Walmart lures shoppers back — at a price

Bob Moon Feb 21, 2012

Kai Ryssdal: Speaking of things you can buy at a discount — like, say, Greek government debt — discount retail has been attracting a lot of customers. Par for the course in an economy that’s been through what ours has. The biggest discounter of ’em all — Walmart — announced fourth quarter profits today. Sales were brisk, thanks to those aforementioned discounts.

But profits suffered thanks — wait for it — to the those aforementioned discounts. Our senior business correspondent Bob Moon reports.

Bob Moon: Walmart is struggling with some of the most profound questions to face retailers — especially in tight times. Questions like this one:

Patty Edwards: How many different types of mustard does a store really need to carry?

At Trutina Financial, retail analyst Patty Edwards says Walmart had cut way back on selection, in favor of its most profitable items. But the retailer has returned lately to what it calls “heritage” merchandise, ranging from fabric to fishing tackle. It’s vowed in its online ads to put some 8,500 more items on its store shelves.

Walmart online ad: We’ve brought a lot of these items back. We just want to make sure that we have low prices everyday, on everything.

Edwards: They went a little bit too far, and now they’ve brought some of those brands back that people had been coming to them for.

Walmart finds itself looking for that “sweet spot” with customers, not just with choice, but also the “low price” promise that it strayed from briefly as it chased higher profits. Instead, sales suffered and only recently have started to turn around.

Bill Simon, the head of Walmart’s U.S. operations, said in his profit presentation today the retailer is on the right track.

Bill Simon: I’m pleased with our strategic plan, and how customers are responding to increased assortment and lower prices. We’re investing in price, and winning back customer traffic.

At the University of Cincinnati, business school dean David Szymanski says Walmart has succeeded in the past with its everyday low price strategy.

David Szymanski: Margins take a hit, but if you can make it up in terms of total sales, at the end of the day, you’re going to be a profitable company.

But some analysts say the growth in the corner “dollar store” these days is giving Walmart a run for its money.

I’m Bob Moon for Marketplace.

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