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5 ways Walmart can get its mojo back

Being the biggest is not always the easiest.

That's what Walmart (WMT) is discovering, after posting its seventh straight quarter of traffic declines to its U.S. Walmart stores and warning that 2014 profit will fall short of its earlier estimate.

The massive retailer is suffering on a number of fronts, including losing business to smaller, more nimble rivals such as dollar stores and the online retailer Amazon.com. On top of that, Walmart's core consumer, middle- and low-income Americans, are still strapped after the recession, and continue to keep close watch on their wallets.

Unfortunately for Walmart investors, the cure may be more painful than the symptoms. The company is making what some analysts say are needed investments to fight rivals such as Dollar General, but those strategic priorities are crimping the bottom line.

But investments are needed: Consumer perception of Walmart's brand has been slipping since the end of 2013, and is now lower than that of its discount rivals, according to data provided to CBS MoneyWatch from research firm YouGov BrandIndex.

The bigger, and tougher, issue to solve is one that's puzzled everyone from President Barack Obama to academic economists: How to revive the U.S. consumer's ailing bank account.

Most American workers have seen either stagnating or declining wages since 1979, the left-leaning Economic Policy Institute think tank wrote in a June report. Even for Americans with a four-year college degree, wage gains have been almost nonexistent since 2000, the study found.

Given that Walmart targets middle- and low-income shoppers, it's not surprising that those customers are either shying away from spending money, or turning to dollar stores that may offer better deals. And with gas prices still high, some customers may be opting to order from online rivals such as Amazon.com, rather than driving 15 minutes to their local Walmart.

A Walmart spokesman said its new smaller Neighborhood Market stores are aimed at bringing the store closer to customers, with more urban or central locations. Sales at the smaller stores have been performing well, with sales rising more than 5 percent last quarter, and Walmart plans to open dozens more this year.

Of course, it's not just Walmart that's getting hit by spending-averse consumers: Stores visits in the U.S. have fallen by 5 percent year-over-year in each month of the past two years, except for April 2014, according to stock analysis firm Trefis, citing ShopperTrak.

Below are five ways Walmart could get back on track.

Boost employee pay. As the biggest private employer in the U.S., the company's 1.4 million retail workers also represent a significant source of potential customers. But with the average employee bringing home $25,000 per year, according to the AFL-CIO, there's not a lot of extra fat left. "If Walmart is truly committed to rebuilding the American middle class, it can start with its own workers," AFL-CIO president Richard Trumka said in an statement on Thursday. A spokesman for Walmart said the company offers competitive wages, with full- and part-time associates earning an average of $11.81 an hour, or more than $4 above the minimum wage.

Aim for a slightly more affluent customer. Trying to squeeze more spending from the already stressed low-end customer may be a losing strategy. Some recent initiatives seem to be targeting slightly more affluent consumers, such as its push into offering Wild Oats organic food.

Move closer to consumers. The fact is, more consumers are shopping at smaller stores that are nearer to their homes, such as dollar stores, which tend to be in more urban or nearby suburban locations. Most Walmarts are located in big-box developments, and some consumers are skipping the longer drive.

Mount a strategic threat to Amazon.com. The biggest online retailer has locked up many Americans with its Prime delivery service, offering free two-day delivery for a flat annual fee. But now Amazon.com is rolling out same-day delivery in several new cities. Walmart, with distribution centers and stores located within 15 minutes of 90 percent of Americans, could potentially outstrip Amazon in the same-day delivery business. With Walmart's prices in some cases cheaper than Amazon's, it might be able to win over some customers on price.

Support a higher minimum wage. Earlier this year, Walmart said it was considering supporting an increase in the federal minimum wage, with a spokesman telling Bloomberg News that the move would give its 140 million shoppers "additional income." Walmart told CBS MoneyWatch that its stance on a higher minimum wage remains neutral.

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