This is not an article about how giant chain stores like Wal-Mart make it tough for small businesses and mom and pop shops to survive.
This is a story is about why even Wal-Mart now finds itself struggling because of the sluggish U.S. economy.
The world’s largest retailer released it’s 2010 fourth quarter numbers today, and things aren’t looking so good. Wal-Mart actually lost customers during the holiday shopping season resulting in a 1.1% decline in its same store sales. That’s the seventh straight quarterly decline for Wally World.
You’d think a massive discount retailer like Wal-Mart would be the place everyone flocks to during the holidays – especially when times are tough. But some say Wal-Mart is feeling the effects of straying from its original formula.
Believe it or not – the store with the slogan “Always the Low Price” – quietly started raising its prices last year.
A JPMorgan Chase study found that the retailer boosted prices an average of 6% last summer, but some items saw prices rise as much as 60%.
During the holiday shopping season, Wal-Mart decided to boost prices on toys and electronics. In December, Bloomberg news obtained an internal company email sent to Wal-Mart managers instructing them to make 1,800 types of toys more expensive. The email stated that the price changes were “to better enable your store and the company to have a successful financial month.”
It didn’t work out that way…
Instead Wal-Mart saw a decline during a holiday shopping season when consumer spending was up. In fact – it was the biggest percentage gain for U.S. retail sales in six years.
A recent article on The Wall Street Journal website indicates raising prices isn’t the only thing Wal-Mart did to scare its customers away.
“A foray into organic foods didn’t catch on with discount shoppers. A push to sell trendy fashions like skinny jeans bombed. And an attempt to cut clutter in stores to attract higher-income customers wound up undermining Wal-Mart’s appeal to its traditional audience.”
First of all, if you’ve ever shopped for groceries at a Super Wal-Mart you’ve probably noticed that their produce section is pretty disgusting. It doesn’t look fresh, it doesn’t look appetizing.
I shopped for groceries at Wal-Mart in college, and there were definitely a few times I ended up with moldy yucky crap a few days after it came home.
Second of all… skinny jeans at Wal-Mart? No offense but the majority of the shoppers I see waddling around the aisles at Wal-Mart are not going to hop in a pair of skinny jeans any time soon – even if they did start eating Wal-Mart’s organic food.
Wal-Mart ended up losing favor with U.S. households earning less than $70,000 a year. That demographic made up 68% of it’s business in the U.S.
Former Wal-Mart executive Jimmy Wright explains, “The basic Wal-Mart customer didn’t leave Wal-Mart. What happened is that Wal-Mart left the customer.”
Wal-Mart’s main customers are obviously still struggling with the lingering effects of the recession. But instead of sticking with that customer base, Wal-Mart decided to try and attract wealthier customers.
The big-wigs now realize that was a big mistake. They’ve apparently seen the error of their ways and are promising to return to the formula that attracted so-called middle class Americans to its stores.
“Clearly, we’ve lost some of our focus on what I would call the core customer,” Andy Barron, a Wal-Mart executive vice president, said at an investor meeting. “You might say, in short, that we were trying to be something that maybe we’re not.”
So Wal-Mart will go back to selling crappy stuff at affordable prices. We can all breath a sigh of relief. Order has been restored to the universe.
Image Credit: Iknownowforsure and lordcolus
Kasey Steinbrinck writes regularly on personal finances and the U.S. economy for Check Advantage. Visit them today and view their most popular checks including a big collection of Classic Checks. Contact Kasey to request free content for your website or blog.
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