Wal-Mart has itself to blame for current woes

But this year, that might not have held true. While the company has started remodeling — which also has turned off shoppers because of the disruption to the stores — most stores haven’t been redone yet. At the same time, Wal-Mart hasn’t always offered the lowest prices.

The discounter failed terribly when it attempted to attract higher-income shoppers by offering more fashionable items such as clothes that were sold at higher price points. It also shifted its advertising away from a low-price focus, but now is emphasizing cost again.

In the meantime, its competitors intensified their price-cutting on the same or similar items sold at Wal-Mart, including food and grocery items. That was especially true over Thanksgiving weekend.

Wal-Mart started discounting toys in October and electronics in early November, hoping to “gain mind share” as the low-price leader over the holiday season, according to Goldman Sachs analyst Adrianne Shapira.

But then it failed to deliver as competitors offered better deals on Black Friday and through last weekend. “The rest of the world caught up in promotions when it mattered and margins were hit across the board,” Shapira said, noting that its biggest declines in customer traffic came during the week of Thanksgiving.

Also at issue is whether Wal-Mart has expanded so much over the last four decades that finding new store locations and capturing additional sales in certain categories are becoming increasingly difficult.

Hitting a 'market-share wall'
As Merrill Lynch’s Virginia Genereux noted, Wal-Mart could have hit a “market-share wall” — since it might not be able to see much more upside to its 30 percent of share of such things as men’s underwear and pet food, or in certain markets like Springfield, Mo.

Then there is Wal-Mart’s publicity problem. Two years ago, a poll of 1,800 shoppers found that 2 percent to 8 percent of respondents said they had stopped shopping at the retailer because of negative press. The findings came in a report to Wal-Mart by consulting firm McKinsey & Co.

That decline was before the recent onslaught of attacks from two union-backed groups, WakeUpWalMart.com and Wal-Mart Watch, which have gotten lots of media attention for taking on Wal-Mart’s treatment of workers so publicly. Wal-Mart bashing was also popular on the campaign trail during this election season.

Wal-Mart has fought back through its own intensified public relations effort. “We continue to create jobs, advance careers and enhance communities across the country,” Wal-Mart CEO Lee Scott said during the Nov. 14 third-quarter earnings call.

Of course, no one should write off Wal-Mart yet. It is big. It is strong. It is resilient. It is in many of the nation’s neighborhoods, catering to many of the nation’s shoppers. No other chain comes even close to the sway that it has over American consumers.

A year from now a different Wal-Mart story could be told, one of better times ahead. For that to really happen, though, the retailer might want to review how it got where it is today, and what shoppers have long looked for in its stores.

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