Wal-Mart is running into a problem as it tries to go upscale — itself. According to an internal report (as reported in Is Wal-Mart Too Cheap for Its Own Good? – New York Times), the Wal-Mart model is hindering its growth:
A confidential report prepared for senior executives at Wal-Mart Stores concludes, in stark terms, that the chain’s traditional strengths — its reputation for discounts, its all-in-one shopping format and its enormous selection — “work against us” as it tries to move upscale.
As a result, the report says, the chain “is not seen as a smart choice” for clothing, home décor, electronics, prescriptions and groceries, categories the retailer has identified as priorities as it tries to turn around its slipping store sales, a decline likely to be emphasized Friday during Wal-Mart’s shareholder meeting.
“The Wal-Mart brand,” the report says, “was not built to inspire people while they shop, hold their hand while they make a high-risk decision or show them how to pull things together.”
The document, prepared in October 2006 by the company’s former advertising agency and based on interviews with scores of consumers, offers a candid, wide-ranging explanation for why Wal-Mart, the No. 1 seller of everything from laundry detergent to underwear, has stumbled badly when it comes to higher-end merchandise like silk camisoles and shag accent rugs.
The report contends, for example, that “our low prices actually suggest low quality” for products like high-definition televisions.
Brands have power. They convey certain meanings — whether you like it or not. Changing that meaning is very hard – if not impossible. Wal-Mart is just the latest to learn that truth. It took the Japanese decades of sustained effort to move “Made in Japan” from meaning “cheap” to “high tech” — and now they are embarked on an arduous shift to “fashionable.” We will see how Wal-Mart responds.