Wheel of Retailing

Topics: Wal-Mart, Target Corporation, Price Pages: 3 (685 words) Published: March 5, 2014

“Wheel of Retailing” Continues, as Wal-Mart Starts to Move Upstream

SCDigest editorial staff

Anyone who took a college course on Retailing may be familiar with the age of old concept of the “Wheel of Retailing” – the consistent cycle of retailers gaining a foothold into a market through productivity and low prices, only over time to lose some of that edge and begin to move upstream in terms of product mix and customers, only to later face more competitive problems as the newest round of low price competitors attacks from the bottom.

For a long while it appeared Wal-Mart may be immune to that cycle, as it continued to operate mostly at the mid-market and below while growing aggressively by adding stores and expanding into grocery and other segments.

Now, amid some slowing of sales growth and pressure from Wall Street due to a slumping stock price, Wal-Mart is attempting to move upstream. How this will ultimately impact the company and the supply chains of its vendors remains to be seen.

The Bentonville giant recently ran an eight-page ad in high fashion magazine Vogue, drawing some laughs from fashion and advertising communities. It is running a video of a Wal-Mart fashion show on a large electronic billboard in Times Square. And as the Wall Street Journal is reporting, “Wal-Mart has created a store prototype with wider aisles, lower shelves and more elegant displays of pricey products. The retailer once prided itself on selling the first DVD player under $100. Now it also offers 42-inch flat-panel plasma TVs for $1,648 to $1,998.”

The move is seen in part a response to the success of the Target Stores chain, which caters to a somewhat more upscale base and which has been growing twice as fast as Wal-Mart lately, though off a much smaller base.

The Journal notes last Christmas season, Wal-Mart ran some aggressive in-store promotions focusing on very low price items for those shoppers at the lower end of the economic spectrum –...
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