Wal-Mart faces big hurdles

Published on NewsOK Modified: June 5, 2014 at 2:37 pm •  Published: June 5, 2014
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The world's largest retailer faces new challenges at a time when low prices and one-stop shopping can be a few clicks away on a tablet computer or mobile phone.

Wal-Mart Stores Inc. built its reputation on everyday low prices and convenient supercenters that allow customers to do all their shopping in one place.

But revenue at established Wal-Mart stores in the U.S., which account for 60 percent of the company's total sales, has declined for five consecutive quarters. Meanwhile, the number of customers has fallen six quarters in a row.

Like many other retail chains that cater to working-class Americans, Wal-Mart is a victim of an uneven economic recovery that has benefited well-heeled shoppers more than those in the lower-income rungs. Moreover, shoppers are no longer willing to spend hours in big supercenters. They're turning to online competitors like Amazon.com, dollar stores and pharmacies.

Wal-Mart's annual shareholders' meeting on Friday could offer clues as to how Doug McMillon, who became Wal-Mart's CEO in February, plans to deal with the biggest issues Wal-Mart faces:

CASH-STRAPPED SHOPPERS

In an interview with The Associated Press, Bill Simon, CEO and president of Wal-Mart's U.S. stores division, says the top concerns among its shoppers are lack of jobs and gas prices.

Wal-Mart's customers also still are struggling with a 2 percentage point increase in the Social Security payroll tax since Jan. 1, 2013. Additionally, they're facing reductions in government food stamp benefits.

As a result, Wal-Mart's customers have changed their shopping habits. They're switching to chicken from beef, and choosing lower-price brands or store labels on staples like detergent. But they do splurge for special holidays.

"It's been very choppy as to how they choose to spend," Simon says.

To combat this, Wal-Mart stocks up on small packages at the end of the month when money is tight for customers. It's also counting on a new money transfer service it says will cut fees for its low-income customers by up to 50 percent compared with similar services elsewhere.

But America's Research Group's C. Britt Beemer asks: "How do you get more money from shoppers whose disposable income is less?"

PRICE PRESSURE

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