business news in context, analysis with attitude

Yesterday, MNB took note of a Bloomberg story about how an internal Walmart memo indicates that visits to the retailer’s US stores - open at least a year - were down 2.6 percent from February through June of this year ... a trend that does speak well about the short term impact of the company’s much-vaunted efforts to reverse eight straight quarters of stagnant same store sales.

Analysts say that Walmart continues to suffer from two trends - low-income families that have less money to shop as the impact of the recession continues to be felt, and everybody else deciding to shop elsewhere.

And I commented:

Analysts say that Walmart has a price and value perception problem that is working against its efforts to bring in more customers - and that the issue of selection has not really been the problem, despite the fact that Walmart has made a big deal out of adding products back in after its editing process fell flat.

It creates an interesting dynamic for the Bentonville Behemoth. On the one hand, it is opening small stores, creating new formats, developing an urban strategy, acquiring chains in places like South Africa, and forging ahead with e-commerce, sustainability and healthy food initiatives, while at the same time desperately trying to figure out how to generate more traffic and sales out of its existing fleet of US stores. It is almost like how a magician tries to distract you with one hand while the real trick is happening elsewhere.

Can Walmart’s existing management pull a rabbit out of its hat? And how long will it be before the board - urged on by the clamoring of investors - decides that a change is needed at the top?

MNB user Howard Carr responded:

Walmart’s numbers looked at alone cannot tell the true story.  What matters most is the total overall sales volumes.

With higher gas prices, you may find that many of their customers, who are financially stressed right now, may be making fewer trips to the store.  You need to also look into the average total check per customer to help determine if this is happening.  If the customers are spending more per trip, but making fewer trips then, that could explain the difference. 

Also, have their online sales increased?  This could be another bell weather telling a story of fewer trips and letting someone else pay for the gas since they are offering free shipping on so much of the product line.

Just a thought from a retail real estate guy.

All of which could be true. But recent history suggests that the reality may be more troubling.

Another MNB user wrote:

As someone who witnessed WMT's assault on the grocery industry from the inside, before they were self-distributing, I was amazed by what quick learners they initially were. I think you are correct in your assessment that the excuse of SKU reductions cutting sales is either a smokescreen or an ill-informed argument.

My perspective is two factors are limiting their growth, poor execution at store level and a loss of their pricing edge, especially in store brands. IMO, as they have expanded into more urban markets they have been unable to hire competent workers at the wages they wish to pay, something that was not a factor for them in their rural markets where they could attract first rate help.

As I see it the poor shopping experience I receive is no longer offset by drastically lower prices. My personal shopping at WMT has declined from $150 a week to maybe $50 every other week.

From another MNB user:

We live in Wisconsin, winter in Arizona. When in WI, we shop in Wal*Mart, Festival Foods, Copps, Target and other major chains. When in AZ, we shop at Fry's Foods, Albertson's & Safeway in addition to Wal*Mart & Target and other major chains. We have found that shopping according to the ads & coupons, Wal*Mart prices are always quite a bit higher on most items. If you want to save money shopping, you have to be very selective as to what you purchase from Wal*Mart. Even their Great Value products are more costly than sale prices on Fry's or Festival's products. Savvy shoppers shop the ads and use coupons and plan their menus accordingly. It appears to me that Wal*Mart has a long ways to go to become the low price leader they once were.

Another MNB user chimed in:

This is very true among my family and friends.  Many times, the savings we would get by shopping at Walmart does not pay for the slow check out lanes, the unhelpful and/or unfriendly associates working or the task of finding produce or meat that appears fresh and not like it was just tossed onto the shelves.  I have found shopping at the local supermarkets is well worth the few extra dollars I am probably spending.  The perishable sections usually look great, the associates are usually very helpful and friendly, and the employees running the check out lanes do not look like they can't wait to leave, as they appear in many of the Walmarts I have been in.  In addition, most supermarkets have a much more enjoyable atmosphere.  I can say I am gladly contributing to Walmart's decrease in customer counts as I have not shopped in one of their stores now in almost a year and really do not plan on going back to one.  I'm sure I am not alone in these thoughts.

Apparently not.

Speaking of customer counts, we got the following email on a different subject from MNB user Bob Hermanns:

Carolyn and I completed our move to Southern California last weekend.  On Saturday night about 9 pm we needed coffee to help us drive the next 3 hours.  We chose a Mc Donald’s off I 5 north of Portland.  While parking the car I noticed a group of people milling about along the side of the building.  Was this a problem I thought?

No... it was people standing 3 deep in line to access two Redbox Machines.  For the 15 minutes we were in the lot, the lines were never shorter than 3 people for each machine.

KC's View: