business news in context, analysis with attitude

Guest column by Jack Whelan of The Hartman Group

In the great Biblical battle between David and Goliath, all the smart money was on Goliath. The little guys, as a rule, don't beat the big guys, because usually they're playing on the terms the big guy defines. That's a sure formula for a losing strategy. Because one thing is for sure - you can't beat the Goliaths of the world playing their game. The gods have to be smiling on you, but you've got to have the guts to buck the conventional wisdom and the knowledge of how to do it.

Wal-Mart is the Goliath on the national retail scene right now, and if it keeps marching unimpeded, soon it will be an international Goliath as well. According to the conventional wisdom, it has everything going for it. It's a well-oiled machine with tons of cash, a commanding distribution system and a ruthless formula for market domination that anyone in its way is powerless to defend against.

It's understandable that Wal-Mart's success commands respect. The Wal-Mart game is the perception of price and convenience - it's one-stop shopping where you believe you're going to find most of what you need at "everyday low prices." That's a good formula, but it's a formula Wal-Mart owns because nobody does it better. If any retailer wants to imitate the formula, fine, so long as Wal-Mart isn't on their playing field. As soon as it comes into town, you can't win if you're going to play by the Wal-Mart rules. It's a formula of utility.

But if Wal-Mart scores high on the utility index, I'd bet its score on the emotional index is about as low as you can go. People go there because it's practical, not because they love to go there, in spite of what their ads may try to show. It's about as soulless a place as you can find on the national retail scene. Wal-Mart's attempts to overcome this limitation by providing "retailtainment" along the lines of X-men scavenger hunts speaks for itself. White men can't jump, and Wal-Mart can't dance. Ain't gonna happen, and there's no need for the Wal-Mart people to worry about it. They've got a formula that works, and they just look silly when they try to be something they're not.

So, here at The Hartman Group we have been wondering if price and convenience is really what is the most important factor for customers in the long run. We think not. We're not saying it's unimportant, but we're questioning whether it's the most important. And we question whether a lot of people go to Wal-Mart for price and convenience (and for everything they need!) by default because something better isn't being offered to them. Is it possible that a new game with new rules can be developed and that, as Goliaths gave way to Davids, Wal-Mart's days are numbered as well?

You know the old Joni Mitchell song about paving paradise and putting up a parking lot. The theme was about not really knowing what you have until you've lost it. Well in the usual way of thinking about it, there's kind of an analogy to the Wal-Mart situation. You know, Wal-Mart equals parking lot; small neighbor-friendly stores equals paradise. But the thing is that most of those small stores in town centers were pretty dreary, not very well managed, and not all that neighbor-friendly. The idea that somehow we've lost paradise when that Wal-Mart comes into town is largely a nostalgic mythologizing of a paradisal past that mostly didn't exist.

Sure, there were exceptions, but they only prove the rule. Most small-town America stores were as mediocre and soulless in the '50s and '60s as anything you could accuse Wal-Mart of being today. Worse, even. They were just Wal-Marts on a smaller scale with a lot less merchandise for a lot higher prices, more often than not staffed by grumpy, not very knowledgeable, not very helpful, poorly trained and poorly educated personnel.

When the chains started coming in to the malls that started popping up everywhere, it just wasn't price, convenience and variety that was at the heart of their success, it was also a more interesting, higher-quality shopping experience than you'd find in the dreary stores downtown. The chains ensured a quality standard that you could depend on. You go into a McDonald's, you know what you're going to get; you go into the greasy spoon downtown, well, you're taking your chances. People were disloyal to the small downtown stores because there wasn't much there to command their loyalty to begin with.

Recently I bought a dog, and at first I was committed to buy all my pet supplies at my neighborhood pet store. But after a while I gave up on it because the store was a disorganized mess; the owner was depressive or preoccupied with an animal rights crusade she was on; her merchandise was expensive, and she seemed continuously annoyed to have to deal with my routine or insignificant needs. I'm as attracted to your quirky eccentric as much as the next guy, but the bottom line is that as much as I wanted to love her, she spurned me, so I started going to one of the big-box, national pet store chains. I found the people there helpful, fun, and a lot easier to talk with. And the prices were way lower and the variety and ease of finding what I needed were far superior. It was an easy choice to keep going there instead of shopping local. All the same, I wish those people in the big box were the ones staffing my neighborhood store, because I'd much prefer to shop in my neighborhood.

What's the point? I think people want something they don't get at the big chains, but when they go to their local or neighborhood stores they don't find it there. If they did find it, the megastores would be in big trouble. So is there a market opportunity here? For sure, but it starts with local stores offering the kind of value that you don't get at the big boxes. It shouldn't be that hard, but it's amazing how rare it is to find. Once you do find it, you fall in love, and that's what keeps you coming back, even if it means paying higher prices. Because ultimately what people want is value, and value means more than getting something at the lowest price. It's about what matters to them. As Wal-Mart continues to focus on value to save their customers money, those customers are beginning to focus on the value of "values." Their values, not the values Wal-Mart has prescribed.

Customers want to be in love, and if they don't find it, they'll settle for price and convenience. We didn't pave over paradise in the '50s and '60s; some smart business people recognized a need, and they developed a very effective way to meet it. Wal-Mart is the logical consequence of a trend that began then, and it will continue to dominate the retail world until customers are offered something better. What is that better? That's something we'll be exploring in future columns. There are some David's out there taking on the Goliaths, and we believe that in the long run, they'll be changing the rules of the game. You gotta love the underdog, but that underdog has to show it can win the game if it's going to have any staying power, that includes having the knowledge as well as demonstrating the guts to do. How to do it is the trick, but it's one worth thinking hard about.

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