Is Trimming the Budget Killing Walmart’s Brand?

In an effort to be more competitive in the face of increased competition, mainly from their “dollar store” competitors, Wal-Mart has been minding its costs as U.S. sales growth slows.  U.S. locations declined for nine straight quarters before snapping the streak with a 1.3 percent gain for the quarter ending last October.  It is understandable that keeping a tight focus on costs during poor economic times is a necessary function of doing business today, but how far is too far before one of the most successful brands in history is significantly damaged?

Founder Sam Walton, built a strong foundation for the future success of his company by featuring wide unobstructed aisles, neatly and plentifully stocked shelves and motivated and friendly staff along with the low process.  In 1980 to make his giant low-price stores even more friendly he added greeters to the entrance of the stores.  The world’s largest retailer has recently removed greeters from the overnight shift at its U.S. supercenters, chipping away at a 30-year tradition of making sure all shoppers are welcomed to the store.  Cutting back, even during the early morning hours, shows Wal-Mart is rethinking long held traditions to boost profit margins and guarantee low prices.

The greeter is part of the Wal-Mart experience and, in stores not always known for killer customer service, sometimes the friendliest face a customer might encounter,” wrote Ryan Mathews, founder, CEO of Black Monk Consulting.  ”It never made economic sense to have a greeter, but that wasn’t the point. If Wal-Mart’s economics are so fragile that they are worried about changing such a signature part of their operation, they have much bigger issues.”

The most recent effects of trimming the brand is having wide spread effect and is garnishing customer complaints from all across the country.  More than 1000 complaints were registered recently regarding the lack of adequate stock being on the shelves to meet the consumer demands.  Many were from previously loyal Wal-Mart customers confused by what has happened to service at a company they’d once admired for its low prices and wide assortment.   Many said they were paying more and driving farther to avoid the local Wal-Mart.

Wal-Mart’s restocking challenges stem from a thinly spread labor force struggling to keep up with all the work that needs to be done, said Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York.  “Stuff gets backed up, and they’re forced to respond as best they can,” said McGranahan, “The result is an increasing amount of customer-encountered out-of-stocks.”

One loyal Wal-Mart customer recently responded to the bare shelves at his local store saying “As much as I need to take advantage of the low prices that Wal-Mart has to offer, the money I would save is spent on gas to drive to other stores to buy the items that the retailer doesn’t have on its shelves, he said. “So it is easier to just shop elsewhere.”

And how is the company responding to the latest criticisms?

Responding to the report in Bloomberg News, Wal-Mart said the customers complaining to Bloomberg aren’t a sufficient sample size and don’t represent shoppers’ impressions of its stores nationwide.  The spokeswoman said, “The premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country.”  Not the kind of response shoppers expect from a major retailer in a highly competitive, economically depressed environment.

Customer service is also driving some customers away.  One frustrated customer tried to get a watch battery changed. “No one could find the batteries and a worker didn’t know how to change it anyway”, he said.  “The lady told me to go to a pawn shop to have it changed.  Michael Young, a 63-year-old accountant in Oklahoma City, goes to Wal-Mart “only when I need things I know I can usually get for less money.” He has to prepare himself for what he knows will be an unpleasant shopping experience.

It is not uncommon for businesses to encounter operational challenges which result in scattered, poor customer relations resulting in some tarnish to the brand, even the world’s largest and most prestigious performers will struggle to consistently maintain quality service and performance levels.  Even if it is an isolated problem or one of localized perception, and the evidence suggests neither is true, perception regardless of whether it has basis in fact, is reality in the eyes of the consumer.

Could Wal-Mart, once the discounter consumers could rely upon for more than just low prices, be so focused on trimming the budget that they damage what many long-standing, loyal customers believe is one of the most endearing brands?

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