In this economy, retailers have to fight for every dollar that consumers are willing to spend. One way to do that, of course, is to offer weekly sales. A great deal, whether it's on paper towels or the latest seasonal fashions, helps drive traffic through the front door or to a website.
The problem is that offering good deals on select sale items doesn't always translate into purchases of other items at regular prices with better profit margins. And that can pinch retailers' bottom lines.
So leave it to Walmart Stores (WMT), the nation's largest retailer, to revisit a marketing gimmick it used to great effect once before: "Low prices, every day." The company, which is rolling out a new ad campaign Monday, says it also plans to bring back some 8,500 items that have disappeared from its shelves in recent years.
The so-called "assortment changes" will bring back customers' favorite local food and other products, Walmart said in a statement. The company also plans to conduct more frequent surveys of other retailers' prices on similar goods to ensure its stores offer lower prices on the right mix of items.
"Our company is determined to create the best one-stop shopping experience and low prices on the right products backed by a clear, consistent ad match policy," Duncan Mac Naughton, Walmart's chief merchandising officer in the U.S., said in a statement.
"Walmart is making progress with their re-merchandising, and the launch of the ad campaign shows that most items to be returned are now back in the stores," Sanford C. Bernstein retail analyst Colin McGranahan told Bloomberg News. "Whether that will be enough to lure disenchanted customers back remains to be seen."
Reversing a Failed Strategy
The retailer's prior advertising campaign -- "Save Money, Live Better" -- failed to drive more consumers through the door. Despite its dominance in the U.S. market, the Bentonville, Ark.-based retailer has endured seven straight quarters of falling sales at its stores.
That previous campaign involved neatening stores and reducing the number of items for sale. While that may have seemed a good strategy, it defined shopping at Walmart a lifestyle choice, causing consumers to perceive the popular retailer as moving away from the low prices and variety they had come to expect, says Paul Kurnit, clinical professor of marketing at Pace University.
"The Walmart that we knew three and five years ago was a pretty messy shopping experience, but that was kind of OK, because we knew we were getting the lowest possible prices," Kurnit says. He adds that research shows that more items on retail-store shelves translates into bigger totals at the check-out counter.
Offering customers a one-stop shopping experience that assures customers of low prices on a variety of goods is good strategy in these days of steadily rising fuel costs and economic uncertainty, Kurnit says.
With gas prices at $4 a gallon and higher prices expected, he says, "People are really feeling the crunch."
Get info on stocks mentioned in this article: