Walmart, arguably one of the most known US brands, has learned a bit about the power of brand. Its brand just doesn’t play well with others.
Toward the end of last year and throughout the first quarter of this year, Walmart quietly removed a number of name brand products. In some cases, it’s own brands replaced these name brands in an effort for them to increase margins. Too bad that Walmart failed to realize that perhaps they were not the “retail savior of the world” they thought they were. And perhaps these brands they were removing might be a bit more important to the consumer than they had thought possible.
As a result, Walmart saw its sales fall for the first time in its history in the fiscal fourth quarter. Make no mistake, the current unease in the economy played a part as did fewer new store openings. But interestingly, profits were up 22% over the same period. Has it gotten leaner? Yes. Has its “green” initiative actually been a cost savings for them? Yes. Were lower-margin name brands replaced by higher margin store brands? Yes.
The company admits that they may have taken too many brands off the shelf and upset some customers. They also admit that perhaps there is some value in name brands and are replacing some that were removed. Some value? If sales is any indication, it seems that there are a great number of brands that actually have more value to the customer than Walmart.
Walmart as a brand is about “saving money.” For real bargain shoppers whose highest emotional intensity is simply trying to make ends meet, the emotional intensity is simply getting what they need cheaply. However, for a segment of it’s customers who are looking for a good deal (not simply cheap), they look for name brands. (And it is to those that the new brand of “Save money. Live better.” is targeted to.) They believe they are just smart enough to know they can get their favorite brands for less money at Walmart.
As Walmart found out, they will go someplace else to get it.
Walmart forgot that its brand is not about “cheap“. It is about saving money. There is a difference. It also realized it actually needed to sell name brands to meet the needs of their entire customer base. Walmart is a powerful brand, but consumer preference trumps it. Perhaps its brand is not as powerful as many thought – especially if it can’t acknowledge that part of its success is because of the power of the brands they carry.