Free Market teaches “Evil” Corporation a Lesson

There are many people that will try to tell you that Walmart is the incarnation of all that is evil due to its staunch stand against unions, towering dominance over other general department stores and ringing the death knoll of Main Street businesses all across small town America. Being reticent on the role of government with regard to regulating what private business can and cannot do to eliminate competitors, I will at least say that I enjoy window shopping downtown and do lament the loss of the small businesses which give character to the small communities which dot the country in regular 15-20 mile intervals. That being said, Walmart has figured out how to provide value, convenience and selection to the customer more successfully than any other retail store has been able to do. That is, until recently.

Project Impact was intended to make Walmart more inviting and comfortable to shop at. Updating an ancient company logo, making aisles wider and shorter to provide more light in the store, reducing clutter and product lines while playing with price points during the recession to trick customers into spending more: what part of this plan would not work? Aspects of the plan have worked: my hometown store is less cluttered and looks more streamlined. But it appears that the objectives of the strategy are at odds with each other, and with Walmart’s customers. The aspiration to provide a cleaner shopping experience was accomplished by removing thousands of products.

An AP article entitled Walmart, humbled king of retail, plots rebound sheds light on the power of the consumer to drive large business strategy and shows how even Walmart is not above bending to the will of the customer. The manifestation of Project Impact alienated Walmart’s most loyal fan base: customers looking for rock bottom prices and choices. Now when a customer walks into Walmart wanting to buy a blender, instead of five choices at different price points and with alternative features, they are met with only two choices: a low price-low end product which is of questionable quality and more than likely less than aesthetically pleasing, and a high price product which has some, but not all, the features a customer might want. There’s very little middle ground, which is the space I (and most people I know) occupy more often than not. By removing the middle ground, Walmart has lost business in several ways.

First, if I am looking to buy a blender (coincidentally, I am not… it’s just an example), I have an idea of what I want already. If I go to Walmart and nothing even remotely matches what I’m looking for, I’ll go to Target, or Kmart, or whatever. If I go to Walmart and the only blender they have is a $10 plastic nameless piece with an on/off switch, they have lost my business. If the second blender they have is a $65 Oster BlendMax with 14 speeds, a second container, and interchangeable color options, they have still lost my business.

Secondly, many consumers can often be convinced to “level up” on purchases when several options are placed on the shelf before them. Imagine you enter Target to buy a blender. They have the $10 store brand and the $65 Oster, but you are really looking to spend about $30. Well, for $30, there is a nice blender that will take care of your every need, but for only $10 more you could have a GLASS container which is more durable and doesn’t ever discolor. You may just spring for that $40 blender when if only the other two had been available, you would have bought neither. Now imagine that happening to half of the products in a store as large as Walmart, and imagine it happening a few million times across the country. For the company that built its brand on low price and options, removing one of the fundamental tenets of the business should have been seen as ominous from the beginning.

No matter, they still have the lowest prices, right? Wrong. As discussed in the article, Walmart started relying on the old “bring ’em in” marketing techniques that everyone else uses to get people in the door. Ridiculously low “rollbacks” on five products advertised in the paper or on television, and sneaky increases of a few cents to a few dollars on 75 percent of the other products in the store. The only problem with this was the executives picked precisely the wrong moment to do it. In the midst of the Great Recession, consumers are tallying their purchases and following prices more closely than ever, and they aren’t stupid enough to miss this tactic. The question is, if a low price, high choice model has made you the number one general retailer in the United States during the high-rolling “good times”, whose idea was it to adopt the business model of the competitors you dominated during the tough times? Where was the logic in this?

The “convenience” factor has also been compromised as a result of the decision to implement Project Impact. If I am going to go through the hassle of parking a few football fields away from a store front in the dead of winter, then deal with everyone else and their brothers during my shopping expedition, and still face the possibility that the behemoth maze I am walking into is not going to carry exactly what I am looking for, you can bet that I am going to choose to shop at a smaller, possibly more expensive grocery store, drug store, and clothing retailer. I won’t even care if I have to go to all three of them on the same day as long as I can park in the same zip code as the store, walk through the store quickly to identify whether they have what I need or not, and get out without having to take my chances with either a grumpy cashier or self checkout malfunction at one of the 25 lanes. Additionally, should I happen to remember that I forgot to pick up something in the first aisle of the store, it won’t take me 10 minutes just to walk back there to pick it up.

These are the hassles that consumers have proven weary of. Does this mean that evil genius of retail Walmart is going to finally fall? No, of course not. They will adapt, most likely shore up their reserves and revert to their original business model. They will regain much of their “lost” business. However, it is possible that this sojourn away from their original premises will provide consumers with the lasting impetus to visit other stores more often and perhaps even first. Perhaps this lapse in judgment on the part of Walmart executives will prove to be the saving grace of a few, though not all, small town businesses (and kudos to those businesses that can develop a way to exploit Walmart’s current weakness in its marketing!). In the end, I believe that this temporary error in Walmart’s history is one of the best things to happen in recent years to prove the viability of the free market once again.

Finally, I would never begrudge Walmart their due profits, but this story does have a way cutting down the appeal of unchecked greed. Congratulations consumers, rejoice in your own power to choose and to choose which businesses are successful.

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~ by aptessmann on February 13, 2011.

One Response to “Free Market teaches “Evil” Corporation a Lesson”

  1. Walmart so huge I don’t bother to go in there. Yes prices are low but they gouge the workers pay so I will resist the low prices and take my business to the descent wage workers at target

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