Good Times for Wal-Mart in Bad Economy

With 135 million Americans shopping at Wal-Mart every week, the retail giant's shoppers offer a revealing window into U.S. buying trends. But while consumer spending has fallen overall, Wal-Mart has seen sales of its discount items increase recently.

The retailer's surveys reveal what it calls "significant" changes in the consumer's condition.

Those changes were crystal clear in last week's government report on the gross domestic product, the broadest measure of the economy's health. It fell to a negative number this summer. And the No. 1 reason for the decline was a sharp drop-off in consumer spending, as consumers worried about their jobs and financial futures hunkered down.

Ninety percent of American consumers shop at Wal-Mart every year, and they are cutting back -- buying only what they need, when they need it.

A record 80 percent of Wal-Mart customers now cite "personal finance security" as their top concern, up from 65 percent a year ago, according to Wal-Mart's data.

At a Wal-Mart in Secaucus, N.J., Lisa Lauerman was worried about losing her job at a clothing boutique.

"There's not enough work. Not enough customers coming through the store that I work at, so they can't afford to pay me," Lauerman said.

Her husband, an electrician, watched his income fall as his overtime work disappeared this summer.

"What we're seeing because of the high prices earlier this year and the looming layoffs and more job losses, consumers can't afford food, fuel and prescription pharmacy items so they have to cut back in every single area," said retail consultant Burt Flickinger.

Almost every shopper ABC News met was looking for ways to scale back. One customer switched from purchasing meat, which is perishable, to canned tuna and soup because they last longer.

Store data shows that sales of generic brands are growing at 2½ times the rate of more expensive name brands.

Flickinger says that's because people are more bargain-conscious than ever: A bottle of Equate, Wal-Mart's private label mouthwash, sells for $2.78, while the same-size bottle of Listerine costs $6.92.

Consumers are also waiting for items to be on sale or deeply discounted before making a purchase.

"If it wasn't on sale, people weren't buying," said Flickinger, who makes regular visits to stores to talk to shoppers and analyze their buying patterns. "And if it was on sale people were only buying one item, where in the past they would have stocked up."

Wal-Mart is keenly aware of the strains its shoppers are under.

Wal-Mart shoppers have seen their paychecks drop an average of 3.6 percent in the last year while their average credit card debt has reached $9,800, according to company data, while inflation has pushed prices up almost 5 percent. With credit tight and home prices down on average 9 percent, most can no longer afford to borrow.

"What we're seeing in our stores is that credit is being used a lot less," said Stephen Quinn, Wal-Mart's chief marketing officer. "Maybe their credit is maxed out or they don't want to be taking on additional debt at this time. But we're seeing a lot more shopping with cash."

Wal-Mart is seeing another tell-tale sign of stress -- more people are shopping when they receive their paycheck, either on the first few days of the month or on the 15th and 16th of the month, with sales tapering off after that.

Sherry Marone, a Wal-Mart shopper, says that she struggles to make it from paycheck to paycheck.

Page
  • 1
  • |
  • 2
Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...