What Does Wal-Mart Stand For? – TheStreet.com

Wal-Mart’s crown as the low-price king has been tarnished.

The discount giant, which prides itself on its motto of “Save Money, Live Better,” appears to have lost its price perception among consumers. According to a survey conducted by WSL Strategic Retail, 86% of Wal-Mart shoppers no longer believe that the retailer has the lowest prices.

“Every brick-and-mortar retailer lowered prices and shouted sales throughout the recession, while the Internet became the go-to place for shoppers in search of the lowest prices,” the report said.

This tarnished price perception is clearly seen in Wal-Mart’s second-quarter results, which marked a ninth consecutive decline in U.S. same-store sales.

This raises a serious conundrum: If Wal-Mart no longer stands for everyday low price in the eyes of the consumer, what does it stand for?

Well, at least according to Wal-Mart, its message of everyday low prices hasn’t changed.

“We are the low price leader,” Chief Financial Officer Charles Holley insisted on a call with reporters.

But he does note that Wal-Mart is not as low-priced as it used to be and the gap has been narrowed.

“We are focused on narrowing that gap. Everyday low price is the foundation of the company,” Holley said.

Wal-Mart’s image erosion started earlier in the year, when rival Target(TGT_) narrowed its pricing gap with the retail behemoth.

Target has reduced its prices on key items shoppers remember most, like a gallon of milk, cereal, and diapers, said Customer Growth Partners President Craig Johnson. The “mom shopper” Johnson said knows the prices of these products down to a penny and can see they are saving money at Target.

So while Wal-Mart is struggling to woo shoppers, Target has seen its traffic improve for six consecutive quarters.

The dollar stores have also become a formidable opponent, a fact not being lost on billionaire investors like William Ackman and Warren Buffett who have recently took an interest in the sector.

Research by AvondalePartners also reveals that both Dollar General(DG_) and Family Dollar Stores(FDO_) are offering more competitive prices for back-to-school than Wal-Mart.

According to analyst Mark Montagna, in a survey of 30 back-to-school items both Dollar General came in 10% cheaper than Wal-Mart. While the unit sizes varies, Montagna said that shoppers are more concerned with the overall price of their purchases rather than pricing on a per unit basis, giving the dollar stores a distinct advantage.

Holley agreed, saying that while Wal-Mart may have the lowest price per unit ounce for a product, at the end of the month consumers only have a certain amount of money left and may not be able to afford the bigger package size even if it provides a better value.

As a result, Wal-Mart is working on offering more smaller sizes on key staples.

In another study conducted by Morgan Stanley in July, 60% of customers said they no longer believe Wal-Mart has the lowest prices.

“Our late July grocery pricing survey shows that Wal-Mart has yet to make any significant moves to widen its price lead. As Wal-Mart’s core lower-income customer is struggling in this weak economy, we remain skeptical about prospects for a same-store sales turnaround,” Morgan Stanley analyst Mark Wiltamuth wrote in a note.

via What Does Wal-Mart Stand For? – TheStreet.