Reinventing Wal-mart

Flock_and_flow_1 The last time I looked Wal-Mart was responsible for 8% of all the retail in the US.  It has captured this position by dominating the low end of the market.

Now Wal-Mart plans to pursue upscale markets.  There is a Wal-Mart test store in Plano that features "expensive jewelry, $500 bottles of wine, plasma TV sets and other expensive items along with organic foods." 

Being the master of the low end is not easy.  Many are called, few will flourish.  The secret is to squeeze costs and margins till they cry for help.  It may not easy, but it is simple.  The model is unmistakable: pile em high, sell em cheap.

So when Wal-Mart decides to go after the upscale market, it is suddenly obliged to learn an almost entirely new marketing game. Now the trick is to follow consumer taste and preference has it plays whack-a-mole niche to niche, leaping daringly trend to trend. 

The good news, I think it’s good news, is that Target has demonstrated that this is possible.  To its credit, Target didn’t just master some of the secrets of the high end, it actually rewrote the rule book.  It came precious close to capturing design as it was moving from a small community of professionals with a characteristic weakness for interesting glasses to a much larger American mainstream.  Target very nearly  branded design as its own.  It was a brilliant, audacious piece of marketing.  (Thanks to Vincent LaConte, as below, I know that the hero of this piece is Ron Johnson, now VP of retail at Apple.  Johnson was Vice President of Merchandising for Target Stores until 2000, presiding over what the Apple corporate website calls "new initiatives for branding, marketing and merchandising.")

But now that is gone.  Or better, Wal-Mart will now have to be design-sensitive but it will get no special credit for being so.  Is there a compelling play out there that it can claim for itself?  It might go looking for a celebrity hookup of the kind that Kmart had with Martha Stewart.  In this case, a taste arbiter lends her mastery of consumer taste to the retailer.  It’s a kind of one stop shopping for the retailer.  The perilous business of consumer sensitivity is farmed out to someone with their own suburb instincts and established track record.

Or, and as the author of Flock and Flow this would be my preference: that Wal-Mart invest in a big board with which all the trends and drivers of consumer taste and preference are tagged and tracked.  This would be useful for the low end work.  There will come a time in our culture where low prices and fast response times are not enough to satisfy the dynamism of the marketplace.  But it will be especially at the useful at the top end where already we are seeing trends change so fast, we are sometimes tempted to wonder if they weren’t merely a figment of someone’s imagination, no sooner thought than gone.

Yes, on careful and dispassionate reflection, that would be my recommendation: build a big board using Flock and Flow as the template.  You know where to find me. 

References

McCracken, Grant. 2006.  Flock and Flow: predicting and managing change in a dynamic marketplace. Bloomington: Indiana University Press. on Amazon here.

Van Riper, Tom.  2006.  Wal-Mart Goes Upscale.  Forbes.  August 30, 2006. here.

9 thoughts on “Reinventing Wal-mart

  1. Grant

    Edward, I don’t think the Flock and Flow model is quite ready for mass merchandizing, but someday I hope it will leap, like GPS, from big enterprise to a handset of one’s own. Yeah, sure it will. Thanks, Grant

  2. Grant

    Vincent, brilliant, thank you, now amended with a shout out in thanks, Best, Grant

    TOM, I don’t know, I think Target and Ron Johnson managed to break the “iron” law of choice. No? Thanks, Grant

  3. Tom Guarriello

    Breaking what used to be the “iron law of choice” is one of the great business opportunites of the coming decade. Target’s shown the way and now we’ll see “concierge-level” services in the most unlikely places as “fast, cheap, stylish” becomes the norm.

    Look at air travel. Who’d have ever thought “fractional ownership” would be accessible to so many people? Next stop: NetJet For The Rest of Us!

  4. steve

    I think that Wal-Mart’s best approach here may be to be a fast second-mover, tracking the fashion/design choices of their rivals and undercutting them on price. In other words, overlap rivals’ merchandise assortments and kill them with greater efficiency. Rivals will then try to get unique merchandise that Wal-Mart can’t duplicate, which will force Wal-Mart to figure out rapid knock-offs, etc.

    This approach will force them to add agility to their model and to upgrade the aesthetic of their stores, but will not require that they corrupt their operations-oriented DNA with alien arty-design retroviruses. It is an extension of their original idea of “nationally known brands at everyday low prices” to “trendy brands and styles at everyday low prices.” Target is design-oriented but still requires a lot of stability in its product mix to maintain its profit margins. Wal-Mart may be able to “shadow” them at lower prices and let them do the pioneering work.

  5. Arnie McKinnis

    Late to the party, but never to late to comment….

    From my understanding of Walmart, they are about Low Prices (not necessarily “low end”) and why not provide a high end product at a low price – this assumes the “label” is the same whether I purchase from Walmart or Norstrom’s – if that Sony HD Plasma is the same – who cares where I purchased it?

  6. Becca

    I’m tired of everyone blasting WalMart. I shop there weekly and am never disappointed. I know many people who have work or have worked there and they really enjoyed it and were treated well. What gets to me is when people say they only pay minimum wage and offer no benitfits. This is so untrue. Besides, they are not paying and different then K-mart, Target, Sears, JCPenney, etc, but you don’t hear anyone complaining about them. And let me tell you, the clothing at Target is made out of cheap fabric and they have no fashion sense. Our whole family buys clothes at WalMart and are happy with how they look. And WalMart does a lot in giving back to the communities where they are…people should really research this kind of stuff before badmouthing businesses. No body complained years ago when Kmart came into our community but bring up Walmart and no one has anything nice to say. Well, I have lived in two different communities when WalMart stores have opened, and everyone was thrilled and no small businesses went out of business because of it.

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