Why Walmart Lost Its Way

Organic Food.  Skinny Jeans.  Higher Prices.

Does this sound like Walmart to you?  I didn’t think so.  No wonder the discount giant reported its seventh consecutive decline in quarterly U.S. same-store sales — a drop this time of 1.8%.

By trying to expand its audience with upscale merchandise to compete with Target and Whole Foods, Walmart lost its core customers.  By losing its focus on “everyday” low prices, Walmart broke its brand promise.

What should it have done instead to reach that desired demo?

If Walmart was intent on going after a well-heeled shopper, it had only to look at what it did to compete in the warehouse club shopping space and against Costco and BJ’s.  It created another brand, Sam’s Club.

In fact, while Walmart’s sales have declined again in the latest quarter, Sam’s Club posted comparable store sales growth of 2.7%.

To compete with the gigantic retail experiences of Costco and BJ’s, Walmart didn’t add a gritty warehouse experience to its already existing Walmart centers.  It separated that shopping experience offsite and even gave it its own moniker.

The key to branding is “focus”.  Yet, in the corner office at many companies CEOs want to “expand”.  Their thinking goes; since the brand is working over here, let’s expand it to offer more categories, more price points and more outlets of distribution, over there.

The better solution is to stay focused on the promise that your core audience expects and launch a second brand to reach that other new market.

When Black & Decker wanted to grasp hold of the professional and hard-core DIYer, it didn’t use the Black & Decker name that had lost its caché with power tool users.  It launched DeWALT.

When Toyota wanted to create a premium brand to accelerate their luxury automotive division, it didn’t try and steer the Toyota brand to affluent customers with an elegant version of “I love what you do for me, Toyota!”  It created a separate unit focused on Lexus (sounds like luxury) and drove toward “The Relentless Pursuit of Perfection.”

And when business casual came into vogue, Levi Strauss & Co. didn’t try and retrofit their iconic denim brand around the corporate office environs, they designed Dockers in 1987.

You may think that launching all these new brands costs a fortune to market.  But in fact, by focusing on their core customers and using alternative means like cost-effective guerilla marketing, Point-of-Sale and clever PR, DeWALT generated $2 billion in sales in under 7-years, helped to double B&D’s Stock, became a Harvard Business School case study and won on EFFIE Award for marketing effectiveness.

Walmart is only the latest in a long line of companies that have tried to expand by leveraging a familiar name into territory where it’s seen as a foreigner (Xerox in financial services, AT&T in personal computers, etc.)

Whether it’s a product or a service, the key to expansion is to stay focused on the brand and stay true to its core mission by fulfilling the promise made to its customers.

0 Comment   |   Posted in News March 11, 2011

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