Walmart’s ‘Johnny One Note’ Approach May Wear Thin

Articles
April 27, 2010

Walmart’s ‘Johnny One Note’ Approach May Wear Thin

How interesting are people who keep repeating the same message over and over? How compelling are stores that do the same? Not very, even when that message showcases low prices.

How interesting are people who keep repeating the same message over and over? How compelling are stores that do the same? Not very, even when that message showcases low prices.  

Walmart found this out the past three quarters when same-store sales and traffic declined – and shoppers discovered and rediscovered alternative stores to buy from that are, let’s say, more comfortable and inviting. 

Walmart thinks more savings are the answer. It just cut prices on 10,000 products, and it plans to expand on that in the coming months. The trouble with this program, in our view, is it spirals to nowhere but lower margins – for the CPG suppliers that bear much of the burden certainly, and possibly for the chain itself. 

It doesn’t take a genius to crack a whip and lower prices. It takes far more ingenuity to collaborate with CPG suppliers on shelf sets and promotional programs that relate to shoppers today. Walmart’s recent get-tough policies may have finally crossed the line with CPG suppliers, who’ve had enough and may begin to care less about their lower-margin shelf space at the world’s largest retailer. 

This sentiment would push them to work with more retailers – supermarkets, warehouse clubs, drug stores, dollar chains and other outlets.

At The Lempert Report, we believe that unless Walmart wakes up soon to the tunes consumers want to hear – brand choice, clean stores, good service, speedy checkouts, appealing environments – the stores could find themselves playing their Johnny One Note savings message to a less enchanted and possibly smaller shopper base.

Walmart won’t easily die the death of a thousand cuts from so many competitors. But people who shop Walmart for no reason besides price will be the first to leave the chain once better times return.  Retail competitors have gotten smarter about being competitive enough on price, more convenient in location, and more inventive in creating the complete shopping package that people want. These are fundamental needs, even in tough times, because you can’t keep a good consumer down for long.