Wal-Mart reverses failed tactic

Empty Wal-Mart shelves

For a mature chain like Wal-Mart, it can be a challenging task to try to increase sales in the stores. The two main ways to achieve this is by either attracting more customers to shop in the stores or for the current customers to spend more money at the store. For retail stores, shelf space and turnover is very important. Ideally, you would like all the products on your shelves to have a high turnover rate, which means you are selling a lot of that particular product. However, in a store like Wal-Mart with a massive product offering, naturally some products will have a higher turnover rate than others.

With this in mind, Wal-Mart decided to discontinue selling some items in its U.S. stores that were not selling very well. Their plan was to replace the shelf space with products that have a higher turnover rate. Simple enough tactic that should work…right? Wrong. Instead of increasing sales at the stores, the retail giant actually had the opposite effect and reported a decline in sales. They also said that traffic was down slightly. What happened was that although the items that they pulled were not overly popular in terms of sales volumes, the customers that regularly purchased them at Wal-Mart were upset that they could no longer find them there. Those customers decided to take their entire shopping list to other retailers.

Basically, Wal-Mart wanted to increase sales by a couple dollars from its current customer base but instead lost the entire shopping budget all together to competing retailers. Upon learning of these results, Wal-Mart said that it would return about 300 items back on to the store shelves.

Although this is a minor change for Wal-Mart and the failure will not hurt that much, it does show that they should have put more thought in to what they pull off store shelves. Perhaps some surveys to see the items’ importance to customers would have raised a red flag or by simply better studying what these products represent to those customers and how the alternatives they would have to purchase would impact them would change Wal-Mart’s tactic. It appears that instead of looking at those aspects, they only looked at the turnover rates and decided to make a change. This is a lesson in being customer oriented as opposed to strictly numbers oriented.

This case also shows that business is not always an exact science and even the best businesses and executives can make bad business decisions and mistakes. This is one reason why owning and running a business is the hardest job in the world. It is also why business holds more financial potential than any other profession on earth.