Wal-Mart

How might you attempt to compete with Wal-Mart if you were:

a) A small hardware store: Wal-Mart has the reputation for having the lowest prices. In fact, they try to be the jack of all trades, but sometimes the smaller mom and pop stores offer the personal service, something the larger department stores lack. The smaller hardware stores can offer more knowledge about the tools that they carry. Their typical brands that Wal-Mart stocks include Stanley and Black & Decker, Black & Decker being the consumer niche brand of DeWalt. The small hardware store can offer the products at a lower price for the short-term, but in the long-term they will not be able to keep up with Wal-Mart.

Wal-Mart uses market research to see who they need to cater to and stick with their customer's price frugality. The smaller hardware store can't compete with the basement bargain prices at Wal-Mart, but they can challenge their dominance by offering personal service, quality products, and most of all rely on word of mouth advertising. Wal-Mart suffers from poor public image and the small stores can use that to their advantage. In Figure 1 in the Appendix, it shows that the small stores are actually rising in numbers with the growth of Wal-Mart. This can be attributed to small stores catering to specific needs of the customers rather than practicing the jack of all trades, master of none.

b) a small men's clothing store: This will be similar to the small hardware store. The difference is that they must concentrate on a certain brand of clothing. For example, if a custom men's suit shop were to open up next door to a Wal-Mart, the shop will not be a direct competitor to Wal-Mart. They have differentiated themselves from the Wal-Mart by offering a more custom experience. The small clothing store must concentrate on offering better products (e.g. materials and craftmanship) and better service (e.g. tailoring and customization). A smaller store can perform tailoring services and offer brand name products. They must cater to the customers that don't typically shop at Wal-Mart for clothing. The demographic that shops at Wal-Mart are lower income families and people who are willing to sacrifice customization for the low cost. These customers may not need the specific attention that the smaller store can provide, but they want to be able to get the most bang for their buck. The expression, "You get what you pay for" applies here.

c) a supermarket: Supermarkets can compete by using brand recognition. Wal-Mart's aren't known for their supermarkets and the public's perception of Wal-Mart is that they provide lower quality goods. Supermarkets can capitalize on the public's perception by showing the shoppers that they have the freshest foods. Society likes the fact that they can get everything from one store. Convenience is paramount. Supermarkets need to push the fact that they have a wider range of products, fresher produce, and offer a better overall shopping experience. Supermarkets can advertise the fact that they have more than just groceries.

Wal-Mart's market research shows that customers want low consistent prices, no stock-outs, a clean environment, and delivery services. One of the conveniences that supermarkets need to offer is having the merchandise that consumers want when they want to buy it. Far too often, when consumers want it and when supermarkets have it, don't match up. Being ready for business at 10:00 a.m. but not at 6:30 p.m. may have worked in the homemaker era, but it makes no sense today (Shopper Report, 2003).

Table 1: Ways that some Younger and older shoppers think Wal-Mart is better than (other) supermarkets

Do you prefer Wal-Mart over

other supermarkets? 112 97

Younger Older

Shoppers Shoppers

Lower everyday prices 68% 55%

Convenient one-stop 67% 28%

shopping

Take anything back 62% 38%

Fewer gimmicks 52% 43%

Clean stores 43% 28%

No cards needed 43% 43%

Greeters make a positive 43% 18%

difference

Quality store brands 39% 23%

Quality perishables 33% 18%

More pleasant shopping 29% 23%

Wider selection 28% 30%

More consistent service 24% 30%

COPYRIGHT 2003 Consumer Network, Inc

COPYRIGHT 2003 Gale Group

d) a toy store: The toy store is already slowly dying off due to the fact that larger stores can offer a larger selection. In the toy world, there aren't many brand name products and price is usually paramount. The toy store will need to offer competitive prices, newer toys, and possibly a babysitting service. They need to differentiate from the market and offer more than just the everyday toys. They just have to concentrate on the fact that Wal-Mart can't sell EVERYTHING a customer needs.

Wal-Mart provides the lowest price for the toys. This can relate to what Toys-R-Us did to small toy stores and what Wal-Mart is doing to Toys-R-Us. The small toy stores cannot compete in this day in age. This is because toys are generic, unless you are an enthusiast. The disinterest in old-fashioned toys is growing and electronic toys has been booming in recent years. Since, video games and electronic toys are taking off and the smaller stores can concentrate on bringing imported games from other countries. Wal-Marts do not carry limited edition video games, nor do they provide the option of buying used products. A smaller store can succeed in this arena. This can be compared to small music stores offering CD buybacks and reselling used audio cd's for a profit.

Most importantly, creating a welcoming and fantasy-like environment will benefit the small store. For example, FAO Schwartz