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Walmart: A Victim of Its Own Strategy?

May 9, 2010 by Dale Furtwengler — President, Furtwengler & Associates, P.C.

Walmart signaled a changing strategy with its "Spend Less. Live Better" tagline.

How's that working for them?

Walmart's recent price cuts indicate that its attempts to change its business model aren't faring well.  For decades Walmart has enjoyed tremendous success with its "Always low prices, always" strategy.  The length of its run has far exceeded what most businesses accomplish for one simple reason.  Walmart has a passion for cutting costs.

Unfortunately, as is always the case with a low-price strategy, Walmart has hit the floor on cost cutting.  You need no further evidence than the change in its tagline from "Always low prices, always" to "Save Money. Live Better." 

To its credit Walmart realizes that it has hit the cost floor and it's attempting to change its business model, but it's discovering just how difficult that is.  Walmart's customers have become accustomed to thinking of "Walmart" and "low price" as synonymous terms.  Any attempt to change a company's business model, Walmart's or any other business, involves the creation of a clear, new direction and equally clear communication of that new direction.  Otherwise you simply confuse the buying public.

Walmart has not accomplished that goal as evidenced by its recent price cuts in the face of declining sales. Unfortunately Walmart's failure to acknowledge that it's going to lose sales during the transition from its low-price strategy to its new, albeit ill-defined strategy, is only going to prolong the transition.  Until Walmart can communicate its new direction clearly and concisely, I'm afraid that it will continue to be a victim of its own strategy.

For more pricing tips visit http://www.pricingforprofitbook.com.

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