Tuesday, February 22, 2011

Rebooting Wal-Mart

Typically, I like to write about entrepreneurial companies in this space, but today’s Wall Street Journal has a very interesting story about one of the very largest companies in America…Wal-Mart. The story is Wal-Mart Tries to Recapture Mr. Sam’s Winning Formula by Miguel Bustillo. The story is a cautionary tale of what happens when you try to expand by being something you aren't and in the process, forgetting about your core customer. The good news if you are a Wal-Mart shareholder is that it appears that they now "get it' and are back focusing on that customer who they previously were taking for granted. Which of course, is bad news for Target and other competitors.

From the beginning of the article:

Wal-Mart Stores Inc. is in the midst of its worst U.S. sales slump ever.
When it reports earnings on Tuesday, the retailer is widely expected to post its second straight year of declining domestic same-store sales.

Wal-Mart's struggles are the result of a misstep: To jump-start lethargic growth and counter the rise of competitors such as cheap-chic rival Target Corp., executives veered away from the winning formula of late founder Sam Walton to provide "every day low prices" to the American working class. Wal-Mart, the world's biggest retailer by sales, instead raised prices on some items while promoting deals on others.

Company executives acknowledge having miscalculated and are adjusting their strategy again. The big question is how quickly the mammoth chain can turn itself around.

And from the end of the article:

"Wal-Mart just went and broke it," said mechanic Mike Craig, 41 years old, lamenting that he could no longer find honey, which is now next to the peanut butter instead of near the salad dressings. "I just don't like what they did at all."

So once again, Wal-Mart is back to cramming wood pallets of $8.97 boxed wine and $8 Justin Bieber CDs into the store's corridors, recreating the messy procession of discount merchandise in the main aisles that the company calls "action alley." Now analysts are concerned that, in changing direction again, Wal-Mart risks alienating whatever higher-scale shoppers it had gained.

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