The retail sector has undergone lots of changes in the recent past. Stiff internal competitions, pricing wars, recession, inflation and lots of other factors have affected the performance of many retail giants. Certain stores managed to stay afloat amidst all these challenges, whereas certain giants like Walmart (WMT, Financial) fell from grace. Low wages, lack of employee motivation, failing consumer expectations and the like were a few factors that worked against Walmart’s reputation. Here is a look at some of the top reasons why Walmart has lost its brand image and goodwill among customers and investors.
Customer satisfaction at all-time low
During 2014, the American Customer Satisfaction Index conducted a survey for retailers, in which Walmart was the least ranked with a score of 68 vs. the average score of 88. What is a bigger cause of concern for the management is that this is the 8thconsecutive time that Walmart is ranked the last among retailers. It is truly incredible that a giant that enjoyed a great brand name during the lifetime of its founder, Sam Walton, has fallen into a deep pit today. One of the major reasons for the fall of Walmart is bad customer service. The U.S. economy was victim to the great recession in 2008, and Walmart fired close to 12,000 of its employees. Since there were not many people employed at the outlets, customers have been finding it extremely difficult to locate their requirements, and they were made to stand in long lines as payment counters were limited.
Online retails stores eating away market shares
Walmart, whose unique selling proposition was goods at huge discounts, lost its uniqueness due the birth of many online retail stores like Amazon (AMZN, Financial), eBay (EBAY, Financial), Groupon (GRPN, Financial). These online stores started giving many discounts, and customers preferred shopping from the comfort of their homes than visit outlets of Walmart, where there were not even enough sales personnel to help them out. It would only be apt to say that Walmart clearly lost out in the price wars as it was not able to offer customers more discounts than they were already getting from online stores.
Incorrect inventory management
One of the bigger issues for Walmart was that it didn’t manage its inventory properly. There were two kinds of problems that the retailer faced with respect to stock. Either it ran out of stock for the products that were demanded by the customers, or it stocked a particular product in plenty that it exceeded demand. In simple terms, Walmart had a problem of abundance when it came to unwanted items and a problem of scarcity when it came to products that were in demand. This boiled down to the fact that Walmart’s internal communication system was faulty. For the year 2013 alone, Walmart lost sales worth $3 billion due to out-of-stock issues. This was clearly not expected from a retailer who had such a big brand name to defend.
Road ahead
The top management of Walmart has a clear-cut task ahead – to clear out the present issues and to bring back the retailer to its original form. The second task looks really complex as of now. Hence the management is focused on working towards the first issue now. As a first step to improve employee morale and motivation, Walmart announced an increase in its wages to a minimum of $9 in April 2015. Experts are of the opinion that this increase could go a long way in rebuilding the brand image of Walmart. Low wages were the prime concern of the retail agent, and this announcement has been welcomed by the customers, workers and investors even though it has come a tad too late.
Conclusion
Walmart is currently facing a very tumultuous situation. The effort taken by the management to increase wages is only a very small step towards resurrection. With these wages taking effect from April onward, one has to wait and watch if these have a positive impact on the share prices and the reputation of Walmart.
