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Wal-Mart Takes a Bite Out of the Big Apple

January 16th, 2011 | Posted by CCorman in Retail | Uncategorized

 

For years, Wal-Mart has been trying to enter the New York market.  It appears that the third time may be the charm: earlier this month, Wal-Mart began an aggressive media campaign (complete with microsite) to court and foster support in the New York community.  The retailer is planning to open small, medium or large stores across all five boroughs.

Wal-Mart’s not the only one.  7-Eleven is planning on growing to 15 stores in Manhattan by the end of 2012 and 100 in the next five years, locations courtesy of the recession.

What does this mean for small business owners?  Many believe the entry of big box or other low price retailers into New York spells the end of smaller shops that are unable to compete with the chains’ low prices, especially during the midst of a recession when many consumers are worried about their finances or finding a job (two details Wal-Mart has handily capitalized on during their media blitz).  These concerns are legitimate, and it is likely that the vast majority of smaller retailers will experience significant declines in revenue with the opening of a new Walmart (or other mega-discount retailer).

That being said, the future is not all that dark.  With two Wal-Marts less than 5 miles from Manhattan and one in Long Island, many retailers have long lost their most price sensitive customers, and there are ways to compete (or at least manage losses) once the giant moves in next door:

  • Products –
    • Small business owners should try differentiating themselves, moving away from lower-tier products that larger retailers will most likely stock at a discount.  Expanding the product assortment to different, higher-end, national and private brands – potentially natural and/or organic – could also help in managing sales with the entry of a large competitor.
  • Promotions –
    • Promotions could also present a viable strategy for managing sales losses.  While smaller retailers will not win matching an “every day low price” strategy, offering periodic discounts could aid in attracting more customers or increasing the frequency of customer visits.
  • Price –
    • This may go without saying, but not competing on price will be key.  It is likely that every price-sensitive customer mom and pop used to have is now scanning the aisles at Wal-Mart.  Lowering prices might simply decrease sales without driving incremental traffic or retaining old customers.

It is unclear which of these strategies (or combination thereof) will work best to manage losses, so a critical step in designing the strategy that works (best) will be testing and refining.

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One Response

  • Akash Chakrabarti says:

    Small retailers should lay emphasis on building personal relationships with customers. They should try to make their customers feel special when they are in their stores. Key areas to address here could be the children who accompany their elders while shopping. They are more loyal to friendship than to cheaper goods. This situation is more like human workers trying to compete against more efficient but heartless Robots. They will not be able to compete in terms of efficiency (lower prices, larger product assortments) but can make a difference with the human touch (relationships).