Posted by: nickgerlich | September 1, 2007

AlieNation

There's no better way to rankle your customer base than to turn your back on them.

At least that's how many people feel about Wal-Mart. Never mind that by default Wal-Mart stirs up a frenzy of foaming-at-the-mouth social and labor critics who bemoan the retailer's largesse (and success). No, this has to do with some of the smaller things.

Wal-MartIt was a little over a year ago that Wal-Mart decided to eliminate their layaway option for customers. From a managerial standpoint, layaway is a major nuisance. No sooner do you have a third-shift employee set the shelves with merchandise, than some customer plucks it off and asks you to store it in the back for a few months. Wouldn't it be easier to just kep everything in the back, and let customers make their selections from pictures in the aisles?

You see, it is primarily lower-income customers who rely on layaway…and these people are Wal-Mart's core customer group. Layaway to them is kind of like credit, but without actually taking possession of the goods. It's kind of like saying, “Hey, I've got dibs on that Barbie set over there, so get your grubby hands off it!”

People use layaway for a couple of reasons: To pre-shop at a time when they do not have the money, as well as to serve as an attic storage space to keep kids from finding Santa's gifts a little too early. And it has these core customers really upset, as they suddenly feel like aliens in the store where they spend the majority of their limited money.

Instead, Wal-Mart is offering these shoppers access to a WM credit card, hardly a wise thing to do. If folks don't have the money to buy an item today, what makes you think they will in three months? Retailer W.T. Grant made the credit mistake back in the 1970s, granting easy credit to people who had a pulse and nothing more. WM would be wise to not be too lenient, in an effort to prop already stagnant sales.

Another unpopular decision by WM is that of eliminating the fabric department. Apparently few people are actually making their clothes these days, and management would rather use the space more wisely (and profitably) by selling ready-to-wear clothes. Once again, it is WM's core customers who are complaining, feeling as if they have been abandoned.

WM clearly wants to make inroads in customer groups with more income, but they must tread carefully. While there currently is no large-scale competitor waiting in the wings to scoop up (and befriend) these lower-income customers, it could present itself an irresistable opportunity for some aspiring company.

Besides, I just don't think it's worth alienating the poor. The rich don't seem too interested in shopping at Wal-Mart, no matter how hard WM tries to woo them.

Dr "Rich Man, Poor Man" Gerlich

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