User:Tadpole256/Wal-Mart stores 'going back to basics'

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Monday, April 11, 2011

Wal-Mart announces new effort to come back from the effects of a failed strategy.

Next month, retail giant, Wal-Mart will launch an advertising campaign called "It's Back," to tell it's core customers the discount chain is restoring merchandise it removed from store shelves in a failed effort to reinvigorate it's brand. The store's failed strategy during much of the recession, was to eliminate a multitude of items, in an effort to declutter its stores so as to appeal to upper income shoppers that were now looking for price deals. Wal-Mart wanted to retain these customers once the economy picked back up.

The plan ultimately backfired. It left many of Wal-Marts' loyal customers who couldn’t find their favorite brands angry, and gave them the impression of higher prices with fewer choices.

Cquote1.svg We have lost our customer confidence... Cquote2.svg

—Duncan Mac Naughton, Chief Merchandising Officer, Wal-Mart

Begining in May, Wal-Mart began displaying signs in their stores announcing the return of onceremoved items such as, bolts of fabric, fishing tackle, and other "heritage" items that Wal-Mart eliminated in its attempted to spruce up its stores' appeal. Some of the items that were removed were very important to Wal-Mart's customers, particularly those in rural areas.

The strategy failed, and Wal-Mart now is trying to win back its once loyal customers by using its formerly famous, "low price guarantees". The company has endured seven consecutive quarters of sales declines at U.S. stores open at least a year. Wal-Mart is still fighting to get its stock prices back to recession levels. However, if W-Mart expects to grow, it is going to have to gain appeal with a wider audience, opening itself to new demographics, without losing its base, a strategy that may be difficult.

In addition to bringing back a wider array of goods in hopes of restoring Wal-Mart's reputation as a "one-stop shopping" destination, executives at the retailer say they are insisting store managers and product buyers step up their price comparisons with neighboring retailers to ensure that Wal-Mart is offering lower prices. This move that could put a bigger pinch on smaller, local retailers which often have trouble competing with Wal-Marts sometimes artificially low prices. Wal-Mart's practice of comparing prices with local, smaller retailers has long been hotly debated, and Wal-Mart has been accused of being anti-competitive. Most smaller stores cannot compete once the world's largest retailer moves in next door.

Independent, non-corporate, retailers often have difficulty competing with the chains like Wal-Mart. They cannot buy the enormous quantity or variety of goods that such a large retailer is capable of purchasing. Nor are they capable of beating Wal-Marts' prices, which often drive smaller retailers out of business once the Wal-Mart moves in nearby.

Local price checks were an obsession of the company's founder, Sam Walton, but have dropped off significantly in recent years as Wal-Mart moved away from its focus on "every day low prices" and began promoting deals on some products while quietly raising prices on others.

Wal-Mart's Chief Merchandising Officer, Duncan Mac Naughton, said, "We have lost our customer confidence...". He went on to say, "Walmart's reputation was founded on the principle of providing low prices day-in and day-out on the broadest assortment of merchandise. Our company is determined to create the best one-stop shopping experience and low prices on the right products backed by a clear, consistent ad match policy."

"We got a little promotional, and they began to wonder whether we really had the lowest price," Mr. Mac Naughton said of customers. "We are going to establish our price leadership once again."

Wal-Mart has begun an advertising campaign touting its price-matching policy in a bid to persuade consumers that it can always be counted on for the best deals. However, some sources have indicated that Target Stores, Wal-Marts biggest competitor in the U.S., often has better deals. Additionally, Wal-Mart seems to be losing some traction to Dollar stores such as Dollar General & Family Dollar, which also frequently have lower prices, and are often more conveniently located.

According to Wall Street Strategies analyst, Brian Sozzi, the new strategy is a positive indication that Wal-Mart traffic is still weak. It could take a lot of effort, and quite a while to reverse the downward sales trend.