Investors faulted its merchandising missteps, including some embarrassingly ill-executed attempts to go upscale. And environmental, labor and social activists formed a never-ending dog pile on the company, blaming it for the destruction of small-town America, employee rights, and especially, the planet.
All predicted the decline of the world's largest company, with the same general theme: "Consumers don't care about low prices. They care more about _____."
Enter the recession. Now, Wal-Mart is showing the world that these days, consumers don't care about anything but low prices. And the company's Walmart stores chain, its Sam's Club Warehouse division, and walmart.com are profiting mightily from its value positioning.
In its most recent quarterly results, the company achieved sales of $97.6 billion--an increase of 7.5%, with income climbing 6.6% to $3.03 billion. More tellingly, however, its month-to-month comparable-store sales have shown increases at a time when even the savviest retailers are fighting for their lives, registering sharp drops in sales as they slash prices, cut capital spending, and gut their marketing budgets.
"Walmart is doing well because it's cool to be cheap," says Catherine Fox-Simpson, a partner at BDO Seidman's retail and consumer product practice, "and saving money is the game right now." The company--the largest in the world, with two million associates and more than 175 million weekly customers--has positioned itself so that it can tap the economic-anxiety buttons of just about every demographic segment, as it gains shares not just from its competitors, but from other channels as well. Low prices? Check. One-stop shopping, to help people save on gas? Got it.
"The company's entire brand equity is tied up in price," adds Stephen Hoch, the Patty and Jay H. Baker Professor of Marketing at the Wharton School of the University of Pennsylvania. "People think they have the lowest prices because they do have the lowest prices." Consumers are willing to overlook the chain's shortcomings, he says, including the sense that it's depressing, inaccessible, hard to navigate, and that it lacks the fun sense of discovery some of its competitors have, because "its strategy has been very consistent--to keep costs low and allow the consumer to benefit as much as they can from its sophisticated, tough supply chain."
Meanwhile, the company continues to explore new formats and segments, including its slightly more upscale Marketside, which is similar to the Fresh & Easy Neighborhood Markets that rival Tesco is rolling out in the western U.S., and stores geared especially toward the Hispanic community, as well as new categories, such as financial services.
But where it has really carved a name for itself is in the arena of environmental responsibility--once one of its most glaring weak spots. Despite constant accusations of greenwashing, the company continues to constantly find ways to improve its environmental footprint, including building and shipping innovations, and getting tough with vendors to cut back on packaging.
And while not all of its consumer-directed green initiatives have been home runs, the company is diligent about trying to mesh its green messages with its value promise. Case in point: Walmart sells t-shirts made from recycled products for under $8, and has launched a line of low-cost Faded Glory t-shirts made of transitional cotton, with tags explaining to consumers why it is critical to support farmers as they transition from inorganic to organic farming methods.
But CFLs are probably the best example of brand synergy yet. "Especially in the case of the CFLs, Walmart took on some extra cost to market them, even before the demand was there," Hoch says. "It helped create the demand, and now it's benefiting." Yes, they save energy, which is good for the planet: Just one bulb can stop 450 pounds of greenhouse gases from reaching the air. But perhaps more importantly, they save consumers money--about $5 to $8 in electric costs per year per bulb, or about $350 a year for a whole house, recouping the cost of the bulbs in six months. And those savings resonate with the company's core image: Walmart saves you money.
Hoch points out that Walmart has skillfully spun this type of "every little bit helps" logic into much of its environmental merchandising, which is so appealing to many consumers. The risk, he points out, is that more educated consumers will consider that "every little bit" to be not nearly enough, and think of the company as a greenwasher.
The big question, of course, is whether its value positioning will continue to resonate when consumers' financial fears ease. "When the economy comes back," predicts Fox-Simpson, "shoppers will stay with Walmart, because of that commitment to the environment. For years, the company was considered one of the worst. Now it's leading the charge, and customers like that."