Wal-Mart’s previous target market was working-class consumers who loved discount shopping. When this market reached saturation, Wal-Mart began to expand its product categories to organic food, Chinese High-end wine, high-end consumer electronics, fashion apparel and other fields, thereby gradually targeting its low-price strategy at mid- to high-end customer groups. Wharton faculty and market analysts believe that although this strategy involves a certain degree of risk, it is also an inevitable solution for Wal-Mart under the dual pressure of fierce market competition and lack of other growth opportunities.
Wal-Mart is the world's largest retail giant, with annual sales exceeding US$300 billion. Now that it's facing slowing growth and a rocky transformation around the world and in the Northeast, it's embarking on a path to change. Walmart CEO Lee Scott outlined key elements of the new strategy at the company's annual shareholder meeting this month, citing company founder Sam Walton's As the famous saying goes: "The old ways are outdated and everything is changing all the time. Only by being ahead of the change will we be successful."
Attracting Baby Boomers
Wharton School Marketing professor Xavier Dreze pointed out that because Wal-Mart has been so successful in the retail industry, its future development space has become very limited. "Walmart will move into the mid- to high-end market, which is its only way out. Its expansion in the United States has reached its peak, so if it cannot attract more customers, it will have to sell more and more expensive [goods]. Ways to grow."
About 80% of U.S. shoppers visit Walmart at least once a year, and more than 170 million consumers shop at Walmart stores worldwide every week. Wal-Mart has its footprints in 70 countries around the world, with a total of 6,100 stores. Wharton marketing professor David Bell said: "Wal-Mart is sending a signal to the market that what it brings to consumers is not just low prices. They have successfully achieved a price advantage, Now we hope to win by quality and thereby enhance the company’s image. As for consumers’ attitude towards this, it is indeed worth looking forward to.” John Zhang, a marketing professor at Wharton School of Business, believes that, The new strategy could help Wal-Mart Inc. compete with rival Target Corp., its major discount store chain. He said: "Target's market performance is very good. In the minds of consumers, the company follows fashion trends more, and its products are relatively more mid- to high-end. Now Wal-Mart is also forced to enter the mid-to-high-end market, hoping to use this Moving away from a purely cheap image and becoming more comparable to Target ” Demographics are also a factor driving Wal-Mart’s changes. In the past, Wal-Mart has always been favored by young families. According to Professor Zhang Zhong’s observation, it is now working hard to cater to the preferences of the 70 million customers in the United States who were born in the baby boom era and are currently entering their later years. "These consumers have greater purchasing power. Businesses must find effective ways to meet their needs."
Wharton marketing professor Stephen Hoch believes These changes will be successful. He pointed out that the new mid-to-high-end products will be scattered among various mainstream products in Wal-Mart stores, and they will not affect the company's existing business base. "Target's brand image is more mid-to-high-end than Wal-Mart, and they have been very successful in this regard. Although Wal-Mart is not a purely high-end brand in the eyes of customers, I think Wal-Mart can also acquire similar or higher-end brands to its competitors. brand.”
Dreeze pointed out that while Wal-Mart is actively entering the mid- to high-end market, it may also endanger its existing market position.
He also contrasted Wal-Mart's current situation with the success and failure of certain regional airlines that performed well in their market segments but lost their original competitive advantage when they expanded nationally. And failed miserably. "The question facing Wal-Mart is, do they have the competitive advantage to sell mid-to-high-end products? Will they become just an ordinary retailer? This is where the risk lies in the new strategy."
Three years of this year In March, Walmart opened an experience store in Plano, Texas. According to data from market research organization Information Resources, Inc. (IRI), the average annual income of consumers in Plano reaches US$140,000, which is three times the income level of ordinary Wal-Mart consumers. The experience store sells 2,000 mid-to-high-end products in categories such as meat, cheese, red wine and fresh produce; these products are not available in ordinary Wal-Mart shopping centers. Bank of America Securities analyst David Sturt Wal-Mart's efforts to broaden the scope of its price system have begun to bear fruit, David Strasser, the company's chief executive, said in a note to clients. In the past few years, the sales growth of Wal-Mart chain stores has been driven by food and consumer goods, while the driving effect of ordinary commodities has been relatively weak. Strasser analyzed consumer electronics sales at 1,300 stores, which last year began introducing mid- to high-end products, mainly flat-screen TVs. He concluded that for the first time in four years, consumer electronics was the non-food category driving overall sales growth at U.S. Walmart stores.
Strasse also mentioned that the Wal-Mart chain sells new mid- to high-end brand clothing. Take Metro 7 as an example. The brand's clothing sales are so popular that the company's inventory is often out of stock. In addition, 400-thread-count bed sheets have also been out of stock recently, which also shows that Wal-Mart is developing into the mid-to-high-end market.
Even for food and beverages, Walmart is innovating the types of goods it sells. The most significant move is the introduction of new products such as organic food, fresh produce, high-end red wine and alcohol. William Cody, executive director of Wharton's Jay H. Baker Retailing Initiative, said Wal-Mart's expansion into wine is a sign that the company is moving away from its roots in Bentonville, Arkansas. The cultural roots of the headquarters: Mr. Walton, the founder of Wal-Mart, once refused to sell hard liquor. Cody believes that the ongoing revision of federal regulations on alcohol distribution may open the door to new opportunities for national retailers such as Walmart Inc. and Costco. In recent federal court cases, prohibition laws that gave states control over the sale of hard liquor have been overturned.
Introducing organic food and other innovative initiatives
For all retailers, organic food represents a new, fast-growing market demand; according to information resources company in May A survey report released shows that the sales rate of organic food is expected to maintain double-digit growth until 2010. The report said: "Given the difference in demand between organic food and Wal-Mart's original low-income mainstream consumer groups, Wal-Mart has been relatively slow to enter this market."
According to North American Organic Food The $15 billion organic food market accounts for just 2% of total U.S. food and beverage sales, but it is growing at an annual rate of 20%, according to the Organic Trade Association. The annual growth rate of the food-like market is only 2% to 4%. "Consumers hope that Wal-Mart can sell organic food at lower prices, but this must be based on the assumption that there are no restrictions on the supply of organic food," Cody said. “Can Wal-Mart become the market leader in selling organic food at low prices? This possibility is not impossible, but the better way is to attract new customer groups to buy organic food.
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Serguei Netessine, a professor of operations and information management at Wharton Business School, added that the move into organic food sales will bring new challenges to Wal-Mart’s classic supply chain system. "Selling organic food poses a bit of a dilemma, especially for large retail stores like Walmart. Wal-Mart's traditional supply model is to incorporate suppliers into its centralized distribution system, while the large-scale organic food wholesale market is composed of many small-scale suppliers, and the perishable and fragile goods sold require more thoughtful and complex processing. deal with. "Essentially, the possibility of establishing a centralized distribution system does not exist, and this approach is meaningless. Therefore, Wal-Mart must redesign the distribution system and return to some extent the previous supply model, that is, directly from suppliers. Supply to the nearest chain store.”
Nitsi said that when the supply operation system has not yet formed an industrial scale, he expressed doubts about Wal-Mart’s claim that it can significantly reduce the price of organic food. But he didn't completely dismiss the possibility of Wal-Mart's success. "They have to adapt. In the customer's mind, Wal-Mart is a retail store that provides discounts to the budget-conscious crowd. But if you look closely at Wal-Mart's catalog, you will find that they also sell gold jewelry, diamonds and expensive products. As long as there is demand for a certain product in the market, even high-end products, Wal-Mart will aggressively attack, but it must adjust its supply chain according to the type of product every time, and [this time] it is targeted at organic products. Adjustments to food are particularly tricky.”
Another innovation Walmart executives are pushing is the creation of in-store medical clinics run by companies such as RediClinic. Swift Clinic is a healthcare startup founded by America Online founder Steve Case. Walmart Inc. is providing rental space for pilot clinics in 11 of its stores and said it will expand the number of such stores to 50 by the end of this year.
Cody believes that such clinics are closer to Wal-Mart's traditional consumer groups. Although they may not be profit centers themselves, they can promote drug sales or attract more customers to the Wal-Mart chain.
Morris Cohen, professor of operations and information management at Wharton Business School, believes that these medical clinics can effectively take advantage of Wal-Mart’s real estate operations, but operating these clinics will lead to new The problem arises, that is, the supply chain management problem in the service field. Supply chain management in the service field is completely different from the merchandise inventory management that Wal-Mart is good at. Cohen said, "Walmart should carefully select chain stores with geographical advantages and provide medical services in these specific chain stores, so that it can share part of the store's overhead costs. This approach is very effective." He also noted Walmart's chain of stores already offers vision care and pharmacy services. "Why not try offering a nail trim service?" Cohen explained the challenges that service delivery centers face in ensuring consistency and quality of service. "Services are created as soon as they are created. The product is consumed; but the product can be put on display and taken out of the package when the customer needs it. Therefore, the quality of service depends on the reliability of the employees who provide the service on the front line. Cohen pointed out that in terms of ensuring service consistency, in order to ensure that possible market demands can be met at all times, the company must also have a certain amount of additional service supply capacity when business is light. "It's still the same old problem of supply and demand, but the solution is different."
These medical clinics coincide with Walmart's efforts to make itself a more approachable company; According to previous reports released by the union, Walmart employees lack health insurance coverage and have the highest number of users of state and federally funded medical programs. CEO Scott claims that 30% to 40% of people who visit Walmart Health clinics do not have health insurance.
At the same time, various surveys and studies have shown that if these patients do not seek treatment at Walmart's medical clinics, 20% to 40% of these patients may resort to expensive emergency room care, while the remaining 10% to 20% of patients will not receive medical care. .
Hoke pointed out that Wal-Mart is also taking other measures to make its stores more attractive to shoppers, including an advertising strategy led by a new image and a project to vigorously promote development and environmental protection. Hawke said: "I believe that Wal-Mart is indeed strengthening its efforts to build various public relations to improve its image, such as broadcasting popular advertisements. They must persevere."
The success of entering overseas markets Versus and Failure
At the same time, Wal-Mart's global expansion also has its gains and losses. Global expansion is Wal-Mart's initial strategic move to seek development outside its increasingly mature domestic market in the United States. In March this year, Wal-Mart increased its stake in Central American Retail Holding Co. to 51%. The retailer has operations in Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica combined*** It has 375 supermarkets. But in May this year, Wal-Mart completely withdrew from the Korean market. Wal-Mart previously had 16 chain stores in South Korea.
Walmart's senior executives have said that India may become the company's next major target market, as India is currently implementing government reforms to abolish restrictions on foreign investment in the retail industry. Professor Zhang said that Wal-Mart is also expanding rapidly in the Chinese market. China has “a large and value-conscious customer base. Local infrastructure and logistics services will also play a vital role. Walmart is uniquely positioned [in these areas]. I think Walmart could do a lot in the Chinese market.” ”
Hoke pointed out that although Wal-Mart’s expansion in Germany has been frustrated, it has still achieved certain success in the British market. After several years of ups and downs in the Japanese market, Wal-Mart acquired a controlling stake in Seiyu Group, Japan's fifth-largest retailer, a few months ago. Seiyu Department Store has more than 400 supermarkets and daily necessities stores in Japan. Hawke said: "There are always gains and losses in business. Every market in the world has its own uniqueness. Walmart has a great record in the North American market, including Canada and Mexico, and will continue to seek new growth opportunities in the region. Walmart is known for its success in the North American market, including Canada and Mexico. Keep growing as a mission, and if you don’t achieve that, the company will be in trouble.”