chicot60
02-13-2011, 10:31 PM
SADDLE BROOK, N.J. — The battle for shoppers is playing out across the country: Wal-Mart vs. everyone else.
Wal-Mart is not in danger of ceding its place atop the retail world. But competitors have begun to chip away at its dominance.
Dollar stores beckon, their small size ideal for quick shopping. Target offers 5% off if you pay with its store-branded card. Costco tempts with high-end, brand-name food and designer clothes at competitive prices.
Bernadette Clark used to visit the Walmart store here twice a week. Now it's twice a month. She got fed up last year when Wal-Mart stopped stocking some of her favorite brands and she couldn't count on low prices.
"It gave me the opportunity to look elsewhere," she says. "I shop around more."
Three years ago, Wal-Mart ruled for convenience, selection and price. Today it is losing customers and revenue, and smarting from decisions that backfired.
Over the past year, revenue at Wal-Mart stores open at least a year has fallen an average 0.75% each quarter, according to the International Council of Shopping Centers. Revenue rose an average of nearly 1.7% at Target, 8% at Costco and 5.9% at Family Dollar.
To fight back, Wal-Mart is again emphasizing low prices and adding back thousands of products it had culled in an overzealous bid to clean up stores. It's also plotting an expansion into cities, even neighborhoods where other national chains won't go.
"We are running a better business because our competitors cause us to raise our own game," Wal-Mart CEO Mike Duke told The Associated Press in an interview. Wal-Mart expects to halt the revenue decline when it reports fourth-quarter results this month.
Mike Duke
Wal-Mart CEO
By Mark Lennihan, AP
Unlike most stores, Wal-Mart thrived when the Great Recession struck in late 2007. Its core customers — households making less than $70,000 a year — bought more. For many, it became the only place they shopped. Affluent shoppers became price conscious and discovered Wal-Mart's prices were hard to beat.
All of Wal-Mart's $27 billion in revenue growth for the year ended in January 2009 came from greater demand for basic items — food, pharmacy and household goods. Shoppers spent 13% more on basics at Wal-Mart that year.
Shoppers also liked that Wal-Mart's stores looked neater. The company was finishing a major renovation to address complaints that its stores were messy. Wal-Mart widened aisles, eliminated clutter, improved lighting and lowered shelves.
Family Dollar and Dollar General posed little threat. Their stores generally were dingy, and their shelves were filled with low-quality clothing and housewares. Their groceries weren't major brands.
Target, meanwhile, struggled with the perception that its prices were high. And stores filled with non-essential items — think brightly colored, decorative pillows and kitchen accessories — didn't appeal to shoppers focused on making ends meet.
GOOD TIMES END
Wal-Mart had a competitive edge. It lasted until June 2009, the month economists would later determine was the end of the Great Recession.
Around that time, Wal-Mart's renovation started to backfire. As part of its store overhaul, it had removed thousands of products from its shelves. Gone were top-selling toothbrushes and other items people counted on Wal-Mart to stock, like handkerchiefs. Wal-Mart got rid of 20% of its groceries, about 10,000 items in that area of the store, says Burt Flickinger, who runs the consulting firm Strategy Resource Group.
Shoppers began complaining that Wal-Mart no longer had what they wanted, including some of their favorite brands. Revenue began to decline.
"We cleaned the stores up, but we cleaned them up too much," says Duke, who had become CEO just months before, in February 2009.
Wal-Mart's next mistake was pricing. Over the past year, it strayed from its "everyday low prices" slogan, the bedrock philosophy of founder and namesake Sam Walton. Wal-Mart was less aggressive about being the low-price leader. Instead, the company slashed prices only on select products, and the deals were temporary. The idea was to draw customers into stores for the bargains and hope they would pick up other, more profitable items.
Last Memorial Day weekend. Wal-Mart advertised dramatic price cuts on 22 items, including a 40-ounce bottle of Heinz ketchup for $1, less than half price.
But the strategy failed.
The economy was still weak. Customers were watching prices as many had never before. They discovered that Wal-Mart couldn't be counted on to have the lowest price on some items, if it stocked them at all.
Wal-Mart is not in danger of ceding its place atop the retail world. But competitors have begun to chip away at its dominance.
Dollar stores beckon, their small size ideal for quick shopping. Target offers 5% off if you pay with its store-branded card. Costco tempts with high-end, brand-name food and designer clothes at competitive prices.
Bernadette Clark used to visit the Walmart store here twice a week. Now it's twice a month. She got fed up last year when Wal-Mart stopped stocking some of her favorite brands and she couldn't count on low prices.
"It gave me the opportunity to look elsewhere," she says. "I shop around more."
Three years ago, Wal-Mart ruled for convenience, selection and price. Today it is losing customers and revenue, and smarting from decisions that backfired.
Over the past year, revenue at Wal-Mart stores open at least a year has fallen an average 0.75% each quarter, according to the International Council of Shopping Centers. Revenue rose an average of nearly 1.7% at Target, 8% at Costco and 5.9% at Family Dollar.
To fight back, Wal-Mart is again emphasizing low prices and adding back thousands of products it had culled in an overzealous bid to clean up stores. It's also plotting an expansion into cities, even neighborhoods where other national chains won't go.
"We are running a better business because our competitors cause us to raise our own game," Wal-Mart CEO Mike Duke told The Associated Press in an interview. Wal-Mart expects to halt the revenue decline when it reports fourth-quarter results this month.
Mike Duke
Wal-Mart CEO
By Mark Lennihan, AP
Unlike most stores, Wal-Mart thrived when the Great Recession struck in late 2007. Its core customers — households making less than $70,000 a year — bought more. For many, it became the only place they shopped. Affluent shoppers became price conscious and discovered Wal-Mart's prices were hard to beat.
All of Wal-Mart's $27 billion in revenue growth for the year ended in January 2009 came from greater demand for basic items — food, pharmacy and household goods. Shoppers spent 13% more on basics at Wal-Mart that year.
Shoppers also liked that Wal-Mart's stores looked neater. The company was finishing a major renovation to address complaints that its stores were messy. Wal-Mart widened aisles, eliminated clutter, improved lighting and lowered shelves.
Family Dollar and Dollar General posed little threat. Their stores generally were dingy, and their shelves were filled with low-quality clothing and housewares. Their groceries weren't major brands.
Target, meanwhile, struggled with the perception that its prices were high. And stores filled with non-essential items — think brightly colored, decorative pillows and kitchen accessories — didn't appeal to shoppers focused on making ends meet.
GOOD TIMES END
Wal-Mart had a competitive edge. It lasted until June 2009, the month economists would later determine was the end of the Great Recession.
Around that time, Wal-Mart's renovation started to backfire. As part of its store overhaul, it had removed thousands of products from its shelves. Gone were top-selling toothbrushes and other items people counted on Wal-Mart to stock, like handkerchiefs. Wal-Mart got rid of 20% of its groceries, about 10,000 items in that area of the store, says Burt Flickinger, who runs the consulting firm Strategy Resource Group.
Shoppers began complaining that Wal-Mart no longer had what they wanted, including some of their favorite brands. Revenue began to decline.
"We cleaned the stores up, but we cleaned them up too much," says Duke, who had become CEO just months before, in February 2009.
Wal-Mart's next mistake was pricing. Over the past year, it strayed from its "everyday low prices" slogan, the bedrock philosophy of founder and namesake Sam Walton. Wal-Mart was less aggressive about being the low-price leader. Instead, the company slashed prices only on select products, and the deals were temporary. The idea was to draw customers into stores for the bargains and hope they would pick up other, more profitable items.
Last Memorial Day weekend. Wal-Mart advertised dramatic price cuts on 22 items, including a 40-ounce bottle of Heinz ketchup for $1, less than half price.
But the strategy failed.
The economy was still weak. Customers were watching prices as many had never before. They discovered that Wal-Mart couldn't be counted on to have the lowest price on some items, if it stocked them at all.