Skip to content, or skip to search.

Skip to content, or skip to search.

Attention, Wal-Mart Shoppers

ShareThis

JCPenney’s got a different but equally killer strategy aimed at Wal-Mart. The store is divided into lower-, middle-, and upper-class price points (at the entry level, you’ll find private-label brands like Arizona jeans; at the mid-level, brands like Levi’s and Dockers; and on the high end, JCPenney recently signed a deal with Liz Claiborne). And the strategy’s working: JCPenney has been the most consistently profitable broad-line retailer in America for several years now, and the gains have largely come at Wal-Mart’s expense, as many lower- and middle-class shoppers have been gravitating toward the store’s higher levels (with their higher profit margins) over time.

It’s not just apparel and soft goods that Wal-Mart’s losing at. Best Buy, the giant electronic big-box retailer, has figured out a way to beat Wal-Mart, too: offer superior customer service on big-ticket items like TVs and computers. Best Buy has trained its salespeople to be genuinely knowledgeable about what they sell. I don’t know if I would trust a Wal-Mart clerk to know the differences between an LCD TV and its plasma competition. A Best Buy representative would know the differences in his sleep. Best Buy has its “Geek Squad” to fix computers, Wal-Mart just has geeks.

For the first time since Sam Walton could visit all his stores in his pickup, it’s worth asking if we’re not seeing the twilight of the largest American retailer.

You want sporting goods? If you’d like better selection at prices similar to Wal-Mart’s, go to Dick’s, which is opening supercenters to compete—and win—against Wal-Mart’s sports repertoire. Costco’s winning the bulk-purchase war against Wal-Mart’s warehouse stores. Costco’s another fun place to shop: I am a proud Gold Star member—love the birthday cakes and king-crab legs, and the barbecue’s not bad either! There’s no pride in belonging to Sam’s Club, the Wal-Mart counterpart, and since the stores’ prices are comparable, there’s no real reason to shop there.

Wal-Mart’s attempts to fight back have been pathetic, to say the least. It initially tried to go “hip,” of all things, by offering more-fashionable clothes, but that effort fell flat on its face rather quickly, and the store’s apparel sales, meager as they were, nose-dived.

Now Wal-Mart seems to have settled on a new strategy—issuing press releases about how it’s going to refocus on discounting merchandise. First it issued releases saying it’s offering pharmaceuticals below the prices of the big drugstores, places like Walgreens and CVS, that have been eating its lunch for years. It’s phony altruism, if you ask me, done mainly to buff the store’s image. The discounted pharmaceutical offerings aren’t that competitive and cover only a small percentage of the vast array of prescriptions purchased at drugstores. Next, the company told the press—clearly because its sales have been weak going into Christmas—that it will discount all of its electronics, including big-screen TVs, underneath its competitors. That’s another canard: The research department at Prudential has surveyed the Wal-Mart TV line and found no serious price cuts versus Best Buy’s. In other words, Wal-Mart’s new discounting push is really just another bogus series of moves by the store to attempt to stem its customer defections.

How can Wal-Mart turn things around? First, it has to acknowledge that the wheels have fallen off the Bentonville Bus. Then it has to bring in some savvy merchants from the outside and give them a real chance to improve the quality of the stores—the atmosphere, the merchandise, the service, everything—without raising prices. (And it wouldn’t hurt if Wal-Mart would create, if not a Starbucks pro-labor feel, at least something that makes shoppers feel that it’s not a global retailing bully and its workers aren’t all desperate retired folks.)

We are nowhere near that now. Wal-Mart’s still thinking that all is well, and that only Wall Street doesn’t understand the greatness of the chain. Funny, Wall Street actually respects Wal-Mart more than it should—it’s Main Street that’s deserting the place in droves. And while Wal-Mart might have just given us a “good” earnings report, the reality is that the numbers only looked good given how low Wal-Mart had set the bar. Until Wal-Mart gets new management, I don’t see its fortunes improving. To me, the company’s stock is a sell, at least until it gets down to the sort of rock-bottom price that Wal-Mart prides itself on offering.

James J. Cramer is co-founder of TheStreet.com. He often buys and sells securities that are the subject of his columns and articles, both before and after they are published, and the positions he takes may change at any time. E-mail: jjcletters@thestreet.com.


Related:

Advertising
[an error occurred while processing this directive]
Advertising