Weak economy may be Wal-Mart’s strong suit

Allison Linn Senior writer • Profile • E-mail

There was a time when Betsy Baker would have been embarrassed to be seen shopping at Wal-Mart.

But that was a few years ago, before the price of gold shot up and the economy slowed, all but ruining her family jewelry business. And it was before her monthly house payments skyrocketed to $3,800 a month from $1,800, and she found herself trying to get rid of a house that is worth substantially less than she paid for it. It was before her family conceded that they could not escape their economic woes without filing for bankruptcy.

“We just got walloped, and you know, it’s — you get past the point of embarrassment, you get past the point of shame, and you go into, like, survival mode,” Baker said. “You have to pay for the necessities: It’s cars, it’s lights, it’s water, it’s groceries for your family. It’s gas.”

It’s also a switch to shopping at Wal-Mart. These days, Baker, who lives in Bradenton, Fla., goes to Wal-Mart at least once a week to stock up on snacks, frozen pizzas and other household staples. Whereas before she would have been embarrassed to give a gift with a Wal-Mart tag on it, now she regularly buys things for her new granddaughter there. Her teenage daughter, who until recently was appalled at the idea of shopping at Wal-Mart, now brags to her friends about scoring a pair of shorts there for just $7.

“I think Wal-Mart has changed, and truly I have changed, too,” said Baker, 47.

A year ago, Wal-Mart seemed to be mired in a world of woes. The discounter’s sales growth was anemic and its share price was slumping. Its two big nemeses, WakeUpWalMart.com and Wal-Mart Watch, two union-backed campaigns critical of Wal-Mart’s labor practices, regularly lambasted the retailer for its wages, benefits and treatment of workers. An attempt to appeal to more affluent shoppers had backfired badly, leaving the company’s apparel and other departments struggling. The company had been forced to scale back growth plans.

Video   Walmart closes the divide June 30: The retail chain loses its hyphen. NBC's Brian Williams reports. Nightly News

Then came a triple whammy for American consumers: an economic downturn, rising gas and food prices and a deep housing slump. While other retailers have suffered from those woes, Wal-Mart has benefited, drawing in shoppers who previously spurned the retailer and retaining the business of those who say they dislike shopping there. Wal-Mart’s share price is up and its same-store sales, a key measure of a retailer’s health, have improved.

Simply put, a weak economy may turn out to be Wal-Mart’s strong suit.

‘Dollar for dollar, it’s just cheaper’
When Wal-Mart announced plans to move into Cindy Parker’s town of Dunkirk, Md., community members held meetings and circulated petitions to try to block the megaretailer from planting its stakes. Parker, 40, vowed not to shop there.

“I said, ‘I will protest with my pocketbook,’ but I did not,” Parker said recently.

Instead, Parker found out that she was expecting a third child, prompting her to stop working just as prices for everything from milk to gasoline started rising. Now she regularly stops at Wal-Mart for cereal, Gatorade, diapers, formula, baby food and even a bathing suit.

“Dollar for dollar, it’s just cheaper at Wal-Mart,” she said.

Parker had watched a movie about Wal-Mart’s business practices, and she admits having mixed emotions about supporting the company. But, she said, “At times like this you’ve got to take care of yourself.”

Still, Parker said there are things she wouldn’t buy at Wal-Mart, such as regular clothes for herself for her husband. She also has found that certain items, such as trash bags, are low in quality.

Wal-Mart spokeswoman Melissa O’Brien said the Bentonville, Ark.-based retailer has “absolutely” benefited from the fact that more Americans need to pinch pennies. But she thinks the company’s efforts to make shopping there more appealing — including extensively remodeling stores, working to improve customer service and revamping the product mix — also have helped keep them coming back.

Wal-Mart, which reports June sales this Thursday, also has worked to make its image more modern. It has almost completely done away with the bright smiley-face that once defined its brand and even announced plans to modify its logo. The simpler logo, which spells the company name "Walmart" without a hyphen and features a sun design, is being rolled out in U.S. stores and ads.

The company also has undertaken a major effort to improve its reputation, countering attacks over its wages and benefits and working to make its business more environmentally sustainable.

That’s paying off with shoppers like Chris Sorah. The 39-year-old Mount Carmel, Tenn., resident says he shops at Wal-Mart more now because he’s been impressed with the retailer's efforts to use more environmentally friendly materials and he likes that the company has made it easy and affordable for him to buy green cleaning products and other items.

The challenge for Wal-Mart will be to keep the newer customers loyal even if the economy improves. Company executives are optimistic.

“We believe that customers will continue to shop at Wal-Mart,” said David Tovar, another Wal-Mart spokesman.

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