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Pundit’s Mailbag — Wal-Mart’s Folly

Jim Prevor’s Perishable Pundit, October 17, 2006

In response to the Pundit’s skepticism on Wal-Mart’s plan to retool its stores to focus on six demographic target groups, John Shelford, President of Global Berry Farms, sent this note:

Right on!!! Stay true to what has made them successful. Low price, huge selection. They will lose their way in the forest with the many rabbit trails.

The number of retailers that change their stores, assortment, merchandising and pricing in the hope of attracting an additional clientele is legion; the number who have succeeded in doing so without alienating their base customer is infinitesimal.

The hotel industry does a better job because they actually create a new product that serves the needs of a particular customer. So Marriott captures both the customers who need a Residence Inn and those who need a Marriott resort. Sometimes the name doesn’t help so the top Marriott chain is called Ritz-Carlton … or was, until they needed a high-end name and partnered with Bulgari to create a super upscale line.

I have written before urging Wal-Mart to launch a chain geared toward Mexican-Americans. When I look at the dynamics of the industry, I also think they need a concept slightly more upscale than Target. Right now, Wal-Mart dominates among families with incomes under $40,000 a year. But Target wins among higher income families.

A good Wal-Mart concept, which should use Wal-Mart’s logistics strength, real estate expertise, supply chain expertise, etc., but not the Wal-Mart name, would be a Supercenter for families earning over $60,000. With the Wal-Mart brand taking the bottom and a new concept (Helen’s? Named after Sam’s wife) going upscale, Target would be caught in the middle.

There are dangers to operating multiple concepts, but they are less so than trying to make one concept serve multiple demographics.

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