Walmart may be fighting a losing battle in trying to increase profits while customers look for ways to fund frugal deals. People are cutting back to stay afloat in an economy that remains tough. Funding shopping excursions is not a top priority for millions of Americans relying on government assistance to make it through the month. At the start of the last year’s holiday shopping season, those receiving federal assistance saw a reduction in benefits. Spending habits had to be curbed for many households. This caused frugal shoppers to be more concerned with putting food on the table than spending on gift items.
Walmart is seeing a reduced customer base as shoppers turn to deals from smaller retailers offering cheaper goods. The number of budget stores opening for business across the country continues to rise. Businesses are cashing in by carrying products similar to those found in Walmart stores and selling them as low as a dollar. Shoppers don’t seem to mind not having a name brand on an item if it gets the job done.
In trying to find a solution to lost profits, Walmart is lowering their outlook for the quarter. They say forced store closures in Brazil and China, along with food-stamp cuts to U.S. shoppers, are making it hard to predict an upturn at this time. Walmart may have to reinvent their image because they are losing the fight to retain customers, while savvy shoppers look for ways to fund the most frugal deals. Over 50 stores have been forced to close in the two countries that make up a large portion of the chain’s international base.
Brazil continues a four-year slump in sales in a market where shoppers will go where they can receive the best deals. They are operating with a new CEO, the fourth since 2008. In a tough economy, people will go where the dollar stretches the most. Brazil continues to lag behind their French competition found in Carrefour and Casino.
Economics have forced the hand of Walmart executives. They will address plans for moving forward in a Feb. 20 quarterly report. Randy Hargrove, a spokesman for the retailer, says they have to restructure with a different strategy for their global markets.
“Walmart cannot be run the same way in each market,” Planet Retail in London analyst Stephen Springham said.
The company cites differences in shopping habits as one of the reasons taking a cookie-cutter approach is difficult. They cite a comparison that notes differences in shopping habits between China and US consumers. In China, people make multiple trips to the store over the course of a week, preferring to purchase a few items at a time. U.S. shoppers, on the other hand, wait until the weekend, buying in bulk and making fewer trips.
The fix may come from Walmart looking at what they view as a strong U.S. base, despite the number of people cutting back on spending dollars with the retailer. Walmart is losing and looking for ways to win back shoppers, while customers fight for ways to fund even the most frugal deals. The economy has caused a ping-pong effect. For decades, Walmart ran a profitable business by offering cheaper prices on items people wanted and could better afford. Now they have downsized employees, sending thousands home with lay-off slips, as customers stopped spending as much as they had in previous years.
By C. Imani Williams