Wal-Mart is an incredibly strong brand. It has very high awareness and an exceptionally clear positioning: Wal-Mart stands for low prices. The company is relentlessly focused on reducing costs and giving consumers the lowest prices.
But Wal-Mart has a very big problem; many people no longer think Wal-Mart has the lowest prices. The Wall Street Journal is reporting today that recent studies indicate most consumers in the United States think other stores are cheaper. A Morgan Stanley study, for example, revealed that 60% of Wal-Mart shoppers don’t think Wal-Mart has the best prices.
This is a huge problem for the Wal-Mart brand.
People don’t shop at Wal-Mart for the exceptional service or for the marvelous shopping experience. Indeed, going to Wal-Mart can be rather painful. People go to Wal-Mart because it is cheap.
But if people start to think other stores have lower prices, then Wal-Mart’s entire value proposition erodes. Dealing with weak service is fine when the prices can’t be beat. It is much less acceptable when you are paying a premium.
The biggest problem is that this is a perception issue. People have trouble keeping track of exact prices, so perceptions are important. If people think a price is low, then it is appealing regardless of the actual price. If people think they could get a lower price somewhere else, then they will likely go somewhere else, regardless of whether the prices actually are lower.
So Wal-Mart won’t be able to fix this issue by just ensuring that prices are low, or even by advertising that prices are low.
Wal-Mart has a major problem indeed.