Wal-Mart A Year Later: High Prices Now Bring In Customers
A year ago Wal-Mart management said that high gas prices were hurting their customers and store sales.
Now, a year later, gas prices are even higher and Wal-Mart management says those expensive costs are bringing customers into its stores.
So I asked CEO Lee Scott where the tipping point in terms of changing consumer behavior.
His answer was an interesting one. Scott said it was undeniable that Wal-Mart's core customers were the first ones impacted by the spike in gasoline prices and they bought less. What changed? Scott said two things: (1) Wal-Mart improved its store experience (cleaned up aisles, added brands to its merchandise and refocused on retail) and (2) the economic stress spread from the bottom up and brought in new customers at "the right" time (i.e. After Wal-Mart improved stores.)
Scott said that this trend doesn't mean that business will fall off when the economy improves. Wal-Mart executives also made it clear that they're interested in expanding health care and green initiatives. In other words, they're trying to anticipate where product trends are headed and carve out a low cost niche to feed developing needs.
Wal-Mart management still thinks that it can tap into the middle income customer base that Target has dominated for the past few years.
While Wal-Mart's past attempts to draw in those customers via merchandising like clothing (remember Mark Eisen?) have failed, this time around the economy may bring those customers in-store. At least, that's what management is betting on.
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