Walmart - Has the killer whale become a walrus?

Interesting times and challenges for big box retailing!

Who would have predicted five years ago that big box retailers would be struggling!  Are the walls of the Walmart Empire starting to crumble?  A quick review of the headlines indicates that Walmart might be more like a big old walrus … instead of the killer whale of retail who sets the benchmarks for growth.  In the sea of change, the ability to evolve means more than sheer size.  What will be the fate of Walmart?

Recent Headlines of Walmart

• Walmart Seeks Redemption With New Ad Slogan, More Products
• The Wisdom Behind Wal-Mart’s $300 Million Social Media Investment
• Wal-Mart Plans to Reduce Space for Electronics in Stores
• Walmart Reverses Course on SKU Rationalization

Is Big Box Retailing Under Siege?

Walmart is not the only big box retailer struggling in these economic times.  Best Buy and other big box retailers seemed invincible just five years ago.  Best Buy dominated consumer electronics, often accounting for more than 50% of a manufacturer’s business in many categories.  Today, Best Buy is scrambling to drive traffic back to current stores and to build smaller ones, especially Best Buy Mobile stores.

It’s not just consumer electronics retailers struggling.  Even the $420 Billion Empire of Walmart struggles to profitably grow revenue, especially for same store sales (stores open for at least a year).  Walmart has actually had 7 consecutive quarters of declining same store sales!  So how did this happen?

Eminent Threats to Big Box Bricks & Mortar Retailing

Beyond the recession there are a host of converging factors that are changing the face of retail in the US, even if the economy recovers:

• Consumers shopping for price have discovered “dollar stores”
• “Dollar stores” have discovered how to merchandise assortments
• Amazon has set new standards of excellence for consumer experience, value and home delivery
• The majority of consumers online have now made a purchase
• Old bricks and mortar retailers have discovered multi-channel retailing – Staples is approaching 50% of sales on-line
• Smartphones with bar code & QR code scanners are literally changing how consumers shop and where they purchase
• Skyrocketing gas prices … let’s not even go there!

Core retail differentiators in the eyes of consumers

A core premise of retailing today is that a retailer must excel in at least two core areas.  Even more critical, these differentiators must mean something in the eyes of the core consumer who shops there.  For Walmart core customers, the two very core differentiators were “low prices” and “vast selection”.

During the economic recession more consumers “scaled down” and shopped Walmart’s stores for “value”.  In an effort to keep these consumers coming back, data centric Walmart embarked on “SKU Rationalization” as a way to reduce clutter, clean up aisles.  And oh by the way, Walmart tried to increase profitability by replacing familiar name brands with more profitable Walmart house brands.

Signs Walmart is reversing course … returning to roots

There are two key signs that Walmart is reversing course and returning to core differentiators that were the foundation of their success:

1. Walmart changed its slogan … not something it does very often!
2. Walmart reversed position on SKU rationalization and brought many name brands back … especially in food.

In case you missed it, Walmart’ new slogan is:

"Low prices. Every day. On everything.”

Translation: Walmart has returned to its roots and is again focused on core differentiators of “lowest price” and “selection”.  In an article distributed in the NRF Smartbrief, Walmart’s CEO has declared that reversing declining same store sales is his “first priority”.

A Walmart landmine – Consumers have changed!

In an Associated Press interview, Duncan MacNaughton, the company’s chief merchandising officer at Walmart, stated. "We have lost our customer confidence ... in having the lowest price. 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.”  

Well Duh!  Amazon, Newegg and a host of online retailers are cleaning out the cash registers of bricks and mortar retailers.  Reading between the lines, “a clear, consistent ad match policy” is not just about the “dollar stores”.  MacNaughton’s statement about and price match says much more about the threat from e-tailers, than from “dollar stores”.

A threatened Walmart is … a dangerous Walmart!

There may be those cheering for the demise of Walmart.  Don’t be too hasty.  Walmart is clearly irritated by their current performance.  And once the beast is awakened, it can be dangerously innovative.  Walmart has recently demonstrated an amazing capacity to innovate and evolve:

• Walmart is going head to head with Tesco opening new format convenience stores that are not even branded Walmart
• They are opening much smaller format stores in urban markets 
• Aggressively going after multi-channel capabilities, especially focused for buying online and picking up in-store 
• Piloting home delivery of not just food, but pharmacy & cosmetics 
• $300 Million purchase of a social media agency!

The list of Walmart headlines regarding innovation goes on and on.  Say what you will about Walmart being a big battleship that is difficult to turn, but that behemoth also has incredible resources and infrastructure.   While Walmart may retrench to low price on the surface, it is has the capacity to leverage distribution expertise to create one of the most formidable differentiators in terms of true multi-channel retailing.

So … is Walmart a sleeping walrus, or still the killer whale of retail?

By nature, I’m not a betting man … but I would definitely bet on Walmart over Best Buy.  “Big Blue” will have a much more difficult time changing course in the narrower and less profitable CE channel. 

What are your thoughts and predictions on the fate of Walmart relative to changing consumer shopping habits and amazing growth of e-tailing?  

Vote YES … Walmart is a killer whale that will turn around & thrive.

Vote NO … Walmart is a Walrus and will decline.

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