“CAME FOR THE BARGAINS, STAYED FOR THE BRANDS”

“Came for the Bargains, Stayed for the Brands”

“Came for the Bargains, Stayed for the Brands”

Being the world's largest private retail company, Wal mart has been using a combination of low prices and relentless expansion to emerge from rural Arkanas to reshape the retail business in America (The Wall Street Journal, 2007). It is successful until 2006 when it reported its first decline in quarterly income in 10 years and domestic same-store sales crept up by just 1.9 percentage in 2006, both are the worst showing in Wal-Mart's history. Wal mart sales growth rate has also decreased since 2006 and it has lost its battle with its major competitors, Target and Costco (Govindarajan, 2005 p.45). To increase sales, it imitates its competitors by selling priority products including home décor, electronics and fashion items. All are not having satisfactory results. The purpose of this paper is to examine the underlying reasons for the slow down trend in sales growth for Wal mart, evaluation of existing strategies, and recommendation to fine tune its strategies to support its growth.

Underlying reasons for the slow down trend in sales growth for Wal mart and evaluation of existing strategies

Before illustrating why it encounters the above problems, the importance of maintaining not only a particular sales volume, but having a sales growth should be discussed first. Firstly, Douglas J. observed that major players in the U.S. retail industry such as Chico's, Kohl's, J.C. Penney and Best Buy are all opening new stores. These are the survivors or innovators of the last major retailing cycle (i.e. the value era) and they are still operating healthily after Wal mart has gained its renowned large operation scale(Feinberg, 2008, p.23).

Secondly, these value retailers are differentiating themselves more than just discounters as Wal mart is claiming itself. They try to provide more values, not just value, to customers to lure Americans away from Wal mart (Barbaro, 2007, p.68). Therefore, whoever remains a player in the industry will engage Wal mart much a much vigorous manner than in the past. Slow sales growth is a warning sign to Wal mart as it may provide opportunities for competitors to gain benefits easily.

After illustrating the importance of maintaining sales growth, its underlying reasons will be discussed. Firstly, according to Charles W., in order to gain superior profitability, competitive advantages must be gained by superior efficiency, quality, innovation and customer responsiveness (Figure 3 The followings are the problems existing in Wal mart, making them reduce their competitive advantages in the battle field of retailing, namely, the low price dilemma, the matter of store sizes and scale, poor supporting service level, its mass retailing format and poor image(Randall, 2000, p. 39).

The low price dilemma

Firstly, lowest price may not always be a good thing, given that for searching for the ever lowest price, Wal mart changes brands they sold once they can get a better deal with another supplier. Therefore people cannot get a particular brand next time ...