Wednesday, April 19, 2006

Wal-Mart: Further Insights on Retail Brand Repositioning

Given the recent pieces I've written regarding Wal-Mart, and the piece I wrote back in September, I thought I'd check my thinking with a friend who has vast retail experience.

I ran into Bob two days ago at the squash club. Bob is a retired retail executive and consultant. He's worked for many major retailers, as well as consulted them and others. Plus he's older than me, which I like, because he remembers things of which I am not even aware.

When I queried him about "the wheel of retailing," retailers moving upmarket, and Wal-Mart, he was guarded in his remarks. Essentially, he feels that a retailer may, if they move very slowly, creep upmarket. But he was much less optimistic about doing so in a consistently profitable manner.

As I expected, he dwelt on the omnipresent risks in such a strategy of losing one's original market segment, especially when the move is on economic dimensions, rather than on, say, pure style or even product niche. He nodded vigorously when I suggested that maybe Les Wexner's Limited was a better example of how to reach new customer segments, via added brands, rather than repositioning your current one.

So, after that discussion, and from even the past two days' news concerning Wal-Mart's fears regarding inventory management, gasoline prices, and sales growth, I still feel comfortable with my comments in September of last year. I do not believe Wal-Mart will be able to successfully reposition itself by moving upmarket and perform with consistent profitability and consistently superior returns for shareholders.

That's my expectation, and I'm sticking to it.

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