According to a recent article in Supermarket News (“Wal-Mart to Invest $6 Billion in Price”),Wal-Mart has made a commitment to be the recognized low price food retailer in 31 markets. Their efforts include TV ads comparing Wal-Mart prices to other key retailers including Safeway, Kroger, Walgreens and others. The commercials focus on the cost savings from shopping at Wal-Mart compared to shopping at the competition by comparing actual register receipts.
Tom Peters, in his book titled “In Search Of Excellence”, statesthat “bigness is automatically badness”. He was talking about the inability of large corporations to be nimble and easily meet the consumer’s ever-changing needs. Wal-Mart’s sheer size makes it difficult for the retailer to compete head-to-head with others on their competitors “turf”. In other words, don't fight the battle Wal-Mart wants to draw you into. Instead, focus on your strengths. This is good news for smaller retailers, especially natural retailers.
Wal-Mart’s greatest strength is that they are experts in driving costs out of the distribution system and passing the savings on to their consumers in the form of lower everyday prices. Few retailers are capable of competing with them on price alone. Retailers should not be lured into playing the pricing game, because they will loose. Wal-Mart is a value-added, one-size-fits-all, no-frills, find it yourself, self-serve retailer.
Wal-Mart’s Achilles heel is that they lack the flexibility to compete head-to-head with retailers that focus on the shopping experience. Smaller retailers do a much better job of satisfying their customers’ needs by providing a full-service offering that includes exceptional customer service, better assortment and variety, local brands, a commitment to the community they service, cleanliness, short checkout lines, help locating items, product advice, trusted produce, differing promotion strategies that can be very competitive, loyalty rewards for gas, floral departments, etc.
My local retailer will walk me to the item I’m searching for if I look lost. They will then educate me on it and then they always ask if there is anything more I need. At the checkout they ask me if I found everything I was looking for, if I want help bringing my groceries out to my car, and they tell me how much I saved. At Wal-Mart, assuming that I can even find one, a clerk might tell me that the item is in aisle 5.
Local retailers continually demonstrate their commitment to the communities they serve. Their actions speak loudly. At Wal-Mart, there is a huge sign telling me how much they gave to the local community. It reminds me of the sign saying “30 billion burgers served”. That’s great, but I still don’t know who was helped and how they were helped.
Wal-Mart will continue to offer the best prices. Most consumers are willing to pay extra for value and to feel special and important. The retailers that differentiate themselves and provide their customers with more than just the lowest price will be able to more effectively and successfully compete with Wal-Mart.