A warning for Wal-Mart

Posted May 30th 2007 8:30AM by Douglas McIntyre
Filed under: Bad News, Products and Services, Consumer Experience, Competitive Strategy, Wal-Mart (WMT), Target Corp. (TGT)

Last year, Wal-Mart's (NYSE: WMT) advertising agency at the time, GSD&M Advertising, wrote a report that said some of the retailers pricing might actually be too cheap. The 50 plus page report was leaked to The New York Times.

No wonder the agency was fired.

While Wal-Mart says that the report is outdated, it offers some fascinating theories. The most important recommendaiton is that prices that are too cheap on high end items might make Wal-Mart's goods seem as if they were of lower quality than those sold at outlets like Target (NYSE: TGT).

As Wal-Mart's same store sales have dropped in the US, the report said that the big retailer is the first choice of only 67% of its shoppers. The number was 75% the year before.

The report's content, based on interviews with large numbers of Wal-Mart customers may well have some valuable insights for the company, but it appears that they are falling on deaf ears.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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