Adapted from a post at the Writing on the Wal.
Maybe you know that Wal-Mart had a bad Black Friday. The company also had a bad November. Its sales went down while those of its competitors, especially Target, increased sharply. In the course of explaining this situation, the Associated Press just told America that there is no Santa Claus:
One big issue plaguing Wal-Mart has to do with its prices. Consumers long believed if they shopped at Wal-Mart, they got the best price. And they were willing to put up with dated stores and sloppy displays so long as they were paying less.
But this year, that might not have held true. While the company has started remodeling — which also has turned off shoppers because of the disruption to the stores — most stores haven’t been redone yet. At the same time, Wal-Mart hasn’t always offered the lowest prices.
[Emphasis added]
I knew this a long time ago. You probably knew the same thing. But the kind of people who think Interest Only Mortgages are a good idea and that Saddam Hussein had something to do with 9/11 – in other words, people who don't pay close attention to much of anything – are going to find this news rather shocking (if this meme catches on enough for them to notice it).
What are these customers going to do if this sinks in? Keep shopping there because the fashions are so chic? I don't think so. Here's my partial transcript of the CNBC interview from YouTube that I first saw on the Wal-Mart Watch blog last night:
The successful stores in this economy are the places where people want to shop – not where they have to shop. And Wal-Mart has done nothing to alleviate the issue that when you shop at Wal-Mart you can see that the ailses are lined with people who have to shop there because the low prices that they've been offered are just constant reminders of the poverty line that they're very very close to. The minute that these people don't have to shop at Wal-Mart, they leave. They go other places that they'd rather be shopping instead of in the aisles of a place that's a constant reminder of how bad things are.
What happens when Wal-Mart's reputation for low prices is seriously threatened for the first time? They try to fix the situation by shouting from every mountaintop how low their prices always are. But then, here's Frankel again:
They keep ramming this low price, low price, low price, which actually is saying, "You can't afford anything else. You better shop here."
Talk about being caught between a rock and a hard place. If they don't have low prices, nobody goes there. If they do have low prices, customers still want to leave.
And did I mention the investigations? From Bloomberg:
The company also may be subject to investigations of its labor practices by the labor panels, which have the power to subpoena executives, says Andy Laperriere, political economist at International Strategy & Investment, a Wall Street advisory firm.
``Wal-Mart may get the tobacco-industry treatment from this new Congress,'' Laperriere says. The company may also face opposition from newly elected lawmakers who benefited from union support in their campaigns.
Democratic Senator-elect James Webb of Virginia says Wal- Mart is a symptom of the failure of U.S. trade policy, which penalizes American workers and industries by flooding the market with cheap imports and making it too easy for companies to export jobs overseas.
Webb and other Democratic lawmakers who seek stricter labor provisions in trade deals may hurt Wal-Mart's ability to get trade-related concessions that help the company curb costs.
Uh oh. When Jim Webb is coming after you, you're in deep trouble. Just ask George Allen.
I almost feel sorry for Wal-Mart, but on second thought a company that thinks a new polo shirt is the way to award employees for twenty years of service deserves everything it gets.
JR