There's something of a confessional tone to much of the talk coming out of Arkansas these days. Reeling from two straight years of declining quarterly same-store sales in the U.S., officials at Wal-Mart Stores have pledged to rebound behind many of the tactics that turned the Bentonville, Ark., merchant into the largest company in the world — and which it seemingly turned against in recent years: Build a lot of stores. Watch the bottom line. Stack it high and deep. Sell it cheap every day. It's what makes us Wal-Mart.
This emphasis on everyday low prices, selection and expansion is also a happy medium between the nuanced approach of 2009's Project Impact and its attempt to romance affluent shoppers — and the brief but chaotic foray into aggressive high-low pricing a year ago, designed to win back traffic that abandoned Wal-Mart when its Project Impact tactics went wrong.
Today, Wal-Mart officials are addressing a business still recovering from a marked reduction in inventories and inconsistent positioning they cite as a root cause of the sales drain. Stated simply, when shoppers couldn't find what they were looking for in a 200,000-square-foot store, they went looking for a new store. Wal-Mart's pricing message in the meantime wavered between EDLP, a softer message around values, and hot pricing, while Supercenters transformed from decidedly dumpy to near elegant as the company built less and remodeled more.
Those tactics are also swinging back today under Mike Duke, who took over as chief executive officer of the company last spring, and Bill Simon, the company's U.S. CEO, who took the reins from the Project Impact-advocating predecessors about a year ago. Their remarks have been couched in language indicating their strategy heralds a return to Wal-Mart's true identity. They want no more surprises.
But there's more to Wal-Mart's struggles that a change of philosophies will necessarily fix, observers say. While the economy has been a factor, there's some debate over the degree to which it is to blame. Wal-Mart has historically done well in hard times, but this recession has been very different. Its core shoppers have been especially hard-hit and, experts note, are recovering slowly if at all even now. Others contend Wal-Mart is simply not executing well, noting that reduced capital budgets funding its more intense focus on low prices are showing up in shoddy execution in stores, particularly in-stock positions. There's also the philosophical shifting itself and the inconsistent message to shoppers.
ADDITIONAL WAL-MART COVERAGE:
• Wal-Mart Faces Recruiting Challenges
• Sam’s Club Gains Momentum
• Multichannel Ecommerce Effort
• Market Format Back in Growth Mode
• Small Formats Key to U.S. Growth
• Paradoxically Private in a ‘House of Brands’
• Walmart Canada Rapidly Catching Up
Beyond that, many of Wal-Mart's competitors, from dollar stores to discounters to supermarkets, have simply ridden the economy better, in part by exploiting Wal-Mart itself: Many have improved in their offering of and defense against EDLP. Others are more convenient. Still more have a better reputation and/or a better selection.
“The biggest issue Wal-Mart has is that the competition still treats them with respect, but they're no longer in awe of them or in fear of them,” Dave Marcotte, senior analyst at Kantar Retail, told SN. “They view Wal-Mart as holding money they can gain back. That's something I hear consistently from all kinds of retailers. We don't need to grab their shoppers — just a portion of their wallets.”