What's Ailing Wal-Mart and How to Fix It

Last Updated May 30, 2011 11:49 PM EDT

Ever since Wal-Mart cut their inventory to reduce store clutter two years ago, sales have fallen. More recently, the company is losing market share. While there are many potential causes, they all relate to one thing - their focus on profits, rather than people. Good marketers know that the ultimate objective of marketing is customer satisfaction. If you take care of the people, you will make more money, but if you focus on profit and forget the people, you will lose both.

People that are Employees and Vendors

In a recent post, my BNET colleague, Christopher Elliot made the point that happy employees make for happy customers. I couldn't agree more. Unfortunately, there are too many stories about unhappy employees at Wal-Mart. In a previous post, I talked about Wal-Mart locking in employees at night and discriminating against women that do the same jobs as men. I also mentioned vendors that feel that the Company squeezes them too much. These are factors that have hurt their reputation and may have contributed to their sales decline.

People in the Community
Because of the economic threat to local businesses and the adverse impact on the environment, people in many local communities have fought to keep Wal-Mart out of their neighborhoods. The negative PR impact of these fights that have appeared prominently in news stories across the country have likely taken their toll on Wal-Mart's sales.

Ask the Customers What They Want

Perhaps the biggest factor in their sales and market share decline is Wal-Mart's decision two years ago to eliminate 9 percent of the merchandise in their stores. Rather than consult with customers, they decided to do this to reduce lower profit items and (they said) clutter. This strategy, however, conflicted with their positioning strategy as a one-stop shop for everything. When customers were unable to get what they wanted in one "Wal-Mart" stop, they went elsewhere to buy what they needed. As reported in a Bloomberg post by Matthew Boyle, a portfolio manager at Rochdale Investment Management in New York, David Abella put it this way: "If I go to Wal-Mart, I expect to find almost anything. Reducing inventory makes things leaner and meaner, but it's also very frustrating when a big box does not have what you want."

Environmental factors and Competitors
The recession and rising gas prices caused people to think twice about driving to Wal-Mart, which is usually located in remote areas further away from customers. At the same time, Target and other big box competitors lowered their prices to meet or even beat Wal-Mart.

How can Wal-Mart fix their situation?
To fix their seventh consecutive quarter of declining sales at stores open at least a year, Wal-Mart needs to do the following:

  • Of the products they eliminated, they need to find out which ones people really want and add these back to the shelves.
  • They need to implement a marketing information system that tells them, in real time, what people want and how well they are performing.
  • Instead of investing in a War Room to manage their PR, they need to focus on a Peace Room to make peace with the people with whom they do business (customers, employees, vendors, and surrounding community).
If they get the people back, they surely will increase their sales and profits. People know when a company cares about them, and when they find a company that does, they will be very loyal even if a competitor dangles lower prices and other short-term enticements.

What do you think Wal-Mart needs to do to recover their sales and market share?


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Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). Follow him on Twitter.

image courtesy of flickr user, Walmart Stores

  • Ira Kalb

    Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California. He has won numerous awards for marketing and teaching, authored ten books and created marketing inventions that have made clients and students more successful. He is frequently interviewed by various media for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter at @irakalb