot of items. In addition to the problem of perceptions, Walmart must find a way to appeal to consumers on really tight budgets, who struggle to afford the packsizes available in its stores. Such buyers can opt instead for smaller versions available at Dollar General and other low-end retailers. Even though the unit price may be higher, the dollar amount per product per visit appeals to customers who live paycheck to paycheck.
In this setting, it looks tough for Walmart to win back customers, especially those who need to fill their tanks with expensive gas before they can drive the distance to get to the nearest supercenter. On the other side, Walmart faces increased competition from Target, which is offering a loyalty program that gives customers 5 percent back on their purchases.
All these factors in combination have led to steep decreases in customers’ perceptions of Walmart’s value. The problem for Walmart is determining which of these effect it needs to address immediately, and which part of its latest strategy were actually right on.
1. Why don’t consumers find the same value at Walmart as they once did?
2. If you were in charge of Walmart, what would you do to recover?
Miguel Bustillo, “Walmart Loses Edge,” The Wall Street Journal, August 16, 2011.