“Exec cleared of Kmart Fraud”
Headline Detroit News, 8/15.
“Wal-Mart author’s theory says discounts are now entitlements” Headline, USA Today, 8/15
Much has been written about these two discount chains over the past several years, drawing comparisons (and mostly differences) about how one chain has succeeded unbelievably while the other has teetered on extinction for quite a while. A couple things occurred to me as I read these articles that I thought would be good material for this forum.
First, Charles Conaway, may have been found not guilty of doing anything illegal while he was CEO, but he certainly can shoulder a lot of the blame (as could some of his predecessors) for Kmart’s ongoing loss of share, loss of sales, and loss of trust by its customers. The company simply ignored what competitors like Wal-Mart and Target were doing in building brands that people not only trusted but where people liked to work. The ongoing reliance on sales and promotions that were not supported in the stores not only turned off most of Kmart’s customers but it depressed and de-motivated most of its employees. So the stores looked lousy, the inventories were never where the customer expected, and the customers basically had a poor shopping experience until they gave up.
Unfortunately, the company continued to reward this poor performance with big bucks at the top and big severances for doing a pitiful job of branding the company. The civil court may have found him not guilty, but the jury of customers passed their judgment a long time ago and they haven’t forgotten.
Secondly, in his book, “The United States of Wal-Mart”, John Dicker calls Wal-Mart the “champion of cheap” while maintaining that all customers care about any more is low prices and one-stop shopping. Well, there’s no doubt that Wal-Mart’s success has its foundation on having the lowest price perception of any retailer (notice I didn’t say cheapest). For some reason, since Wal-Mart has become the largest company in the world, we think it’s a fault that they have driven down prices for the consumer. The reality of it, as born out in countless research studies, is that the company has won because the customers trust them to have the lowest prices and to have what they want and need. And they trust the people working in the stores to make sure they do in a friendly way.
Is Wal-Mart a predator? I think “competitor” is a more appropriate description. As a company obsessed with getting the best prices and the best values for its customers, Wal-Mart has beaten a lot of lesser retailers (like Kmart and all those poor small town retailers who never provided good value to their captive markets). And it has developed an organization that believes they are providing the best for their customers. Sure there have been some guilty parties who have taken advantage of the company’s strength and positions lately, but with over a million people in an organization, these have been the exception. In a recent store check (which I do regularly), I found the checkouts at both Target and Home Depot (2 of my favorite stores) to be fairly empty on a recent Tuesday night with only two checkouts open plus the self-service aisle. Wal-Mart, on the other hand, had at least seven open and ringing up big shopping baskets.
People shop Wal-Mart because they like it, they trust them, the like their people (who most of the time love where they work), and by the way they save money. That’s not being cheap!
What do you think??
Ken
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