Walmart is the largest company on Earth. It has a brilliant strategy in terms of its distribution model, placement of stores, data analysis, and, above all else, making absolutely sure it is the low-price retail leader. I believe it was Walmart that coined the acronym “EDLP” – or “Every Day Low Price.”
So why has Walmart chosen to go with everyday low prices when most of its competitors focus on big sales events? Companies like JCPenney and Sears try to drive traffic by using strong advertising for big sales under every banner they can think of: Presidents’ Day, Memorial Day, Labor Day, you name it. They all compete against each other on the same platform and philosophy of being on sale pretty much year-round. I understand why they do this. If you read some of the research out there and simply observe consumer behavior in terms of how people react to sales, it is easy to understand the approach. How has Walmart been successful flying in the face of this tactic? I don’t pretend to be an expert on the topic but I do have a few thoughts.
Marketing: Walmart has done an excellent job convincing the consumer that it is absolutely the low-price leader. It uses its own people to tell that story as well as that all-too-familiar smiley face that wreaks havoc on high prices.
I bet if you were to ask 10 Walmart shoppers why they shop there, the majority would tell you that low price is at least somewhere on their list. It’s true that while they have very low prices, they are not the lowest on every item – but they tell the story well!
Trust: When people go to Walmart, they really believe that the prices are good. If someone wanted to buy a new 50-inch television, they wouldn’t be able to haggle it down from $999 to, say, $600. (Well, most people wouldn’t be able to, anyway.) If they were able to do that, do you think that consumers would actually buy into Walmart’s EDLP philosophy? I say no because the pricing would then have no integrity, therefore breaking the trust with the consumer. When you go to buy a car and the guy selling it to you drops the price at the first mention of resistance, do you actually trust them to get you the best deal, even after you have worked your way down a price point or two?
Why do we in the mattress industry believe this will work for us? If we are on sale pretty much all the time, do we think that the consumer actually believes they are getting a deal? I am not saying there isn’t a percentage of buyers that will buy into that, but I suggest to you that many DO NOT. If we don’t have trust with the consumer when it comes to our prices, what kind of impact does that have in creating some kind of long-term relationship with them – a relationship that will create an opportunity for future business? How many consumers walk into a store, see a bed that is priced too high compared to one in the store down the street, and walk away, never even voicing their concern about bad value?
Now before you retailers start blasting me because you don’t think I understand retail and the need to bring people in the door, I really do get that. I am just saying there are people out there that are successful doing it a different way while maintaining a good relationship with the customer so I ask, “Is there a better way?”
Do your customers TRUST you to deliver the best product at the price?
What am I missing? What are you thinking?
DISCLAIMER: The views and opinions expressed in this blog are mine and mine alone. They do not represent the thinking of the company I work for, or anyone else with whom I am affiliated. Except my wife of course, who is good at telling me what not to say.