Can Wal-Mart hold on to its new-found customers?

The US’s largest retailer believes that its reputation for low prices has won over new customers not only from middle income households, but also from the more affluent sections
of society. Certainly its quarterly like-for-like sales this year have outperformed most mid- to upmarket rivals in the US.

With some signs of economic recovery on the horizon, Wal-Mart chief executive Mike Duke recently told the US press that he is now faced with the challenge – albeit an enviable
one – of hanging on to the retailer’s new-found friends.

When the pressure on consumers begins to ease, and they find themselves with a little extra cash in their pockets, many will begin to trade up again to their former favourites, with Target most likely to benefit. However, Wal-Mart has been making significant changes to its US business that will very likely help it retain higher- income households.

Firstly, the wide-ranging overhaul of its US business, a programme dubbed Project Impact, is transforming the in-store experience for shoppers. Remodelled stores are cleaner, easier to navigate and boast eye-catching fresh food displays. These measures will undoubtedly help Wal-Mart further shake off its already diminishing downmarket stigma. By the end of 2010/11, when many analysts expect the recovery to be in full swing, the retailer will have remodelled over 50% of its massive store network.

Wal-Mart has also been busy, especially since Tesco’s arrival in the US, trying to find the right store concept to drive its penetration of urban markets. With demand for new Supercenters fast drying up in rural and suburban US, the grocer needs to find ways of connecting with the fast-growing and, in many areas, higher-income, urban population. New concepts Marketside and Supermercado de Wal-Mart show early signs of progress on this front.

Finally, it is worth noting the strides that Wal-Mart is taking towards addressing its CSR issues. Wal-Mart’s leadership in areas such as environmental sustainability – including the recently announced global sustainability index – will contribute towards re-positioning the company as an attractive and guilt-free shopping destination, rather than a store that customers visit only out of necessity.