Wal-Mart Has Its Mojo Back - Giving Customers What They Want

The last couple of weeks have been interesting for Wal-Mart (WMT) shareholders. Fresh off the news that the stock was the best performer on the DOW Jones for Q1, investors got more good news:

• Wal-Mart's Great Value milk is now being sourced exclusively from cows that have not been treated with artificial growth hormones like recombinant bovine somatotropin [rbST]. Sam's Club is also exclusively offering milk selections from suppliers that have pledged not to treat cows with rbST.
• Later this month Wal-Mart will begin selling six coffees under the Sam's Choice brand in all of its U.S. stores. The line includes Sam's Choice Fair Trade certified coffee, Sam's Choice Rainforest Alliance certified coffee, and Sam's Choice USDA organic decaffeinated coffee. Wal-Mart also said the six coffees are certified as "carbon neutral" because Cafe Bom Dia, its Brazil-based coffee roaster, has cut its net carbon emissions to zero. A twelve ounce bag of the coffee will be priced about $1 lower than competitors' brands.

Wal-Mart seems to have its mojo back in giving customers what they want at prices they want. When the chain ran into trouble at the turn of the century it did so by trying to dictate to people what they wanted, lower and lower prices on goods. Quality inevitably suffered and shoppers fled. The plan failed and Target (TGT) rushed in to fill the void.

People want what they want and the current trend out there is for organic products. Rather than rushing for the lowest price milk and sourcing it from wherever, Wal-Mart is now listening to customers and giving them what they want, at low prices.

It would seem Wal-Mart has recognized that people are far more willing to pay $5.99 for a twelve oz. bag of organic coffee compared to $2.99 for a 12 oz. bag of hard brown beans. Now that the company has recognized this, the edge Target had over the chain is lost.

There is not an organization out there today that is more capable of sourcing and pricing its products to make them more affordable customers. Now that it has realized that people do want the things they want and the retail giant has decided to give it to them in better looking stores, the freight train that is Wal-Mart is back on track.

Disclosure: Long WMT.

Comments

[deaverb:]

Interesting. Wal-Mart finally responding to what customers want as opposed to what they want to sell--after several years of not doing it. This is the tradition Sam Walton built the business on. Beware of the behemoth if it returns to the best for less....

2008 Apr 03 08:59 AM

[Roudy:]

I usually say this about Wal-Mart, since I've owned their stock since 1981, as follows; All these problems that WMT has had seem to lie directly with Rob Walton and Lee Scott. If WMT should "fall back" again as mentioned will be their fault since they are the top dogs.

2008 Apr 03 11:58 AM

[User 172469:]

I realize that we live in a complex global community and that Walmart makes of itself a big target but bottom line...I am impressed and very appreciative of Walmart's pricing which, in turn, stretches our family's income and puts a smile on our faces.

2008 Apr 03 01:42 PM