October 31, 2006
Customers Want Their Wal-Mart Back
You can keep your new Wal-Mart with its upgraded merchandise. We want the same stuff we’ve been buying at the low prices Wal-Mart has always charged. That, according to a CNNMoney.com report, appears to be what consumers in a number of locations around the country are telling the retailing giant.
Lee Scott, CEO of Wal-Mart, admitted as much in a presentation before analysts last week. Mr. Scott provided Wal-Mart’s Metro 7 urban fashion line as an example.
“We have to understand why Metro 7 does well in 600 stores but [doesn’t] do well when you expand it [into more stores],” he said.
Wal-Mart had early success with Metro 7 in the 600 stores referenced but the line seemed to hit an invisible wall when the retailer sought to move it into a greater number of locations.
In general terms, Mr. Scott said his company went too far on the upscale fashion side at too fast a pace for its core customers to keep up.
“We overexpanded it. We had a pretty good idea. I think what happened is we didn’t follow the strategy. We overloaded the fashion part. We need to remember who we are,” Scott said.
“We need to have a little bit of fashion so our customers know we have a sense of what’s happening in the world. If we try to do more [with fashion], we’re not going to do well,” he added.
Howard Davidowitz, president of Davidowitz & Associates, told CNNMoney.com, that Wal-Mart is taking the wrong route with its attempt to woo fashion hounds.
“Wal-Mart is not cool,” he said. “It’s impossible for Wal-Mart to be cool because they would have to discredit their entire business to do that.”
Mr. Davidowitz said that while going upscale in fashion may be mistake for Wal-Mart, there are other areas, such as organic foods and consumer electronics, where it can be very successful.
“Wal-Mart has to seek out new customers in order to grow. That’s a given. But the Metro 7 issues show they can’t do a blanket upscale push,” he said.
Richard Hastings, senior retail analyst with Bernard Sands, shares the same sentiment.
“Going upscale in clothing is not the solution for Wal-Mart. It won’t work because of Wal-Mart’s discount store experience and layout,” he said. “You can’t put clothing 20 feet away from groceries and create the same ambience that consumers have shopping for clothes in a specialty or department store.”
On the other hand, said Mr. Hastings, “Wal-Mart can get really competitive in these areas (organics and household products) and get a good payout.”
Discussion Questions: What is your assessment of Wal-Mart’s progress with its more upscale approach? Should the program be abandoned or do you believe
that adjustments (perhaps even changes in expectations) can be made to achieve satisfactory results?
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Wal-Mart, like most successful entities, suffers from the “growth paradox.” How can WM continue to grow at double digit rates with their existing formats and offerings? You need to ask “What is under WM’s umbrella?” Although WM is capable of sourcing a line of upscale items the question remains whether the target market will give them permission to do so. Permission to source new products comes from the company. Permission to sell any new products comes from the customer and apparently a large segment of their target market is not giving WM the requisite permission.
I’m always reminded of the phrase, “You can make it with class or make it for the mass, but you can’t do both.” WM would be better served by identifying offerings that fit their current target market and by developing new formats for new target markets. Customer confusion is a death knell.
What is more significant is Wal-Mart’s substantial strategic shift in its store planning. Wal-Mart is planning at least 100 full-store reorganizations over the next six months, focused mostly on the 40% of its stores located in major metropolitan areas. It will now customize store designs and product mixes around six demographic groups:
— The affluent
— Empty nesters
— Hispanics
— Suburbanites
— African Americans
— Rural Residents
In other words, even Wal-Mart, the giant retailer known for uniformity and operational efficiency, is now recognizing it must reorganize around customer centricity. Wal-Mart has to do so because its growth is slowing, and it has already wrung every ounce of cost out of operations. The store must now look to increasing revenue by targeting specific customers.
Getting more business from targeted shoppers will be a challenge for Wal-Mart. It will mean listening more carefully to the preferences of different customer groups, being anticipatory and responsive, finding needs and fulfilling them, solving problems and providing service. This calls for a completely different mindset than “stack ’em high and let ’em fly!”
When even Wal-Mart is recognizing it must customize its offerings, all retailers should take note.
Wal-Mart was built on selling value to the lower and middle-income shoppers who need to save money. These customers do not have a lot of discretionary income for upscale items. The Dollar stores and Aldi’s are rivaling Wal-Mart with low overhead and low price thus slowing same store sales growth. Wal-Mart forced all other surviving retailers to get right on SG&A thus more competition. Stay with low price and add spending opportunities for their customers. Upscale customers will not stop visiting their upscale stores.
Regarding the apparel effort specifically, it is disheartening to hear senior management back-peddling at this early stage. Talk about a credibility hit. Let’s not forget that, contrary to recent press referring to Wal-Mart’s “years” of “attempts,” the most significant changes in apparel from branding to trend direction have been implemented within the last year.
Those quite conspicuous (and growing more so every day) houndstooth jackets in the Mark Eisen ME collection were dead-on (check out their “sisters” at Valentino and Hilfiger), as were the muted tweed suiting pieces (seen J. Crew’s catalog? They brought out similar looks AFTER Wal-Mart did at exponentially higher prices this fall). Ditto for ruffle blouses in beautiful colors, wrap dresses worthy of Diane Von Furstenberg, military jackets, beautiful skirts in the color of the season – plum, etc. Now before the predictable backlash starts about how Wal-Mart somehow should not be in the trend business because the “Wal-Mart customer” just doesn’t get fashion (snobbery of the worst order), I would summarize the problem this way: Too deep, too broad, too long.
Too Deep: Why not bring in limited quantities in top doors rather than planning uber depth in every single store, all season long? On the positive side, they had every single look from their fantastic Vogue ads in store and in force from day one. The same can’t be said of Target’s Go International efforts (try putting the looks presented on the website together in the store early in each program).
Too Broad: Again – why all looks in all stores? Did Metro 7 really need to go from zero to ninety? On the other hand, why was the super effort in young men’s that is Exsto limited to so few doors (creating a male-female fashion imbalance)?
Too Long: Probably the most important factor. Had Wal-Mart really carried through with the H&M, Zara, Mango, Topshop, Uniqlo…and yes, Target Go International model, Wal-Mart really would have planed for certain core items (say, the core George line) to stay out all season then layered on the coordinating directional items (Mark Eisen) in multiple deliveries to keep it fresh and exciting. Planned obsolescence. This is the piece that gives consumers much-needed PERMISSION to buy apparel at Wal-Mart. Who will know? It’ll only be here thirty days and my friends don’t shop here…yet.
As for media darling, Target…When is the last time you bought something at Target and someone said “Oooo! Where did you GET that?” (“Nice khakis” doesn’t count). Target was so much LESS fashionable than Wal-Mart!
Wal-Mart simply needs to remember who they are. They MAY be able to spend some cash and target markets to better penetrate a more upscale market with more upscale offerings, however, they themselves have defined their territory–Price–and that is what their customers want – for the most part, and it is what they have built their whole juggernaut for. Customers in Westchester County, NY or near the 90210 zip code aren’t going to flock to WM for Metro 7. If WM can sustain double digit growth forever, they have found the Holy Grail. For WM, it’s price– as they say–Always.
Never, never take anything away from a customer before they indicate they don’t want it anymore. The tried and true provides fulfillment with confidence. New, untried items often leave the consumer with the option of purchasing a product in which they have built no confidence. That is the entire basis of brand marketing.
Wal-Mart should look at expanding their brands. I would advise that the expansion of their brands might draw a more upscale consumers if they would incorporate more upscale fabrics. Cotton, wool, Cashmere, leather are always good options. Also look at the upscale crowd who flock to natural fibers and you won’t find them wearing hip huggers and belly rings. Design your clothes for the audience you covet, price them right and for gosh sakes don’t included embroidered logos, and consumers will beat a path to your doors. Try using that Wal-Mart buying power and those Far East factory connections to bring high quality clothing to market at reasonable prices. Remember that department stores often mark up clothing 300%. I would think that Wal-Mart could retail the same product for half of department stores retail.
This reflects a sampling of customers who believe that all of the additional efforts of Wal-Mart to diversify their retailing efforts will result in higher prices. Unfortunately, this is a fallacy, since increase customer service and better positioning will mean that they have more products and lower prices, like Wal-Mart’s upcoming $349 notebook computer. Without continually challenging their current position, Wal-Mart will not grow. These efforts are critical to Wal-Mart growing and fulfilling all of their customer’s needs.
I agree with both Richard and Leon in their assessment.
Wal-Mart is a pretty big ship and when they change course they often either under or over correct, it is difficult not to.
When they under correct and proceed with caution they are seen to be reacting too slowly, when they over correct and make significant changes which become very visible, their efforts fall under intense scrutiny by the analysts and media pundits and any shortcomings are quick to be criticized.
Wal-Mart will correct its course and will ultimately be successful in achieving acceptance by more of the upscale segments, who by the way are certainly in the Wal-Mart shopping for something.
Wal-Mart has the ability to fine tune their assortments in order to merchandise only those stores who have shown the ability to attract that portion of the customer base willing to try out their upscale offerings.
Even if the new apparel lines are added to only 600 stores (ONLY 600?) that is a pretty substantial achievement. How many 600 store apparel or home goods chains are out there?
Wal-Mart will get it right, they will simply need to keep their focus on their core customer, step them up where they can, while adding assortment and value to the non core fashion customers.
If the media and other critics were to spend less time prognosticating and speaking FOR the Wal-Mart customer and more time talking to the customers they might find that it ain’t all doom and gloom. As far as I’m concerned there are at least 600 stores where customers bought Metro 7 that seem to love the offering and are willing to buy it again!
They made a TV show about this about 40 years ago. It was called the “Beverly Hillbillies.” No matter how hard the hillbillies tried, they could never fit in there upscale Beverly Hills neighborhood. Wal-Mart reminds me of that. When they went back to their old hillbilly ways, everything worked out.
Bargain stores can’t go upscale without replacing a large percent of their old customers with new ones. I am not sure why they would want to be more like a key competitor and not more true to their core identity.
We need a jump the shark listing for companies like there is for TV. The jump the shark web site (http://www.jumptheshark.com/) is dedicated to that scene in every show that signals the end of the series. For Happy Days it was when Fonzi jumped his motorcycle over a shark tank.
Our list could start with Wal-Mart going upscale, Kmart stopping their blue light special, and “The softer side of Sears.”
Others?
Gee, I thought “have what the customer wants, at the right price, at the right time” covered it all. Of course Metro New York or Detroit or Chicago or LA is different than Bryan, Texas or Tulsa, Oklahoma or Grand Rapids. But then it has never been just about fashion. You don’t sell snow shovels in South Texas and not too many riding lawn mowers in Metro Detroit or Chicago.
There is room at the top end to add the $400 DVR, but not at the expense of the $29 DVD player. You can push the upper envelope by offering limited upscale apparel, but you can’t delete the Dickey’s work clothes. This can not be “change it all today.” Making a change in the mix is about evolution, not revolution. Alienating the core customer base is very dangerous unless you have absolute certainty that the consumers you hope to add will in fact be there and “out profit” those you might lose.
Wal-Mart will never be “cool,” but their clothing offerings can certainly get to higher acceptance in middle America – over time. I’m sure seeing an excess of clearance merchandise in their George and other new lines right now. I really question trying to hit “fashion” in the burbs and rural areas too quickly.
Charles & DVZ have it right.
Wal-Mart is all about right product, right place and right time.
The model is to enhance the store assortment to appeal to the lifestyles and budgets of the customers that typically shop a particular store which can vary widely from one side of town to the other, let alone on opposite ends of the country.
One store can sell the $400 electronics item like crazy and the next will hardly sell a single unit.
If the perception of the analysts is that Hillbilly Wal-Mart needs to just keep merchandising to the hillbillies that shop the store, they are right…in Flippin, Arkanasas.
But in Boca Raton, Florida, Jed, Ellie Mae, Granny & Jethro are looking for the 80GB iPod and some nice outdoor furniture and a high-end stainless BBQ grill to put next to the cement pond….
WM’s endeavor, in principle, is smart. It’s in line with economic and demographic changes in the marketplace, but WM has spent years building their banner image around price for un-differentiated products. To re-train the consumer will take a long time/money, and they may not have the shopper’s permission to do it, as the article suggests. I’m willing to give WM the time, but I also expect that they will execute locally according to local tastes and forecasts.
Clothing shoppers get fashion/taste validation from the store environment, not just the merchandise itself. Wal-Mart’s interior design standards undermine Metro7’s positioning. Target does a better job selling apparel because the merchandise is tasteful and the environment doesn’t hurt the positioning. Target sells groceries and hand tools and toothpaste and fabric softener in the same four walls as the clothing. But Target’s signage has consistency, the background audio isn’t a cacophony, and the displays don’t scream. Wal-Mart spends money on its interiors, but doesn’t get good value because the overall design isn’t appropriate for its aspirations. And the Metro7 quantities need to start out gently. Turning around a multi-generation fashion positioning cannot be accomplished in 12 months.
The First Commandment of Retailing is, “Thou shalt know thy customers and never break faith with them.” Wal-Mart needs to stop listening to consultants and analysts and go back to listening to the folks it serves. They have all the answers.
Wal-Mart’s problem is very typical of a retailer listening too much to Wall Street and not paying attention to Main Street. Wal-Mart has done a great job of defining who they are to their customer base and it has resulted in a great love affair between consumer and retailer. In response to Wal-Mart’s need to sustain growth and fight off Target they thought they could move more upscale. Result is it is upsetting their core consumer base while at the same time they’re not able to attract the upscale consumer they’re looking for. We are seeing something that many people thought would never come, the maturing of Wal-Mart to the point that if they are to sustain growth as a corporation, they will have to look more aggressively to other retail formats or global markets.
It’s premature to write off Wal-Mart’s efforts to offer more upscale merchandise. It was only a few months ago that they were getting a lot of positive press about these initiatives along with efforts to tweak their store design. To dismiss the effort as misguided when it represents a long-term strategy important to Wal-Mart’s future says more about the impatience of investors and commentators (and its own senior management) than about the effort itself.
The shaky sales results from the last few months show that Wal-Mart has a lot to learn about how to roll the new merchandise initiatives out more carefully, how to market it more effectively (without losing its value proposition) and how to enhance the in-store experience at a faster pace so it’s in sync with the merchandise. But Wal-Mart needs to stick to its guns and learn over the next couple of years before declaring the effort a success or a failure.
While it may be easy to pounce on Wal-Mart and say ‘see, we told you so’, their response is ‘so what’. Certainly, I am no fan of Wal-Mart as a customer or even as an observer of retail. However, that’s not the point.
The point is, Wal-Mart is all about expanding their share of the consumer’s wallet. And, that is the consumer’s wallet, not exclusively from their existing customer base. While that may be easier to sell a bit more to those you have, they are also all about expanding their offering to attract the new.
While the street may criticize, they will be hard at work introducing something new tomorrow and making adjustments to what they already have in order to maximize the sale.
There’s a real message here for other retailers. Watch, learn and look for your own opening – then pounce yourself. Certainly don’t waste a moment gloating about their one small misstep – they surely won’t be.
If you try to become too many things to too many people as Wal-Mart is attempting to do, then you become Sears. And then you become irrelevant.
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Wal-Mart, like most successful entities, suffers from the “growth paradox.” How can WM continue to grow at double digit rates with their existing formats and offerings? You need to ask “What is under WM’s umbrella?” Although WM is capable of sourcing a line of upscale items the question remains whether the target market will give them permission to do so. Permission to source new products comes from the company. Permission to sell any new products comes from the customer and apparently a large segment of their target market is not giving WM the requisite permission.
I’m always reminded of the phrase, “You can make it with class or make it for the mass, but you can’t do both.” WM would be better served by identifying offerings that fit their current target market and by developing new formats for new target markets. Customer confusion is a death knell.
What is more significant is Wal-Mart’s substantial strategic shift in its store planning. Wal-Mart is planning at least 100 full-store reorganizations over the next six months, focused mostly on the 40% of its stores located in major metropolitan areas. It will now customize store designs and product mixes around six demographic groups:
— The affluent
— Empty nesters
— Hispanics
— Suburbanites
— African Americans
— Rural Residents
In other words, even Wal-Mart, the giant retailer known for uniformity and operational efficiency, is now recognizing it must reorganize around customer centricity. Wal-Mart has to do so because its growth is slowing, and it has already wrung every ounce of cost out of operations. The store must now look to increasing revenue by targeting specific customers.
Getting more business from targeted shoppers will be a challenge for Wal-Mart. It will mean listening more carefully to the preferences of different customer groups, being anticipatory and responsive, finding needs and fulfilling them, solving problems and providing service. This calls for a completely different mindset than “stack ’em high and let ’em fly!”
When even Wal-Mart is recognizing it must customize its offerings, all retailers should take note.
Wal-Mart was built on selling value to the lower and middle-income shoppers who need to save money. These customers do not have a lot of discretionary income for upscale items. The Dollar stores and Aldi’s are rivaling Wal-Mart with low overhead and low price thus slowing same store sales growth. Wal-Mart forced all other surviving retailers to get right on SG&A thus more competition. Stay with low price and add spending opportunities for their customers. Upscale customers will not stop visiting their upscale stores.
Regarding the apparel effort specifically, it is disheartening to hear senior management back-peddling at this early stage. Talk about a credibility hit. Let’s not forget that, contrary to recent press referring to Wal-Mart’s “years” of “attempts,” the most significant changes in apparel from branding to trend direction have been implemented within the last year.
Those quite conspicuous (and growing more so every day) houndstooth jackets in the Mark Eisen ME collection were dead-on (check out their “sisters” at Valentino and Hilfiger), as were the muted tweed suiting pieces (seen J. Crew’s catalog? They brought out similar looks AFTER Wal-Mart did at exponentially higher prices this fall). Ditto for ruffle blouses in beautiful colors, wrap dresses worthy of Diane Von Furstenberg, military jackets, beautiful skirts in the color of the season – plum, etc. Now before the predictable backlash starts about how Wal-Mart somehow should not be in the trend business because the “Wal-Mart customer” just doesn’t get fashion (snobbery of the worst order), I would summarize the problem this way: Too deep, too broad, too long.
Too Deep: Why not bring in limited quantities in top doors rather than planning uber depth in every single store, all season long? On the positive side, they had every single look from their fantastic Vogue ads in store and in force from day one. The same can’t be said of Target’s Go International efforts (try putting the looks presented on the website together in the store early in each program).
Too Broad: Again – why all looks in all stores? Did Metro 7 really need to go from zero to ninety? On the other hand, why was the super effort in young men’s that is Exsto limited to so few doors (creating a male-female fashion imbalance)?
Too Long: Probably the most important factor. Had Wal-Mart really carried through with the H&M, Zara, Mango, Topshop, Uniqlo…and yes, Target Go International model, Wal-Mart really would have planed for certain core items (say, the core George line) to stay out all season then layered on the coordinating directional items (Mark Eisen) in multiple deliveries to keep it fresh and exciting. Planned obsolescence. This is the piece that gives consumers much-needed PERMISSION to buy apparel at Wal-Mart. Who will know? It’ll only be here thirty days and my friends don’t shop here…yet.
As for media darling, Target…When is the last time you bought something at Target and someone said “Oooo! Where did you GET that?” (“Nice khakis” doesn’t count). Target was so much LESS fashionable than Wal-Mart!
Wal-Mart simply needs to remember who they are. They MAY be able to spend some cash and target markets to better penetrate a more upscale market with more upscale offerings, however, they themselves have defined their territory–Price–and that is what their customers want – for the most part, and it is what they have built their whole juggernaut for. Customers in Westchester County, NY or near the 90210 zip code aren’t going to flock to WM for Metro 7. If WM can sustain double digit growth forever, they have found the Holy Grail. For WM, it’s price– as they say–Always.
Never, never take anything away from a customer before they indicate they don’t want it anymore. The tried and true provides fulfillment with confidence. New, untried items often leave the consumer with the option of purchasing a product in which they have built no confidence. That is the entire basis of brand marketing.
Wal-Mart should look at expanding their brands. I would advise that the expansion of their brands might draw a more upscale consumers if they would incorporate more upscale fabrics. Cotton, wool, Cashmere, leather are always good options. Also look at the upscale crowd who flock to natural fibers and you won’t find them wearing hip huggers and belly rings. Design your clothes for the audience you covet, price them right and for gosh sakes don’t included embroidered logos, and consumers will beat a path to your doors. Try using that Wal-Mart buying power and those Far East factory connections to bring high quality clothing to market at reasonable prices. Remember that department stores often mark up clothing 300%. I would think that Wal-Mart could retail the same product for half of department stores retail.
This reflects a sampling of customers who believe that all of the additional efforts of Wal-Mart to diversify their retailing efforts will result in higher prices. Unfortunately, this is a fallacy, since increase customer service and better positioning will mean that they have more products and lower prices, like Wal-Mart’s upcoming $349 notebook computer. Without continually challenging their current position, Wal-Mart will not grow. These efforts are critical to Wal-Mart growing and fulfilling all of their customer’s needs.
I agree with both Richard and Leon in their assessment.
Wal-Mart is a pretty big ship and when they change course they often either under or over correct, it is difficult not to.
When they under correct and proceed with caution they are seen to be reacting too slowly, when they over correct and make significant changes which become very visible, their efforts fall under intense scrutiny by the analysts and media pundits and any shortcomings are quick to be criticized.
Wal-Mart will correct its course and will ultimately be successful in achieving acceptance by more of the upscale segments, who by the way are certainly in the Wal-Mart shopping for something.
Wal-Mart has the ability to fine tune their assortments in order to merchandise only those stores who have shown the ability to attract that portion of the customer base willing to try out their upscale offerings.
Even if the new apparel lines are added to only 600 stores (ONLY 600?) that is a pretty substantial achievement. How many 600 store apparel or home goods chains are out there?
Wal-Mart will get it right, they will simply need to keep their focus on their core customer, step them up where they can, while adding assortment and value to the non core fashion customers.
If the media and other critics were to spend less time prognosticating and speaking FOR the Wal-Mart customer and more time talking to the customers they might find that it ain’t all doom and gloom. As far as I’m concerned there are at least 600 stores where customers bought Metro 7 that seem to love the offering and are willing to buy it again!
They made a TV show about this about 40 years ago. It was called the “Beverly Hillbillies.” No matter how hard the hillbillies tried, they could never fit in there upscale Beverly Hills neighborhood. Wal-Mart reminds me of that. When they went back to their old hillbilly ways, everything worked out.
Bargain stores can’t go upscale without replacing a large percent of their old customers with new ones. I am not sure why they would want to be more like a key competitor and not more true to their core identity.
We need a jump the shark listing for companies like there is for TV. The jump the shark web site (http://www.jumptheshark.com/) is dedicated to that scene in every show that signals the end of the series. For Happy Days it was when Fonzi jumped his motorcycle over a shark tank.
Our list could start with Wal-Mart going upscale, Kmart stopping their blue light special, and “The softer side of Sears.”
Others?
Gee, I thought “have what the customer wants, at the right price, at the right time” covered it all. Of course Metro New York or Detroit or Chicago or LA is different than Bryan, Texas or Tulsa, Oklahoma or Grand Rapids. But then it has never been just about fashion. You don’t sell snow shovels in South Texas and not too many riding lawn mowers in Metro Detroit or Chicago.
There is room at the top end to add the $400 DVR, but not at the expense of the $29 DVD player. You can push the upper envelope by offering limited upscale apparel, but you can’t delete the Dickey’s work clothes. This can not be “change it all today.” Making a change in the mix is about evolution, not revolution. Alienating the core customer base is very dangerous unless you have absolute certainty that the consumers you hope to add will in fact be there and “out profit” those you might lose.
Wal-Mart will never be “cool,” but their clothing offerings can certainly get to higher acceptance in middle America – over time. I’m sure seeing an excess of clearance merchandise in their George and other new lines right now. I really question trying to hit “fashion” in the burbs and rural areas too quickly.
Charles & DVZ have it right.
Wal-Mart is all about right product, right place and right time.
The model is to enhance the store assortment to appeal to the lifestyles and budgets of the customers that typically shop a particular store which can vary widely from one side of town to the other, let alone on opposite ends of the country.
One store can sell the $400 electronics item like crazy and the next will hardly sell a single unit.
If the perception of the analysts is that Hillbilly Wal-Mart needs to just keep merchandising to the hillbillies that shop the store, they are right…in Flippin, Arkanasas.
But in Boca Raton, Florida, Jed, Ellie Mae, Granny & Jethro are looking for the 80GB iPod and some nice outdoor furniture and a high-end stainless BBQ grill to put next to the cement pond….
WM’s endeavor, in principle, is smart. It’s in line with economic and demographic changes in the marketplace, but WM has spent years building their banner image around price for un-differentiated products. To re-train the consumer will take a long time/money, and they may not have the shopper’s permission to do it, as the article suggests. I’m willing to give WM the time, but I also expect that they will execute locally according to local tastes and forecasts.
Clothing shoppers get fashion/taste validation from the store environment, not just the merchandise itself. Wal-Mart’s interior design standards undermine Metro7’s positioning. Target does a better job selling apparel because the merchandise is tasteful and the environment doesn’t hurt the positioning. Target sells groceries and hand tools and toothpaste and fabric softener in the same four walls as the clothing. But Target’s signage has consistency, the background audio isn’t a cacophony, and the displays don’t scream. Wal-Mart spends money on its interiors, but doesn’t get good value because the overall design isn’t appropriate for its aspirations. And the Metro7 quantities need to start out gently. Turning around a multi-generation fashion positioning cannot be accomplished in 12 months.
The First Commandment of Retailing is, “Thou shalt know thy customers and never break faith with them.” Wal-Mart needs to stop listening to consultants and analysts and go back to listening to the folks it serves. They have all the answers.
Wal-Mart’s problem is very typical of a retailer listening too much to Wall Street and not paying attention to Main Street. Wal-Mart has done a great job of defining who they are to their customer base and it has resulted in a great love affair between consumer and retailer. In response to Wal-Mart’s need to sustain growth and fight off Target they thought they could move more upscale. Result is it is upsetting their core consumer base while at the same time they’re not able to attract the upscale consumer they’re looking for. We are seeing something that many people thought would never come, the maturing of Wal-Mart to the point that if they are to sustain growth as a corporation, they will have to look more aggressively to other retail formats or global markets.
It’s premature to write off Wal-Mart’s efforts to offer more upscale merchandise. It was only a few months ago that they were getting a lot of positive press about these initiatives along with efforts to tweak their store design. To dismiss the effort as misguided when it represents a long-term strategy important to Wal-Mart’s future says more about the impatience of investors and commentators (and its own senior management) than about the effort itself.
The shaky sales results from the last few months show that Wal-Mart has a lot to learn about how to roll the new merchandise initiatives out more carefully, how to market it more effectively (without losing its value proposition) and how to enhance the in-store experience at a faster pace so it’s in sync with the merchandise. But Wal-Mart needs to stick to its guns and learn over the next couple of years before declaring the effort a success or a failure.
While it may be easy to pounce on Wal-Mart and say ‘see, we told you so’, their response is ‘so what’. Certainly, I am no fan of Wal-Mart as a customer or even as an observer of retail. However, that’s not the point.
The point is, Wal-Mart is all about expanding their share of the consumer’s wallet. And, that is the consumer’s wallet, not exclusively from their existing customer base. While that may be easier to sell a bit more to those you have, they are also all about expanding their offering to attract the new.
While the street may criticize, they will be hard at work introducing something new tomorrow and making adjustments to what they already have in order to maximize the sale.
There’s a real message here for other retailers. Watch, learn and look for your own opening – then pounce yourself. Certainly don’t waste a moment gloating about their one small misstep – they surely won’t be.
If you try to become too many things to too many people as Wal-Mart is attempting to do, then you become Sears. And then you become irrelevant.