Walmart Tries on Cheap Chic

1. What has been Walmart’s traditional Strategy?

For years, Wal-Mart has adopted the cost leadership strategy by offering goods with features
that are acceptable to customers at the lowest cost. The company’s philosophy is “price it low,
pile it high and watch it fly.” Wal-Mart low prices were achieved by building efficient operations,
using low-cost modes of distribution system, and maintaining effective relationships with
suppliers. The company was able to move goods from factory to store faster and cheaper than
competition. And continually pressing suppliers to charge less and refusing to accept routine
increases in wholesale prices.

2. What is the Major Decision must Walmart make?

Considering the escalated costs of expansion, energy costs and the negative publicity, Wal-Mart
has turned its attention to fashion goods, an area of potential higher margins. The company’s
new strategy is becoming a focused cost leadership strategy: convince middle-class consumers
who already shop at Wal-Mart to buy high margin products. To do so, Wal-Mart entered the
Cheap Chic market and decided to create its own brand of clothing: George and Metro7. This
strategy did no go as expected. Customers’ expectations were more than just great items, they
wanted a store with a vision of itself. Wal-Mart tried to address this issue by opening a Trend
Office in New York, however it was not easy to translate the vision of the Trend Office into
product. Even with the help of the designer Mark Eisen, the company did not follow-up his
developed collection with advertising. Another problem Wal-Mart had to address was in-store
merchandising of the fashion lines. Management began adding additional space between apparel
racks, upgrade the design of the space to highlight the outfits, hired a fashion merchandiser. Still
customers complained that it was hard to shop at Wal-Mart’s stores. Adding to all these issues,
the company faced an inventory challenge where its effort to develop a better program for its
fashion lines failed. The firm had to move introduction date of new apparel in order to fill gaps in
other lines.
 3. What should Walmart do next?
By integrating a new strategy, Wal-Mart should adapt its support functions and value chain. The
company should make long-term investments in development of new technology and innovative
products, in marketing and advertising, and in ability to provide exceptional service. In addition,
it should recruit highly qualified employees and invest in training them to provide better
capabilities and services. Also, Wal-Mart should acquire and develop a better version of
information systems that provide up-to-date market intelligence and information in the fashion
area. The company has a powerful endorsement from fashion industry observers and a good
relationship with its suppliers. However, they should focus to build strong positive relationships
with its customers.