What Would Sam Do?

3 06 2011

The bigger they are, the harder they fall.

In the long run, customers have seldom been kind to the giants they once helped build up. Just ask the folks at Sears and K-Mart (actually, they are now under one corporate umbrella). Whereas these two were once huge retail players, both are now struggling to stay on top of the retail cemetery soil. But dig a little below the surface, and you’ll find the bones of Montgomery Ward, Service Merchandise, W.T. Grant, Venture, Circuit City and many more who once thought themselves invincible.

That’s the problem with being a giant. There’s always a David lurking around the corner with a slingshot full of stones to hurl.

And not that I would ever predict the demise of Walmart, it is fair enough to say that even it, the world’s largest retailer, is not immune to competitive threats and the occasional faux pas. Like what it are experiencing today as it scurry to try to keep its customers. No doubt Sam Walton is wincing in his grave.

Yes, even Walmart, the company we all once thought could do no wrong, bungled terribly during the recent recession. Thinking that once-wealthy people were starting to shop there, they opted to get rid of a bunch of familiar products and brands. In the process, they alienated their core customers, which tend to be middle-class and lower. Walmart was drooling over the prospects of selling 52″ LCD TVs to upper-middle classers, but forgot that it was the big bulge in the US income distribution curve that constituted the bulk of their sales.

The result has been that many long-time WM customers have migrated to stores like Dollar General, which has seen its sales (and profits) soar the last few years. Dollar General is also now venturing out into the grocery business, with small food markets much like those of German grocer Aldi.

While Walmart is not quite to the point yet of shuttering stores, it has noticed a significant dip in earnings, and it is because they under-estimated (and let down) its customers. The People Of Walmart may make for humorous web surfing, but at the end of the day (as well as the fiscal year), they account for a whole lot of sales.

So what’s a retail giant to do? Well, start stocking a lot of those products again.

The lesson to be learned is that changes in the economy can have enormous implications for retailers, and to smugly start de-listing items one’s core constituents have come to rely on is just bad business. Walmart was no doubt giddy trying to appeal to cash-strapped folks a couple of notches up the income ladder, but in so doing, it lost sight of its mission. Remember, the cross hairs of the marketer’s scope intersect on the forehead of the target market. Upper-middle class people are not the target. As soon as the economy recovers, they will ditch Walmart as quickly as last week’s brown bananas. You know…the ones with those pesky little bugs swarming over them.

It’s not too late for WM to right this ship, but there’s a dent in the hull. There’s also room in that graveyard for one more, though.

Dr “Paper Or Plastic” Gerlich

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One response

5 06 2011
Poyen Chi

This is an interesting perspective of the retailer giant, Walmart. Since I came to states as an international student, I thought people here mostly go to Walmart for their daily grocery. However, after I have stayed here longer, I start to hear different perspectives from native residents about Walmart. Now, Walmart has been regarded with the tag like low quality and not always lower price. The middle-class people are not so willing to shop in Walmart. As I travel around US from west coast to east coast, I notice that there are also some sights to indicate that Walmart has been losing their customers. For example, in the east coast, people prefer to go to Target more than Walmart for daily grocery. They care the quality of product and the shopping environment, so they regard Walmart is for the lower-class shoppers. In contrast, people in the west coast have more alternative substitutes to get the lower price with other local retailers. Local retailers might not have same economic scale as Walmart, but they can satisfy customers on certain grocery with lower price, like food or daily supplies. Last question, who will go to Walmart eventually? “the people of Walmart”? ( I do enjoy that website sometime.) Walmart still has its 1st place on retail business, but they need to seek other approaches to maintain their market. I had a marketing project of mobile application about Walmart for Information Technology Management course. Mobile devices might be the next dawn to tie their customers. (but obviously they are quitting the mobile service recently.)

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