Wal-mart can be beat, but not by copying it
By Tom Dougherty, blogs.stealingshare.com
The Holy Grail in retailing is, of course, how to take market share from the biggest retailer of them all: Wal-Mart. It seems impossible given Wal-Mart’s arsenal of hundreds of billions of dollars in yearly revenue (more than five times as much as the nearest retailer).
Wal-Mart has continued growth in both revenue and earnings and although recent news reported less-than exciting same-store sales, Wal-Mart is king.
Retailers such as Home Depot, Lowes, Sears, Macy’s and J.C. Penney continue to struggle against Wal-Mart -- even direct competitors such as Target continue to lag behind.
How do you beat that?
The No. 1 rule for those retailers: Stop copying Wal-Mart. In any category, if you copy the market leader, it only helps the market leader. It is the reason why beer companies have had such difficulty cracking into Budweiser’s ever-growing market share because they look and sound just like the market leader. What happens is that the market leader’s messages, from the point of view of consumers, become category benefits.
So, if you copy Wal-Mart, that only helps Wal-Mart. Because Wal-Mart competes on price -- and even then it has become sophisticated about that -- you will lose if you market on price. Wal-Mart wins that every time.
Many retailers are doing just that, though, which is one reason why Kmart, once a formidable competitor, is practically a non-entity right now. From the consumer’s point of view, why choose Kmart when there’s a Wal-Mart, in some cases, close by?
That doesn’t even take into account Wal-Mart doing a better job of marketing price than its competition. It has a new, brighter and more optimistic look with a theme (“Save Money. Live Better.”) that allows those consumers who once thumbed our noses at Wal-Mart to go there. They now have permission. “Living better” is a very attractive outlook these days, and it shows that I’m smart for choosing them.
So when Kmart says, “There’s smart, and there’s Kmart smart,” it attempts to hold the same position as Wal-Mart -- and not as well. What seems smarter to you? To “Live better” or be “Kmart smart”?
What others say
It’s, of course, easy to pick on Kmart, even as its same-store sales rose in December. Target is Wal-Mart’s nearest direct competitor. However, despite holding that position since the mid-80s, it has yet to make much of a dent in Wal-Mart’s fast-driving machine.
Target’s revenue has basically flattened -- and little wonder. It often fights on price as well. “Great electronics at surprisingly great prices” said one recent spot.
Based on that, it’s no surprise Wal-Mart took a lion’s share of the flat-screen TV purchases over Christmas, stealing Target customers in the process. So, how effective was “at surprisingly great prices”?
Target promises “Expect More. Pay less.”, a theme eerily similar to Wal-Mart’s promise. The “Expect More,” and the sophisticated and trendy nature of Target’s advertising, suggest that you will get a better in-store experience at Target.
But something has happened at Target. Its stores are beginning to seem stale and bizarrely empty now, less important compared with the bustling, almost overstuffed, nature of Wal-Mart. Target has even tried to copy Wal-Mart right down to having grocery departments: Tiny, little grocery departments with practically the same goods as Wal-Mart, but not nearly the range of selection.
If you don’t copy Wal-Mart, then what should you do? For one thing, you must uncover what is most important to your target audience. That means understanding more than just what goods and merchandise they want to buy. It means understanding what drives them so they can see themselves in the brand and covet being a part of it. (Hello, Apple Store!) It means finding the most intense emotion in the market and owning it.
There are retailers, for example, that had that kind of emotional preference but lost it by copying Wal-Mart. (See Rule #1.) Sears was once a giant, owning its own position as a man’s place for appliances and other equipment. Now, its theme, “Life Well Spent,” is a carbon copy of Wal-Mart’s winner.
Sears or any other retail brand that has lost its once-proud luster (RadioShack, Foot Locker, Gap) would regain their position if they’d embraced change and dug deeper into today’s consumer than simply understanding usage and attitudes -- and trying to mimic the market leader.
It’s time for retailers to start embracing change and think about transforming its model because, right now, everyone looks and feels and acts the same from the perspective of the consumer. In department stores, for examples, the differences between Macy’s, Dillard’s, Kohl’s, JC Penney and Belk are paper-thin. How can a consumer choose among them?
Even the specialties copy each other. Office Depot versus Office Max versus Staples. Family Dollar versus Dollar Store versus Dollar Tree. Advance Auto Parts versus AutoZone. PetSmart versus Petco.
How can consumers have any lasting preference with one over the other?
Retailers are chasing Wal-Mart by trying to duplicate its model and messaging without the buying muscle.
The lesson is that if you want to beat Wal-Mart, stop trying to be Wal-Mart. If you want to beat the leader in your category, stop trying to be them. That’s living better.
Tom Dougherty is CEO and president of the brand development firm, Stealing Share. His blog can be found at blogs.stealingshare.com.