"Exec cleared of Kmart Fraud"
Headline Detroit News, 8/15.
"Wal-Mart author's theory says discounts are now entitlements" Headline, USA Today, 8/15
Much has been written about these two discount chains over the past several years, drawing comparisons (and mostly differences) about how one chain has succeeded unbelievably while the other has teetered on extinction for quite a while. A couple things occurred to me as I read these articles that I thought would be good material for this forum.
First, Charles Conaway, may have been found not guilty of doing anything illegal while he was CEO, but he certainly can shoulder a lot of the blame (as could some of his predecessors) for Kmart's ongoing loss of share, loss of sales, and loss of trust by its customers. The company simply ignored what competitors like Wal-Mart and Target were doing in building brands that people not only trusted but where people liked to work. The ongoing reliance on sales and promotions that were not supported in the stores not only turned off most of Kmart's customers but it depressed and de-motivated most of its employees. So the stores looked lousy, the inventories were never where the customer expected, and the customers basically had a poor shopping experience until they gave up.
Unfortunately, the company continued to reward this poor performance with big bucks at the top and big severances for doing a pitiful job of branding the company. The civil court may have found him not guilty, but the jury of customers passed their judgment a long time ago and they haven't forgotten.
Secondly, in his book, "The United States of Wal-Mart", John Dicker calls Wal-Mart the "champion of cheap" while maintaining that all customers care about any more is low prices and one-stop shopping. Well, there's no doubt that Wal-Mart's success has its foundation on having the lowest price perception of any retailer (notice I didn't say cheapest). For some reason, since Wal-Mart has become the largest company in the world, we think it's a fault that they have driven down prices for the consumer. The reality of it, as born out in countless research studies, is that the company has won because the customers trust them to have the lowest prices and to have what they want and need. And they trust the people working in the stores to make sure they do in a friendly way.
Is Wal-Mart a predator? I think "competitor" is a more appropriate description. As a company obsessed with getting the best prices and the best values for its customers, Wal-Mart has beaten a lot of lesser retailers (like Kmart and all those poor small town retailers who never provided good value to their captive markets). And it has developed an organization that believes they are providing the best for their customers. Sure there have been some guilty parties who have taken advantage of the company's strength and positions lately, but with over a million people in an organization, these have been the exception. In a recent store check (which I do regularly), I found the checkouts at both Target and Home Depot (2 of my favorite stores) to be fairly empty on a recent Tuesday night with only two checkouts open plus the self-service aisle. Wal-Mart, on the other hand, had at least seven open and ringing up big shopping baskets.
People shop Wal-Mart because they like it, they trust them, the like their people (who most of the time love where they work), and by the way they save money. That's not being cheap!
What do you think??
Ken
3 comments:
As usual, you are dead on Dr. Banks. Wal-Mart wins because they act as the customers' agent to drive down prices. They win because they respect your time enough to have what you want when you want it (Target's getting much better, by the way). And they win because, as Mr. Sam, Paul Higham or Roy Spence always said (I'm betting on Paul Higham), "At Wal-Mart, nobody's too good and everybody's good enough." It's called respect. And it's huge. Historically, Wal-Mart has always been inclusive while many other retailers are exclusive -- in their pricing as well as their personal demeanor. WM gave folks an option to be respected no matter how much money they had in their pockets (assuming they had pockets). So it will be interesting to see what happens with WM's stated intention to attract a more "upscale" customer. Will anyone be lost in the shuffle? With Tom Coughlin's exit, a staunch champion of the everyman is gone. And with John Fleming's arrival, we are already seeing more Target-like thinking. (WM started selling $400-500 bikes five or six years ago, so this is not exactly a new trend.) What is new, is the apparent brushing aside of the long-standing Real People Campaign and that deep, honest, genuine inclusiveness in every Wal-Mart message (except for flying Smiley Faces). I called it "Great American Characters with Great American Stories." Through that powerful campaign, customers easily and naturally connected with each other. And it was/is worth its weight in gold. Some smart retailer out there is going to see this moment as a grand opportunity to include its customers in the brand message now without looking like an also-ran to the WM campaign. And if they get it right -- if they get out of the way and let customers do their own talking -- there will be great dividends. It's not an easy genre to work in -- most brands get it pitifully wrong -- but done well, it is powerful. (Who do you trust most for restaurant and movie recommendations -- your friends or the newspaper?) But know that the campaign has been under constant attact in the halls of WM for years. Pretty much everyone there comes from somewhere else -- another retailer. And they bring with them a good amount of baggage, including what I call "concept envy" for a new campaign "like _______ does!" WM used to work hard to have you check your luggage at the door and give you the "cultural dip" ASAP. But now a whole layer of Wal-Martians who either started the company or worked with those that did, has either retired recently or self-destructed. So a serious gap has formed in the cultural teachings. Meanwhile, the growth continues. So it really shouldn't surprise anyone that WM is walking away from one of the most powerful and consumer-embraced "non-advertising" campaigns of our time. (We used to get dozens of letters every week thanking us-- blessing us-- for including the great WM Associates and Customers in the commerials and pre-prints. When's the last time you received or wrote a POSITIVE letter to ANY business? I'm talking dozens a week.) And now, along comes the Dove and Nike "real people" campaigns. And for some reason, us marketing and ad types are surprised -- once again -- when the genre creates a stir AND we're told -- once again -- that 87% of the American population believes EACH OTHER more than they believe us! Imagine that. At WM we used to say that we were not really in the retail business, that we were in the Trust business. Because we wanted the customer to always be able to trust WM to NOT take advantage of them on price or anything else. The Real People Campaign was a huge part of perpetuating that Trust Relationship with the customer. A bunch of Great American Characters telling some Great American Stories. Sounds easy, doesn't it? Well, it's not... It's hard. But if you look at the results, I think you'd have to say they pretty much speak for themselves. (But if you're thinking about getting into the Real People "Non-Advertising" Genre, call me -- I'll try to talk you out of it! Did I mention that it's really, really hard to get right? It's hard. Building trust always is. It's loosing it that's easy.)
-- Randy Curtis
Well I have to at least pose an opposing thought or two. Walmart, in my opinion has begun to lose it's edge. I think their service is pretty mediocre and has been on the decline for a while. Does that have anything to do with it's recent woes? I don't know. Compared to Kmart they are wonderful. Compared to Target and many others, I think they are just price. Well, good inventory too.
No arguing they have built a great retail machine, but more on price and logistics than on service. In the early days service may have been an advantage but it is not today. And I don't think people love working there anymore than Target or Publix maybe less.I am talking about those on the front line below store manager level.
No doubt they have great price perception. But their prices have creeped up if you look close enough. On those items that are not highly identifiable, they are not as low as they once were. Margin pressure and slowing sales. But people still believe, and rightfully so on many items they are the lowest.
And would Sam Walton roll over if he saw his once "we just carry American made products" become what every other retailer has done, import for margin? Not saying they shouldn't do this, just pointing out that a lot has been changing at this mega giant.
I would say Target is far from being as big, but I think they are at least as good if not better. And not because they cater to a so called slightly upscale customer.
And speaking of Tom Coughlin, the champion of the everyman, looks like he might have been out for himself, at the expense of the everyman.
jw stettner
Jerry: Your thoughts are very much in tune with what the press has been saying lately. No, WM will never be what it once was because it's just gotten so big. Kind of reminds me of Yogi Berra's comment: "Nobody goes there anymore. It's always too busy."
It still amazes me that they have been able to do so much business without having to have a sale ad every week. It's not just about price and their quality has gotten better, while more of their people are less motivated, but still on the whole love working there. As for the imports, the whole world is importing from China now. Only way to have the quality and the price we all want, e.g. IBM laptops. As for Coughlin, too bad our egos get in the way of common sense. He's getting what he deserves and the company is taking swift disciplinary action. Thanks for your input.
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