November 29, 2004

Sluggish Wal-Mart Sales

While I'm watching the Packers battle the Rams (hopefully the succeed better than my fantasy football team) ponder the possiblity of Wal-Mart having sluggish early Christmas season sales while retail as a whole appearing to be doing well. Professor Bainbridge thinks we're seeing an income effect. With a stronger economy than in year's past people may be shopping more for quality rather than price. With more consumer purchasing power due to greater employment, better pay, and lower taxes price may not be as important in a shopping decision. While Wal-Mart can trump anyone on everyday items (groceries, toiletries, paper products) Christmas shoppers may be more interested in higher quality, name brands. Wal-Mart current product mix maybe unable to pique shoppers' interest. An indication that this may be what's happening we should look to Target's sales. That company's strategy has been to emphasis style rather than price. While Target too offers plenty of low prices they have an image of placing more emphasis on appearance, aethetics, and quality. If Target's sales better match the entire retail field then Professor Bainbridge's theory has more weight.

If you're a worried Wal-Mart investor I wouldn't fret too much. Wal-Mart has the best internal computer system in retail. When you combine that with their buying power Wal-Mart has the ability to figure out what customers want and get those goods to them. I don't think even it is fast enough to make changes in the middle of this shopping season, but don't be surprised if you see more name brands and higher quality goods in their stores.

"Wal-Mart's Woes, Online Shopping, and the Economy: A Comment"