Wal-Mart Gains as Economy Slips

By Tom Branna, VP/Editorial Director | August 5, 2008

Well, at least one company is having a good year. As economies around the world sputter, Wal-Mart announced that its June sales jumped more than 11% from a year ago—its best monthly sales gain in four years. Wal-Mart’s gain underscores the fact that consumers are back to searching for bargains again as tough economic conditions in the U.S. and, more recently, Europe, take hold. In fact, according to Nielsen North America, visits to department stores are down 6% this year. In contrast, Dollar General Corp. reported a 5.6% rise for the fiscal quarter ended May 2. Similarly, sales of private label products are surging.
The success of these discount operations isn’t anything new. The last time the U.S. was mired in recession, consumers flocked to dollar stores, where they could purchase national brand name items like laundry detergent and shampoo for just a buck. As the economy regained strength, a lot of those dollar stores disappeared from the retail landscape near our headquarters in northern New Jersey. But now, with energy prices remaining near record levels, housing prices still falling, the stock market hovering near bear territory and jobless rates climbing, you can bet that more folks—regardless of their income level—will be shopping for bargains. If this slowdown is anything like previous ones (and it surely is), it means that the mid-priced, second-tier brands are the ones most likely to suffer.
That’s because retailers and marketers will start eliminating niche products that don’t have mass appeal. Products that may also get left out of the equation are those that offer convenience over value. Apparently, even the most time-strapped consumers are willing to look for a bargain when cash is running low.
The last recession reshaped the household and personal products industry, as multinationals shed under-performing brands that were sometimes acquired by startups. Will this round of belt-tightening lead to a new chapter in acquisitions? Or will mid-sized companies and brands that are unable to adapt to the “new” economy disappear from the retail landscape altogether?