Two separate articles conclude that Wal-Mart Stores is having a tougher go of it since the economy began to rebound, in part because it has gone too far with its SKU reduction efforts and because a wide variety of competitors have found ways to beat the world's largest retailer on price.
A Bloomberg article cites a number of product categories, including cereal, health and beauty care products, laundry detergent, pet treats and soda. According to the piece, Wal-Mart cut inventories in its U.S. stores by 7.6 percent while increasing sales by 1.1 percent.
"Wal-Mart cut too deep and now they're going back to manufacturers," Michael Kantor, chief executive officer of the Promotion Optimization Institute, told Bloomberg.
"In some instances, we are returning SKUs to the floor; it is evolutionary and ongoing," said Linda Blakley, a Wal-Mart spokesperson. "Based on customers' response, we may return an item to the shelf. At the end of the day, we want to have what she wants at a good price."
Having a "good price" may not be good enough for consumers who have come to think of the chain as having the best price and now learn that others may save them more money.
Kantar Retail's Management Ventures has been tracking prices on 40 items sold in Wal-Mart and Target stores. Target has beaten Wal-Mart in two of the three surveys taken to date. In the latest comparison, Target came in 2.5 percent lower than Wal-Mart or $7 in real money.
Interestingly, 71% of respondents to a RetailWire poll last month said their perception was that Wal-Mart's prices were somewhat or much lower than Target. Only two percent believed Target had better prices while 27 percent thought the two chains were evenly matched.
Target isn't Wal-Mart's only concern. A recent survey by WSL Strategic Retail found three-quarters of shoppers in dollar stores believe they are getting better prices than if they shopped at Wal-Mart.
Burt Flickinger, principal of consulting firm Strategic Resource Group, said he also saw Wal-Mart losing ground to conventional supermarkets who offer superior selection and cut prices in key categories to drive traffic.
"The consumer has figured out that Wal-Mart's prices are too high in key categories. ... The consumer is confused. When Sam Walton and Doug Degn [who formerly ran merchandising for Walmart's grocery products] ran things, the consumer understood she would save in every category every day," Mr. Flickinger told Advertising Age.
Discussion Questions: Do you see Wal-Mart as being more vulnerable to competition today than in the past? Where is its market share most at risk and what will it need to do to address its weaknesses and the strengths of its competitors?