06/09/2005: Thought for the Day:
Retailers can drop from the luxury market to the mass market. (See, for example, the cheaper Jaguar X-types and the more expensive XK models.) But it's not clear they can do the reverse and move from low-end to high-end. What if Hyundai were to unveil a $50,000 luxury SUV? It would have difficulty getting its existing customers to trade up. If they could afford to—or wanted to—pay $50,000 for a car, they probably wouldn't be Hyundai customers in the first place. And snobbish Lexus owners wouldn't deign to consider a premium-priced Hyundai. McDonald's probably wouldn't do too well with a $15 McKobe burger. The connoisseurs would wrinkle up their well-trained noses in distaste, and the regulars would be priced out of the market.
What's more, Wal-Mart has been until recently a famously inward-looking company. Its competitive advantage has always been the stuff behind the scenes—sourcing, logistics, inventory control, cost control. Wal-Mart has always been less interested in, and comparatively weak on, external factors like public relations and marketing. For four decades, that formula has worked fine. The coastal elites who run ad agencies, the media, and large companies have long been forced to trek to Bentonville, Ark., to educate themselves about the consuming and retailing habits of middle America, to acknowledge Wal-Mart's power, and to nod dutifully at the hokey Wal-Mart cheer. Now, the calf-skin shoe will apparently be on the other foot. Seeking growth, Wal-Mart will have to familiarize itself with the shopping habits of people with whom they are not familiar: yuppies, urban sophisticates, bourgeois bohemians, suburban nondesperate housewives, kids with trust funds, foodies, health nuts.
Len on 06.09.05 @ 11:38 AM CST