Walmart Taking Lead To Lower Prices With Current Customer Mood

Dough McMillon, CEO of Walmart
WMT
, spoke on CNBC about the effort of the company to drive down prices. He stressed the company’s ability to keep prices on their own brand merchandise at low levels and that management encourages national brands to reduce the selling price of their goods as well.

This is a great move. Walmart is able to use its buying power to ensure that companies reduce prices of merchandise sold to Walmart. It is likely that suppliers to Walmart will also offer price reductions to other clients at this critical time. We are three weeks before Christmas and, at this moment, stores are begging for excitement.

We are in the stressful period that happens every holiday season – when sales slow down between Thanksgiving and the last-minute shopping peak. Walmart’s effort to get national brand merchandise at a reduced price shows great leadership to stimulate sales.

Traditionally, sales slow down after Thanksgiving and Cyber Monday. A lot of effort goes into preparing for sales over that extended holiday weekend, and then there is a lull. That’s when stores hope that customers will shop their best merchandise at regular prices. However, many people have shopped early this year and are still worried about a potential recession. In fact, those recession concerns have worried everyone, including Jerome Powell, the chairman of the Federal Reserve.

The National Retail Federation predicted an increase in merchandise sales of 3% – 4%, or sales between $957.3 billion and $966.6billion, for this holiday season. There is a lot of wishful thinking in that number as others, like Bain, have shared lower numbers. One note of caution – the Nation Retail Federation projection covers the whole months of both November and December, since they see holiday shopping starting early in November. That time frame takes into account the early shopping activity that took place leading into, and through, Thanksgiving.

Around December 18, most store management teams will go through their stores to look for obvious slow sellers and mark-down these liabilities. Since they did not sell at regular price, maybe the markdowns will encourage some bargain hunters to buy them. The retailer made a mistake in buying so much of the item, and now customers may well enjoy finding a sale item they like.

This is the period every retailer prepares for all year long. If all goes as planned (or adjustments made along the way are successful), the heavy sales volume before the holidays pay off. And, if every expense factor is in line, management can look to the new year and focus on the challenges it will bring.

POSTSCRPT: Retailing is an exciting profession even as it has its stressful moments. While the previous year’s performance is a guide for the following year, savvy retailers know that the consumer is unpredictable and economic conditions may change so it’s important to be opportunistic as well. It will be interesting to see how this year will work out and how retailers will position themselves for the year ahead.