business news in context, analysis with attitude

• The Wall Street Journal reports this morning on a story that has been fairly well documented on MNB and elsewhere – that Wal-Mart is looking “to jump-start sluggish sales gains by abandoning its one-size-fits-all approach to retailing. In place of cookie-cutter stores stocked with largely the same products, the retailer is custom-fitting its merchandise assortment to reflect one of six demographic groups. Besides African-Americans and the affluent, it is targeting empty-nesters, Hispanics, suburbanites and rural residents.”

According to the Journal, “Wal-Mart's attempt to break its approximately 3,400 U.S. stores into six different models is a huge shift for a company that grew to be the largest retailer in the world on the strength of standardization. By buying products in giant volumes, Wal-Mart was able to relentlessly lower prices, forcing other retailers to adapt or go out of business. But with comparable-store-revenue growth slowing and the stock price falling, the company now thinks aiming at specific types of customers will boost sales.”

The strategy has forced Wal-Mart to adopt a less centralized organizational approach, in the hope that this will allow it to be more “in touch” with local shoppers. But as the Journal notes, the risk is that Wal-Mart could lose its ownership of the low-price segment of the business, diluting its image and alienating core customers.
KC's View:
We think it is pretty clear that Wal-Mart has come to the conclusion that it has sold about as much typical Wal-Mart merchandise to typical Wal-Mart customers as it can…and that growth requires an entirely new approach. The question is whether it should be trying to diversify under the same banner, or perhaps should be trying something different to appeal to these new shoppers.