The Microevolution of Wal-Mart

When Charles Darwin returned to England following his stint on the Galapagos Islands, he brought with him new ideas on how animal species evolved. And while he remained a creationist for some time before his major paradigm shift to evolution, he had no clue that the things he was thinking would someday be applied to everything from social organization (think Nazi Germany) to retailing.

And to make this point, we need only look at Wal-Mart to observe how it is "naturally selecting" itself so that it can better survive into the future.

Starting with but one store in the early-1960s in Arkansas, the Wal-Mart empire has grown around the world. It has become to American retailing what Google is to web search. With 3000+ stores in various formats around the US (supercenters, neighbrohood groceries, discount stores, and warehouse clubs), Wal-Mart is the biggest retailer in the world.

But it cannot afford to rest on its laurels. Pesky competitors like Target and Kohl's are chiseling away at categories, and developing their own niches. And Best Buy, the biggest electronics retailer in the US, looks mighty attractive and could easily have some of its customers siphoned off.

And so Wal-Mart finds itself today in an interesting position. It wants to appeal to a higher class of customer than its core lower-middle class patrons. And it also needs to find a way to sidestep critics, liberal politicians, and municipalities bent on keeping Wal-Mart outside their city limits.

This presents an interesting strategy dilemma, but if Wal-Mart wants to maintain, not to mention grow, they must find ways around these potholes in the road. They must continue to evolve...from small-town discount store initially to supercenter, and now to everyman's store, be it uptown, downtown, or out of town.

Wal-Mart has drawn the ire of many, starting with labor groups who protest wage scales and benefit packages. Others protest the very size of Wal-Mart, thinking that if they can keep WM out of their town, they can preserve old-economy mom-and-pop stores (and a few jobs).

Chicago, for example, is trying to impose a $10 minimum wage on any "big box" retailer wanting to set up shop; this move prompted WM to move a planned new store to a nearby suburb (which welcomed them with open arms).

Still, WM knows that this threat will not go away. So they are launching an ad campaign that demonstrates their community giving and involvement, and the fact that they have just absorbed the cost of health insurance for 150,000 workers.

But WM needs to do more than just make these critics happy. Its stock price has plummeted by one-third since 2002, mostly because the firm was unable to maintain its double-digit sales growth record. You can only penetrate that core market so far, and WM was nearing the end of its potential.

The result? WM has decided to go upscale, which is a precarious balancing act. They want to simultaneously attract well-heeled customers with expensive plasma TVs, jewelry, and trendy organic groceries, while at the same time not alienating their core on-a-budget customer group (read the article here).

Interior decor of nearly all Wal-Marts has been undertaken in the last two years to try to give off a better image, including faux wood floors in clothing departments, and better merchandising of garments. Still, one of the biggest hurdles for Wal-Mart will be in convincing these upper-class customers that it's OK to buy stylish clothing and expensive electronics along with the groceries and staple items they may already be buying there. This can be an uphill battle.

I wonder if Darwin would shop there?

Dr "Always Looking For A Bargain" Gerlich

Competing With the Big Boys in a Niche Market

It's a dog-eat-dog world out there. Mass market retailers are always eager to make a sale, and they'll stock just about anything that is selling well. Even if it happens to have a religious nature.

To wit: Wal-Mart, Target, Best Buy, and others have noticed the immense size of the Christian music market. These big box category killers have added an ever increasing number of Christian titles to their CD selections. In 2005, mainstream outlets accounted for 61% of all Christian CDs sold (roughly 24 million out of 39 million units).

This leaves the Christian booksellers with a dwindling share in a market niche they once could claim all their own.

So what's an industry to do? Marketing Strategy, enter Stage Right.

Christian bookstores, especially the larger corporate chains like Family Christian and Lifeway, have, to their credit, built some solid defenses. Much-anticipated new releases are hyped with pre-buying promotions, in which customers can pay now for a new album, and receive a special low price and/or a gift item (t-shirt, bonus disc, etc.).

A good example of this is the upcoming release of Chris Tomlin's See The Morning CD on 26th September. Both Lifeway and Family Christian are running big pre-buy programs. And Tomlin has obliged them by having his new website up and running weeks ahead of the album release, while his record label has released a couple of tracks to Christian radio to "tease" listeners and build lots of hype. Finally, a special "digital EP" collection is being made available at iTunes to further tantalize listeners.

For those of you not familiar with Tomlin, he is one of the best-known Christian singer-songwriters of the day. Worship leader at Austin's Stone Community Church, Tomlin has written and recorded a growing list of praise songs that have become anthems of the post-modern 21C church.

Christian booksellers face the added competitive threat that mass market stores are open round the clock in some cases, and in the case of Wal-Mart, have a core customer group that is decidedly conservative Christian. Family Christian has countered by opening its stores for five hours on Sunday afternoons, a move that was met with resistance in some church groups. But if your market is being taken away by mainstream outlets, you have to fight back somehow.

I give credit to these niche marketers for devising ways to counter the big boys. Having a pre-buy does several things:

--Stores make the sale in advance, and get the money now.
--Any promo items can help make the sale, and generate increased traffic to the store.
--And when the album is finally released, it means yet another trip to the store, resulting in more traffic.

Given that "increasing store traffic" is the first order of business for retailers (hype insertion::You'll learn this in my MKT4344/5344 course next spring, which is planned to be in an entirely new teaching format::end hype here), the pre-buy plan is simply good marketing.

And I always feel good when the little guy can stand up to the big boys.

Dr "Anyone Want to Pre-Buy Tuition For My Course?" Gerlich

The Latte Factor

Imagine going to church/synagogue/temple and hearing the cleric tell you that you should go on sinning. That it's really OK, that you don't need to clean up your life, that the world won't end.

Now imagine a marketer telling you that you really don't need to keep on buying with reckless abandon, that you should give second thought to the idea of sacrificing your pleasures, that you should save your money.That's what I'm telling you right now.

I know, I know...I've been chastised before by surprised students who think that a marketer would never actually tell someone to not spend money. After all, isn't consumption our raison d'etre? Aren't we born to shop?

Well, the longer I play this game, the more my conscience tries to take the steering wheel. The more I try to plan for retirement (I'm 47), the more I try to reign in those little indulgent expenditures. And the more I look at all that junk littering my house, the more I just want to host the Mother of all Garage Sales and declare a ban on all non-essential purchases.

So if you're among the crowd spending $4 per day for your fix at Starbucks, think about how much money you could save if you just brewed a pot of Folger's at home and toted one of those nice stainless steel cylinders to school or work. Think about it in these terms: 5 days a week times 50 weeks (I'll give you a little vacation time). That's 250 lattes X $4 = $1000.

Would an extra $83 per month help out at the gas pump?

A few years ago I kept a spending log for an entire year. I recorded every single purchase, from an incidental gumball all the way to computers. It was a sobering experience. After just a couple of months my spending habits changed, for I had become more aware of just how free-spending I was.

I concluded that, while I had earned about $1 million in my adult life, I was well on my way to spending the second million. (And if you think $1 million is a lot of money, think again. Spread out over many years, it comes out to a modest $50K per year...not exactly enough money to play with the big boys.)

My wife and I are becoming real cheapskates. Maybe it's the fact that we have two young kids. Maybe it's the fact that I can almost see 65 from here. Maybe it's the high price of gasoline.

Or maybe I'm just finally growing up, figuring out that my parents and grandparents (the masters of frugality) were on to something.And so we're not ashamed to use coupons at restaurants, not embarrassed to order water with lemon (unless the Happy Hour specials are too cheap to resist, that is), and not worried about what others might think when we carry a stack of styrofoam containers out to the car containing tomorrow's lunch.

Marketing is a fine subject, no doubt. I'm glad I followed this path. I also realize that the job of all marketers is to help people decide they cannot live without something, and that they need to waste no time in running to the store. The problem is simply knowing when to say "Enough's enough!"

But it's not easy. Just last week in Colorado I had the opportunity to buy a nice new road bike, a $4200 titanium model being cleared out for a paltry $2800. Yeah, some of you might think it's still too much, but for hard-core sports fanatics, we all know it's possible to drop a lot of dough for your passion. It was all I could do to say no (never mind that I had visions of the doghouse...).

I know I'm not perfect, but I'm trying. Like most Americans, I am blessed with more than I need...yet I always want more. Perhaps it's just the human condition: slavery to one's possessions.

And that's a latte to think about.

Dr "I Just Hope I Still Have the Energy to Play Hard When I Retire" Gerlich

In A Pickle

As a long-distance cyclist, I have consumed more sports drinks than I care to remember. I have guzzled everything from c-store fare like Gatorade and Powerade to high-tech meal-in-a-bottle formulas like Spiz, Pro Optimizer, and Perpetuem. I've also gulped Coca Cola in a pinch, when that sugar-and-caffeine punch was what I needed to get home.

But I've never thought of buying a bottle of pickle juice.

Thanks to a Mesquite, TX company, though, we can now enjoy (I'll let you decide your level of enjoyment) a nice big bottle of Pickle Juice Sport.

Minus the pickles, of course.

At last weekend's Hotter'n Hell 100 bike ride in Wichita Falls, I encountered a booth at the consumer show featuring Pickle Juice Sport. I grabbed a couple of bottles for future consumption, and lifted the sampler cup to my lips.

Instant pucker.

Touted as having 15 times more electrolytes than Gatorade and 30 times more than Powerade, Pickle Juice Sport is trying to position itself as an athletic drink that will save your hide in the heat. And given that the ride lived up to its name (it was 104 degrees for the ride), this was a good place to do some product testing.

I'll be honest, though. Guzzling pickle juice is hardly on my list of refreshments. Yes, I love pickles, and I even chomped a couple Saturday at the aid stations along the course. But pickle juice?

At last year's HH100, staffers served some pickle juice at aid stations. I recall stopping once and grabbing what I thought was a cup of Powerade, only to have the most horrific experience when I took a huge swig. I spewed it out, thinking someone was trying to poison me. Imagine expecting something sweet, and instead getting something sour.

Yecch.

And while I liked those pickles I ate last Saturday, I must say that they came back to haunt me throughout the final 20 mile slog in the heat. While the product sample the day before was somewhat palatable (it really helps when you're expecting the taste of pickles), I can only imagine how my stomach would have reacted had I imbibed a pint of that brine during the ride.

I think I'll pass on this one. Pickles are great as a condiment or a stand-alone snack. But please don't slip any of that juice into my water bottle.

Dr "Cool As A Cucumber" Gerlich