Goodbye lower prices, says Wal-Mart
Any management consultant will tell you that a strategy based on low prices is suicidal, with one exception — if you have scale. Scale that allows you to beat your suppliers to demand lower prices and drive your competitors out of business. And we always used the Wal-Mart case study to make that point and scare our clients from talking lower prices and destroying shareholder value.
One big problem with offering lower prices is that customer expectations are about even lower prices. They aren’t looking for quality or innovation or new products, just lower prices. Unfortunately, there is a limit to lower prices. WalMart already sells many products at prices that defy logic. All this hurts margins and makes business a challenge.
No surprise then that the smart people at the company dreamed of a designer clothing line George which was a disaster. It wasn’t a bad idea, it was just so poorly executed that even a high school kid could have done better.
I am looking forward to the strategic shift and Wal-Mart. It should be good for the company, its suppliers, and employees. I am also hoping that Wal-Mart customers will start to appreciate that behind all those really low prices are real human beings who are being squeezed.
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