Wal*Mart’s Midlife Crisis

SadfaceThere’s an interesting article on BusinessWeek.com called "Wal-Mart’s Midlife Crisis".  I’m pointing it out not so much because it criticizes Wally World (I’d never do that!), but because there’s a good lesson to be learned from their current difficulties.  It’s also a lesson that mass merchants never seem to learn.

Wal*Mart has a niche.  It’s been very successful for them.  Simply put, their stuff is cheap and they’re almost never out of stock.  They have an amazing distribution system.  They have huge buying power and the clout that goes with it.  They control their expenses.  They have a simple, easy-to-understand mission that rings true with their target (small t target) customer:  Always the Low Price.

So, what are they doing?  They’re trying to go upscale.  They’re trying to reach a customer that they just don’t have.  As the article points out, they’re having trouble keeping things in stock.  They’re the best at what they do so they’re trying to do something else.  Sadly for the folks from Bentonville, this isn’t the first time it’s been tried, and it’s never worked.  Ask Sears.  Ask J.C. Penney.  Ask Montgomery Ward (remember them?).  It doesn’t work.

When a value-priced retailer tries to go up-scale two things happen.  First, the core customer, the price shopper, won’t spend the extra money.  Plus, they get the feeling that their favorite store is abandoning them.  So they’re unhappy.  Second, the customer who might buy the better item won’t buy it because they don’t shop at Wal*Mart. 

Sears tried it and failed.  Penney’s tried it and failed.  Montgomery Ward tried it and really failed. 

So, what’s the lesson here?  Find a niche and stick to it.  You’re never going to beat the chains on price so don’t try.  Service the heck out of them.  Offer merchandise that no one else has.  Offer free coffee and babysitting while they shop.  Whatever you find that works, do it every day, with every customer and stick to it.  Don’t try to be something you’re not.  Your customers will notice and they won’t like it.

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