Doing what it does best

Wal-Mart has never shied away from marketing to the mass public on the basis of low prices. Not clean and inviting stores, not colorful and pleasing shopping experiences and certainly not about brand name marketing and the related fluff advertising to get consumers paying for mediocre goods at overinflated prices. It's always about price at the world's largest retailer, a fact that has gotten it into trouble with main street merchants to marketing consultants throughout the U.S.

When Target began taking some of the spotlight in 2007 with its bright colors, energized marketing and niche approach to discount retail, many pundits were worried that Wal-Mart would become increasingly shunned as shoppers wanted bargains but wanted more from the experience of buying them. Many consumers need to be told what to do and how to buy, which is why marketing exists. Target was able to get out that message very nicely and, at least for a while, was growing its same-store sales growth rate above Wal-Mart.

Wal-Mart half-heartedly responded by trying to customize the product selections and shopping experiences in many of its stores to try and attract this "new" Target audience (no pun intended). I say half-heartedly because the retailer was probably waiting for the next bomb to drop before customers scurried back to Wal-Mart to shop on price and price alone. As the summer of 2008 came to a close, this was evident every passing month.

Value is in price -- at least, for now

With gas prices coming back down to earth for the last few months, motorists sure did not notice -- both SUV and truck sales fell significantly in December even with recent drastic plunges in fuel prices. Does this mean that consumers automatically switch back to old habits when prices come down or economic circumstances change? Possibly. Still, the housing market is still a mess, layoffs have increased and will increase in 2009, the economy is still just partially recovering from a near-collapse late last year and a new President is about to take office. Change, anyone?

Once any routine is established in the U.S. in 2009 and anything returns to "normal" (whatever that is), will consumers again break free from Wal-Mart and turn their dollars elsewhere? Back to trendier retailers? Back to department stores and high markups? Back to Target? That remains to be seen, but for now, price is absolute king. The most rudimentary way to see this is to drive by parking lots of your local retailers. Which ones are full and which are not?

Price is Wal-Mart's single piece of brand equity -- and always has been

Even from the day Wal-Mart was founded in Arkansas at the end of the 1960s, it has been all about bringing the best price to the consumer by leveling the playing field between supplier and buyer (manufacturers and consumers in this case). Consumers clearly have responded by making Wal-Mart the world's largest retailer (and company), even at the expense of shutting down countless mom-and-pop operations and other retail outfits that just could not complete with Wal-Mart's pricing power and breadth of product selection.

At the same time, it painted a target on its own back from critics who lamented over its entry-level worker wage and willingness to do anything to make sure consumers were provided the lowest price possible in order for the retailer to continue growing. Wal-Mart's most recent quarter showed global sales of $97.6 billion -- a whopping increase of 7% from the year-ago period. Remember -- this was during a fuming time in the U.S. economy, not to mention the start of a global economic contraction. And Wal-Mart grew sales? Yes. In fact, it's more akin to plucking customers from the competition with one lure -- low prices.

Stephen Hoch with the University of Pennsylvania, told Marketing Daily "The company's entire brand equity is tied up in price... people think they have the lowest prices because they do have the lowest prices." Hoch went on to say that consumers will forgive Wal-Mart for its many shortcomings to save on price -- and nowhere has this been more evident than in the last four months. Perhaps Wal-Mart's constant and consistent strategy of "low prices" has given it some semblance of just a single image that sat in the back of many consumer's minds while they navigated the competition and kicked the tires of retailers like Target.

2009 will be a year to watch the retail landscape and see if Wal-Mart gains even more power or if consumers start splintering off to the discount retail competition like they have in the past. What's your prediction?