NumBytes 48: How Wal-Mart Lost Its Groove

A Morgan Stanley survey of 1100 Wal-Mart shoppers found that 60% no longer viewed Wal-Mart as offering the lowest prices on products, even though a Goldman Sachs Group survey of store prices in Chicgo found Wal-Mart prices about 6.2% less than rival Target. Second quarter 2011 same store sales fell 0.9%, the ninth straight quarter drop at Wal-Mart, although Sam's Club same-store sales surged 5% to allow the company as a whole to say comparable store sales were flat overall.

CEO Mike Duke contended Wal-Mart's core shoppers, many of whom live paycheck to paycheck, were running out of money much faster than a year ago. They changed their buying habits, picking up more groceries and household goods while cutting back on non-essential items such as clothing and home furnishings. Wal-Mart also noted fewer shoppers headed into its stores as overall customer traffic at Wal-Mart stores fell compared to the previous year.

What he didn't say was that a couple years ago, the company abandoned its 'everyday low prices' strategy to focus on a special promotional pricing model that consumers found, to be kind, uninspiring. To the surprise of Wal-Mart executives, consumers then shopped around and found better deals elsewhere -- in rival retail stores and online. The company returned to everyday low pricing, but consumers noted 'once burned, twice spurned.' The company certainly has its marketing work cut out for it to gain back the perception of offering the best value around.

For the third quarter, Wal-Mart expects same-store sales at its US stores to range from a decline of 1% to a gain of 1%.