Wal-Mart to reinstate dropped products, emphasize price
The running joke at Wal-Mart used to be that if the big-box behemoth didn’t sell it, shoppers didn’t need it.
That was before the company got rid of 9 percent of its merchandise two years ago in an attempt to beautify and simplify its cluttered stores. But sales at established stores have fallen nearly every quarter since then. Analysts say that the retailer has lost market share for the first time in a decade and that rival Target has finally matched many of its prices — and no one at Wal-Mart is laughing.
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“It’s really about our core commitment to the customer,” said Duncan Mac Naughton, chief merchandising officer for Wal-Mart U.S. “You have to have what I want when I come, and it has to be a great value.”
Wal-Mart began quietly adding products back to its shelves last summer, starting with groceries, snacks and beverages, and saw a bump in sales, executives said. Products in categories such as cleaning and pet supplies will be phased in through the summer, with other merchandise returning by the end of the year.
Wal-Mart executives said the deepest cuts — as much as 26 percent of inventory — had come in “heritage” categories such as hardware and apparel, once counted among its staples. Take fishing gear, for example. At a recent conference with investors, Bill Simon, head of Wal-Mart’s U.S. stores, said the company boosted its assortment of rods and reels, and sales shot up 40 percent.
“If we can make money on it and the customer wants it, we are going to carry it,” Simon told investors.
The stakes are high for Wal-Mart. Sales at stores open at least a year — a key measure of a retailer’s health — have dropped for seven straight quarters. An analysis last month of Wal-Mart’s market share by Credit Suisse found that it declined for the first time in a decade from 13.9 percent in 2009 to 13.4 percent last year.
Even if it fixes operational issues, Credit Suisse analyst Michael Exstein wrote in a report, Wal-Mart still faces broader challenges from rising gas prices, online retailing and higher costs.
Meanwhile, Wal-Mart’s reputation as the low-price leader is being challenged by a newly focused Target. The cheap-chic retailer is remodeling its stores to include more groceries in a direct shot at Wal-Mart and touting 5 percent discounts on all purchases for customers using a store credit card.
Craig Johnson, president of Customer Growth Partners, a consulting firm, compared prices at the two retailers on 45 items at stores in Connecticut, Indiana, North Carolina and New York and found that Target had matched Wal-Mart for the past three months. Part of the price creep occurred because Wal-Mart tried to focus on lowering prices on best-selling items, rather than across the store, executives and analysts said.
“Their pricing strategy seems to have been very confused, both to employees and to customers,” Johnson said. “Are these the best prices everywhere these days?”
Wal-Mart acknowledged the misstep and has instituted a new motto: “Low prices. Every day. On Everything.” The company said Monday that it is stepping up price checks at competitors and loosening guidelines for matching their ads. Mac Naughton said the moves are aimed at “building trust” with its shoppers.
“This is really about reestablishing and reinforcing the importance of Wal-Mart offering the convenience of one-stop shopping for our customers,” he said.
muiy@washpost.com
