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Thursday, February 24, 2011

Is Wal-Mart facing new walls?

Former colleague and current friend Lucy Rice sent me an article earlier this week; a story she noted from the Wall Street Journal about the earnings report from Wal-Mart. Virtually every business publication or news program ran a story about the company this week, recognizing that is still a dominant player, but pointing-out that same store sales are looking a little weak.

The WSJ story had a bit more analysis, though, including this poignant quote: The basic Wal-Mart customer didn't leave Wal-Mart. What happened is that Wal-Mart left the customer.” That remark can from former Wal-Mart executive Jimmy Wright. See the full Wall Street Journal story by clicking here.

Implications: I can think of no company that is exempt from the importance of knowing who its most important customers (the heavy user of the product or service you sell), and the benefits those customers hope to satisfy when making their purchase decision. That is not something a company does once, and “that’s that.” Core customers can change, over time, and the benefits which drive their decision process can change, too. (Particularly true in extreme times, like the recent recession.)

Perhaps Wal-Mart strength has become its weakness. According to accounts I’ve heard or read, they wield considerable pressure over manufacturers who would sell product in their stores. That has led some companies to abandon the retailer, and pursue, instead, exclusive distribution through smaller retail channels. The variety Wal-Mart offered, as a result, might be somewhat different today than it was a few years ago.

In another account of the Wal-Mart situation, Lee Peterson, a vice president at WD Partners, an Ohio brand-consulting firm, made this statement in a story from MSN Money: "For the first time in a long time, quality has a chance to gain on price."

As the recovery continues to gain momentum, I have a hunch Mr. Peterson is right. What do you think?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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