As sales drop for two retail giants, Wal-Mart and Target, they are expecting the hard work in the recent times to boost their sales.
As Target Corporation (TGT, Financial) and Wal-Mart Inc. (WMT, Financial) releases their first quarter earnings this week, they are hoping for better earnings reports matching with some of the good reports in the last few quarters. The companies are banking on the revamp plan that they have followed for better growth and to attract more consumers. Both the companies have expressed their belief in increased customer’s trust and loyalty towards the respective brands after a series of declines in the U.S. sales and footfalls.
The Hurdles
The Arkansas-based Wal-Mart Stores Inc. is a American multinational retail corporation that runs a chain of discount department stores and warehouse stores. With 11,000 stores present in 27 countries across the globe under 71 banners, the company was founded in 1962. On the other hand, Target Corporation was founded 1902 and is the second largest discount retailer in the United States after Wal-Mart.
The companies had been experiencing a major hurdle in the growth path from the shoppers themselves. This matter noted among the shoppers was unwelcoming as they refrained from spending much in the big box stores. The wages are increasing, fuel prices are going down and even unemployment rates are declining, yet the consumers are more inclined towards making a visit to the online retailers as well as the small stores, instead of spending at big stores like Wal-Mart and Target. Figures in the company records show that there was hardly any gain recorded in sales in the month of April, and this is the fourth time in the past 5 months as per the data compiled by the Commerce Department. University of Michigan Index also recorded a “lack in consumer confidence” in the month of May.
The revival plan
Considering a sharp decline in their footfalls and thereby a decrease in their sales, both the companies planned to bring in newly developed features and policies to revive the lost confidence of the customer. They not only did some shuffling of the management, but also made efforts to give a new look to their stores. A bend towards Internet shopping has led them to introduce their own online portals as well, especially after they started losing out the end customers to Amazon.com (AMZN) and few other online retailers.
Target for instance appointed its new Chief Executive Brian Cornell to bring back the lost fame the company accomplished through its cheap-chic retailing when it started. It has also partnered with the designer Lilly Pulitzer last month as a proof of soon to be launched high fashion products in its stores. Though Target failed to attract consumers in its other sections like grocery where it lost the shoppers due to outdated stock, it is banking on other revamp plans it has adopted to gradually come back to business.
Wal-Mart, in a bid to match customer’s expectations, brought Greg Foran who represented Asia division of the company to run its U.S. business and to turnaround its domestic business unit. The company is focusing on improving its store operations including its stock and service levels as well as proposing itself as a low-price store. In line with the advancements, Foran has even declared 2015 as “the year of improving our stores”.
The roadblocks in implementation of plans
Though both the retail chains sound upbeat about gaining back their lost customers through innovative policies and offerings, the path is not as simple as it looks to be. First, it involves a lot of money. Wages at the stores have already been increased to $9 per hour, apart from an investment of $1 billion planned in this year for modernization of their supply chains and technological improvement of their e-commerce division. Wal-Mart has also started a test subscription service at half the price from Amazon. Both the companies are also working on building smaller stores closer to city centers keeping in mind the customer’s preferences.
Competitors in the market are not going through the same phase. Lowe’s Co. (LOW, Financial) and Home Depot Inc. (HD, Financial), being in the home improvement businesses, are seeing profits going up.
What next?
Other retail chains like Macy’s Inc. (M, Financial) and Kohl’s Inc. (KSS, Financial) have also been going through tough times and have reported weaker sales. Even if it is put on bad weather or port congestion or a weakened tourist spending, the fact remains that retail chains across the U.S. are losing their business to new innovative players. The big box concept which once made a blockbuster opening is sinking and requires revival strategies.
