As reported by ABC News, U.S. based retailer Wal-Mart experienced weaker than expected holiday shopping on Black Friday, prompting Wal-Mart to cut its projected sales increase for November by more than half:
The world’s largest retailer estimated that the month’s sales at U.S. stores open at least a year would be 0.7 percent higher than last November, well below the 2-to-4 percent range that the company had said it expected last week.
“Sales fell below plan this past week, which impacted the results of our November forecast,” the [company said in a statement on its Web site]. “Keep in mind that this past week was the largest week of the reporting period.”
The company’s raison d’etre is to function as THE low price pass-through between manufacturers and consumers. The Wal-Mart brand positioning is all about low price rather than shopping experience and affiliation. As a result Wal-Mart’s consumer base may be more price sensitive than those of most other retailers. Analysts were quick to say Wal-Mart’s sales didn’t grow more rapidly last month in part because it didn’t cut prices on promotional items aggressively.
There may be another reason. With a singular low-price focus, perhaps Wal-Mart has devalued their brand.
In contrast, by fostering an emotional connection between their brand and consumer base, the Target brand positioning is about being smart as a consumer, affiliating with other smart consumers in seeking cheap AND chic products, in a store environment focused on an intimate human scale appeal rather than an industrial warehouse. Store environments and the staffs operating them are critical brand touch points, demonstrating brand difference and brand relevance more effectively than any advertisement.
James Cramer of TheStreet.com says this about Wal-Mart: “The stores are dowdy. The aisles are ugly. There’s nothing exciting or different or even colorful at Wal-Mart. It feels almost Soviet in its selection and presentation.”
By failing to fully optimize every brand touch point perhaps in deference to developing new stores, Wal-Mart has become the brand of the low margin necessity item. In contrast, by optimizing consumer touch points Target attracts the higher margin discretionary item purchaser.
Which company produces the greater return on equity? Given their respective Wall Street reputations, the answer may surprise. Many would say Target’s greater ROE is due to a difference in the attitude and very human point of view projected by the brand.