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Wednesday, October 13, 2010

WALMART'S ROLLBACK FAILURE

Hey World,
            Remember the Rollbacks at Walmart? Well, the Rollbacks did not get Walmart to the sales target they were introduced for. What does this mean? Has the Rollback strategy failed? The answer is a big NO. The strategy was fine and it did what it was designed to do. I believe that the strategic move by Walmart was not implemented properly and so is Walmart raising prices to make up for the substantial revenue loss.
           Let me elaborate on this. Earlier this year Walmart implemented its Rollback strategy, announcing big cut-down on prices, expecting customers to flood its stores and eventually bring out a substantial increase in revenue. The prices were slashed by really big margins, given the preconceived notion that Walmart gives the cheapest price in almost everything. The word "Rollback" was publicized extensively so much that every Walmart employee wore a fancy batch that said "Rollback." The price-cuts substantiated the move.  Did the message reach out to the customer pool? It definitely did. Did they respond to the price cuts? They sure did. Then what could have possible gone wrong?
            The problem is not with the food. It is with the platter. The inherent Walmart characteristics coupled with the recent changes that happened in the stores created a "Crystal Maze" scenario where every Walmart shopper had to literally hunt their product down. Walmart recently gave a complete make-over to all of its stores ending up with all-new categorized aisles and a new color theme. Living in Starkville, Mississippi, I found this to be a very interesting move. Simply because there are not many stores to buy from here in this fantastic college town that is home for Mississippi State University. But there was an interesting after-effect to this make-over move that created a state of slow yet steady chaos. The whole store got rearranged and every time I went to Walmart, I had to win the "Treasure-Hunt" contest to get the product I went there for. Things are not in the place they used to be. The whole make-over move that was initiated by the then US CEO Eduardo Castro-Wright was implemented rightly but the consideration for a possible "settling-period" was overlooked. New aisles with re-arranged products will impact the customer experience and it did so. All that was needed was some time for the customers to get used to the new Walmart. Any further move should have been taken after the "settling period." Unfortunately the Rollback was already there when the customers were still getting used to the new Walmart. This in my opinion affected the extent to which the price cuts would reach the customers' minds.
            Another issue that complicated things for Walmart was missing brands. I am a music enthusiast. I always made a trip to the musical instruments rack (a corner of an aisle in the "toys" section!!) every time I went to Walmart. One fine day the small rack of musical instruments vanished. I never saw them again. This vanishing of brands was throughout the store, almost in every aisle. Walmart had been removing brands that did not promise a good sale and in the process infringed upon the specialty of Walmart which obviously is variety. It has to be pointed out that around March Walmart started restoring some of the "sacked" brands back into its aisles which in my view is an appropriate solution.
           The question that comes to my mind is "Why would Walmart mix-up store make-over, brand restoration and price cuts at about the same time, given that Walmart had been through consecutive sluggish quarters in terms of sales?" Each of the strategic moves that Walmart did were individually fail-proof and profitable but their blend created contradicting scenarios where the benefits of each strategic move basically ate parts or whole of each other. This is one reason why the Rollback strategy did not pay off as expected.
            Adding to the troubles is (I am not happy to make this point but I consider it true and hence making it) the well-known inferior customer-service that Walmart has always been blamed for. There are numerous employees in every store but astonishingly every time I look for a customer-service personnel, I don't see one. I either have to walk to a corner of the store or to the check-out counter to find a customer-service personnel. I personally know a lot of people who have switched from Walmart to other stores (even in this small college town of Starkville simply because they did not get the help of the customer-service personnel when they needed it. I wouldn't blame them because I myself had experiences at Walmart where I would walk to the other end of the store and get a quick reply "I don't know, somebody working in the aisle will be able to help you." I appreciate the public address system but it is merely being used as an excuse to escape the pain of helping the customers find what they want (which ironically translates into "customer-service").
            I have also noticed that the customer-service personnel are not very happy with their jobs (on more than one occasion). The worker may not be wrong all the time. Sometimes the work may be packaged wrongly that no matter who takes up the work will find it difficult. Motivating the employees is one thing that Walmart should seriously consider because being the cheapest definitely brings the customer into the store but it is the shopping experience that will bring the customer back to the store and this is where customer-service will play an important role.
            Walmart made more than one strategic move and has observed the symptoms as well. It all depends on how the symptoms are interpreted to device a suitable and timely solution. Too many changes with below-par customer service cannot help the customers enjoy the additional price cuts (at least it did not do this time). Walmart eventually had to roll up the prices to make up for the loss of revenue in the past quarters. Price leadership is the most powerful trait any business can have but it needs to be supplemented to bring about a substantial difference in sales. Walmart has been a market leader for long and I believe its management understands this much better than anybody else. As I had stated earlier, the problem is not with the food but with the platter on which it is served. Come on Walmart, you have done it before and you can do it again. The key is to Build, Preserve and then Progress.

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Signing off,

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