Rollbacks a' plenty

Wal-Mart is famous for making the term "price rollback" synonymous with providing extra value to its consumers. Using vendor price rebates, negotiated volume purchases, or seasonality (or anything else up its sleeves), the retailer will commonly "chop" prices on certain products and categories to give the perception of added value, which generates more sales. Wal-Mart has not stopped the "rollbacks" even in light of the current economic recession and continues to proactively beat its competition on pricing. Or, so goes the company line.

Wal-Mart has rolled back prices in 2009 that already outnumber and surpass the amount of rollbacks from 2008. In fact, company executive Charles Holley said that 40% more rollbacks exist now than did a year ago. Does Wal-Mart think it needs help recruiting even more customers into its stores from the competition? Any shopper who has not already converted a little to a lot of their shopping dollars to Wal-Mart visits probably won't by now. But, maybe the retailer's rollbacks will goose more sales from those already in its aisles?

Holley indicated that a good majority of the current rollbacks are in the grocery and entertainment areas, and that the retailer plans to maintain the pricing gap between the competition and itself. Holley also indicated that the retailer does not see the current economic environment going away any time soon. In other words, Wal-Mart is setting out to crush as much of the competition as possible so that it will reign supreme when the economy in the U.S. does get better. Talk about an iron fist.

Competitor Target Corporation (NYSE: TGT) has admitted that its sales in recent times have suffered due to the customer perception that its products are more expensive that those from Wal-Mart. This is precisely what Wal-Mart wants: the perception that everyone else is pricier. If it can grab the majority of shopper dollars during a recession, chances are that many of those shoppers won't "trade up" to previous stores and retailers once the economic hurt is gone. They'll stay with Wal-Mart and the rest will be history.

Cleaner and brighter

But, there is more to Wal-Mart's semi-metamorphosis recently than mere price reductions. After having visited no less than three Wal-Mart SuperCenters in the last two weeks, something understated but dramatic has just happened.

Instead of being crammed into center aisles filled with ugly, dressed-up merchandise pallets (meant to grab as many impulse buyers as possible), I found the floors to be clean and bright and the majority of center aisles to be completely clear of obstructions. Instead of pallets and other obstacles, all that remained was plenty of free and clear floor space for customers to walk on. In two of the Wal-Mart locations, the retailer had even installed park benches in the cleared-out center aisles, along with small trash cans as well. In fact, that is precisely what the arrangement reminded me of: a park. Yes, this was a big-box retailer, but it sure did not look like one.

Trying to comprehend why Wal-Mart would give up precious floor space is a new mystery. When metrics such as "sales per square foot" are obsessively used to measure success, giving up a huge piece of that so that customers don't feel squeezed in and overburdened while shopping is signaling something. Maybe, just maybe, Wal-Mart is thinking of the shopping experience, not just pure sales.

There is nothing wrong with this approach, and it mimics Target's presentation in a way. While Target's in-store colors (bright red) and cleanliness make it a completely different shopping experience than Wal-Mart, the latter's attempt to open up floor space to navigation instead of merchandising may indicate that it has seen something in Target's overall experience for shoppers. Just at a time when Wal-Mart is taking away sales from its largest competitor, it's also trying to integrate some of the competitor's customer experience as well. Target, be afraid.

Although there is no shortage of economic news these days, the evolution (of devolution if you will) of retail in 2009 will continue to be a sight to keep watching in 2009. Target's popularity in the retail landscape of the last few years may well cede a good portion of that goodwill to Wal-Mart this year. What are your thoughts?

Stay tuned right here at BloggingStocks this time next week for another edition of the Wal-Mart Weekly. Until then, have a safe Spring Break.