Strategy and innovation in today's economy
If you follow the news relating to Walmart you might have picked up a steady theme recently
. These are a few of the headlines from the last week regarding Walmart's strategy.
"Wal-Mart's new' strategy: Everyday low prices"
"Walmart expands in store medical clinics"
"Wal-Mart expects holiday shoppers to be practical"
After reading these stories one finds a recurring theme. Walmart has read the writing on the wall. Regardless of the report put out by The National Bureau of Economic Research, a government agency, stating that the recession ended in June of 2009, Walmart knows that their core shopper is struggling like never before in this generation.
Bill Simon, CEO of Walmart U.S., recently made the following statements at a Goldman Sachs conference about the shopping patterns of Walmart's core shopper in the U.S.
"The paycheck cycle we've talked about before remains extreme. It is our responsibility to figure out how to sell in that environment, adjusting pack sizes, large pack at sizes the beginning of the month, small pack sizes at the end of the month. And to figure out how to deal with what is an ever-increasing amount of transactions being paid for with government assistance.
"And you need not go further than one of our stores on midnight at the end of the month. And it's real interesting to watch, about 11 p.m., customers start to come in and shop, fill their grocery basket with basic items, baby formula, milk, bread, eggs, and continue to shop and mill about the store until midnight, when electronic -- government electronic benefits cards get activated and then the checkout starts and occurs. And our sales for those first few hours on the first of the month are substantially and significantly higher.
"And if you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it, and they've been waiting for it. Otherwise, we are open 24 hours -- come at 5 a.m., come at 7 a.m., come at 10 a.m. But if you are there at midnight, you are there for a reason."
Couple these statements with Walmart's renewed focus on everyday low prices instead of high/low deals along with recent statements of expecting a "practical Christmas" shopping season, and the supplier or manufacturer must ask themselves if they are on the same page as their largest customer.
A common phrase being passed around in the media and even in conversations with colleagues runs something like this, "When the economy picks up we'll"
The mindset seems to be to wait for the worst to pass and we'll get back to a time of better business. But is this the right strategy?
I'm certainly not saying here that the economy will not eventually pick back up. Economies always do recover at some point. The question is, when? How long will this protracted recession (or decline if you prefer) continue and how should suppliers plan their business to thrive in the midst of the American consumer having substantially less money to spend each month than in past years?
Bill Simon offered a few examples in his statement shown above. Could the "bonus pack" be reduced to the "tiny pack" in order to help consumers buy all of their necessities, albeit, in lesser quantities?
Also consider the second recent article listed at the top of this piece. Walmart is the largest retailer in the country and is most aggressively pursuing healthcare units in their stores. Why is this necessary and why are people using this service if not for a cost savings? Regardless of any attempted healthcare reform, the cost of healthcare continues to rise and Walmart is positioning itself to be a strong player in the basic care arena.
Walmart is taking the necessary steps to be the retailer of choice during these difficult economic times, but what are the manufactures doing to be the product or brand of choice during these times? If the strategy is to wait for the economy to improve, you might just wait yourself off of Walmart's shelves.
Strategy and innovation in today's economy
By: James Harris
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