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Friday
Nov142008

Don't Go Under: Survival Secrets From America's Most Profitable And Recession-Proof Retailer

More bad news on the economy. Retail sales in the U.S. dropped in October by the most on record. 2.8 percent. The biggest since records began in 1992, according to the Commerce Department.

Macy's, Target, Gap, Best Buy all among the big losers.

But do you know that there's a retail company whose same-store sales are actually rising right now? Who....

It's Wal-Mart.

What are they doing that the others are not? How can they rally while others falter? And MOST IMPORTANTLY, how can you do what they do?

All answered right here. Read on...

Of course, you'll probably immediately grasp on to the idea that this is all about low price. Obviously low price is part of Wal-Mart's model. But Wal-Mart's low prices don't come at the expense of their margin. They've found a way to offer low prices, with high profit. That's what we're zeroing in on today.

We've compiled a "Top 10" list of the strategies Wal-Mart is using and has used to succeed in this bizarre market and we've spun 'em into ideas for car dealers. If you only read one email this year, read this one.

Wal-Mart rebuilt their brand around a benefit, not just low prices

Wal-Mart's message used to be "low prices everyday." That is a feature of how they run their business and what you can expect when you shop there. That's fine. But in the ten million plus dollar rebrand Wal-Mart has converted their feature-based tag line into a powerful benefit statement. The new tagline:Save Money, Live Better. It contains two benefits that people want.

Most dealers' brands deliver no benefit at all. No reason to shop there or choose them. Even franchise dealers who proudly display their big brand banners don't truly have a powerful, clearly defined positioning statement that resonates with the consumer. What do you do potentially better than anyone else? How does that benefit your customer? Tell your customers that.

Wal-Mart built a model based on repetition, not novelty

Most reports agree that Wal-Mart has 134 million weekly customers. That's a staggering number. We're pretty sure they all shop at our local store, and all on the same day, at the same time, standing in the same line. But that's another story. Wal-Mart's customer base is loyal, and they buy frequently and consistently.

How many car dealers can say this? Of course, with a span of 24 - 48 months between transactions, what can you do about it? If you have a service department, you could be doing business with your customers once every 3 months. Are you? And if you don't have a service department, you could offer all past customers complimentary car washes and fluid checks for life.

Cost to you? Not much. Benefit? Huge.

You should HOPE to have all your customers coming back to your store every week for a car wash and tire pressure check. If that happened, you'd remain at the very top of the customers' minds, you'd develop a high amount of "future purchasing debt" (meaning, they'd owe you their future purchases). And customers who return to the dealership frequently,BUY more frequently and REFER more frequently. Could you ask for anything better?

Wal-Mart creates value for their customers

These days consumers are more concerned than ever about VALUE. When most people think of value, they think of price. But that's only part of the equation. When selling dish soap, cheap microwaves, tennis shoes, greeting cards, and wrangler jeans, price may be your only option. But when selling transportation (vehicles and service) you're selling a high-ticket item that people are nervous about buying, that people place their faith and the security of their families' in.

There's a lot of room for value-building that goes beyond low price. Value can be found in the experience, in the confidence level of the customer, in a guaranty or warranty, in testimonials from past customers, in relationship with the customer, and more.

Wal-Mart doesn't offer low prices on everything. Some things are more expensive. But they capture the spirit of value creation by selling milk for cheaper than others, or offering 3 months of prescription drugs for $10, or by offering low-cost health clinics, or hair cuts, or tax prep, or photography, or eye glasses in their store. You get the feeling that the value is sky high.

What feeling do your customers get at your store? Do they leave feeling like they got MORE than they paid for or LESS? These days, you need to be striving for more or they won't come back, they won't refer, or they may not buy in the first place. So you either need to cut prices (not recommended) or add more value.

Wal-Mart owns their own customers

Wal-Mart is as powerful as it is partially because they own the customers. Those 134 million customers are their customers. They're not the customers of the manufacturers whose products are in the store! Wal-Mart owns the loyalty, the repetition. If the Sunbeam blender is .13 cents lower than the Hamilton Beach blender, the customer is choosing the Sunbeam. Whatever their choice, they're buying it from Wal-Mart.

Many new car dealers fail here because they let the manufacturer own the customer and maintain the relationship. Bad idea. Then they have the power, and you do not.Many independent dealers fail here because they don't bother at all with maintaining a relationship, so nobody owns the customers. You must stay in touch with your past customers somehow, whether through the mail, through events at your dealership, over the phone, in email, in person, preferably a combination. Wal-Mart has it easy because the customers come back into the store every week, and the relationship continues.

Wal-Mart has stayed true to traditional American values

Though Wal-Mart has many critics due to many of their "behind-the-scenes" business practices, the company is largely perceived to stay true to traditional values. Everything from DVD players that censor language and violence to their "buy American" campaigns of the 80s and 90s. Wal-Mart's reputation is steeped in the ideals of hard work, hiring from within, unbridled growth and a remarkable level of corporate frugality. Their culture has been described as "one part Southern Baptist evangelism, one part University of Arkansas Razorback teamwork, and one part IBM hardware."

Despite a growing "secular progressive" movement in this country, the vast majority of Americans feel a strong appeal to traditional "American" values. Highlighting your own alignment with these values through your marketing and communication with past and current customers can be a very powerful marketing strategy.

Wal-Mart values community and relationships

Although Wal-Mart gets beat up over their size and community impact, they really are a company that's about relationships. The word "always" can be seen in virtually all of Wal-Mart's literature. One of founder, Sam Walton's deepest beliefs was that the customer is always right, and his stores are still driven by this philosophy. When questioned about Wal-Mart's secrets of success, Walton has been quoted as saying, "It has to do with our desire to exceed our customers' expectations every hour of every day."

Duplicating Wal-Mart's stance on relationships would be a smart move for any dealer. The goal at your dealership shouldn't be to move a car today, it should be to get a customer and make a relationship today. With that mindset you can create a lasting connection with your customers and get them to come back more often and refer others. Without a relationship focus you'll be forced to run on a treadmill of sales now and end up with an empty shell of a business that's frail and susceptible to recession and outside factors.

Wal-Mart stays true to a core message

Wal-Mart has a message and they're sticking to it. They are, by design, a discount store. Wal-Mart's goal is to be cheaper than everyone else. So they do what ever they have to do to fill those shoes. Why? Because that's what their customer expects. That's why customers shop there. Wal-Mart is smart because they don't try to be everything and for everyone. They don't try to have beautiful, spotless stores and lowest prices or concierge service and low prices or even great service and low prices. Just really low prices and OK everything else.

What are you known for? What void in the market or customer desire does your store fill? Is it clear and obvious or are you just trying to be all things for all people? That does not work. People want to buy things from places that understand their unique needs. For dealers this could mean stores for women, stores for high-end cars, stores for credit challenged customers, stores for mid-life crisis, stores for kids' cars.

Wal-Mart uses systems to streamline costs

Wal-Mart is a master at innovating and implementing systems to increase profit, reduce costs, save time and streamline processes. Wal-Mart has been regarded as an industry leader in "testing, adapting, and applying a wide range of cutting-edge merchandising approaches." Walton proved to be a visionary leader and was known for his ability to quickly learn from his competitors' successes and failures. In fact, the founder of Kmart once claimed that Walton "not only copied our concepts, he strengthened them. Sam just took the ball and ran with it."

Dealers need to take a page from Walton's book and begin looking at what other successful business are doing right and wrong and learning from it and taking action on their findings. There are so many new, innovative and profitable approaches out there right now waiting to be found and capitalized on. This can be work but it's the necessary work that keeps a business innovating and moving forward. Sometimes it seems like the car business is a dinosaur that can barely keep up. That's not good for dealers or consumers.

Wal-Mart goes the opposite direction

One of Sam Walton's rules of success was to "swim upstream." Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there's a good chance you can find your niche by going in exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you you're headed the wrong way. "I guess in all my years, what I heard more often than anything was: a town of less than 50,000 population cannot support a discount store for very long."

We call this Same Is Lame thinking. The reality is that the majority and status quo is usually wrong and only produces a modest level of success. For car dealers the mission is clear: reject what you see everyone else doing. And why not? Most dealers are in the pits right now. So, doing something opposite than them couldn't be a bad thing!

Wal-Mart places a high value in information

If you read 100 reports, books or articles about Wal-Mart's success, you'll find 100 instances of Wal-Mart's use of information as paramount to their winning strategy. They've pioneered completely new methods of supply chain management by leveraging the lowly bar code at every step of the process, from manufacturing, to distribution, to stocking, to merchandising, to promoting, to discounting, to selling...all the way down to the hour of the sale of each product. They now warehouse vast stores of information about buying habits and cycles, and from this information they make strategic decisions that crush their competitors.

Of course, this probably isn't practical for you as a dealer. But that doesn't make information any less critical. You just need to get it through different channels.

Networking and masterminding with other dealers, sharing data and trends, or accessing the vast amounts of information on buying and marketing psychology like you'll find in the Rich Dealers program. Or, here's a novel idea, visiting the bookstore or the library and getting information from there. Information is your number one defense against slumping traffic and sales and your number one offense for dominating your market. What information are you relying on?

A valuable resource you need to make it in times like these

That leads into a very important point. A resource you should all be very well aware of by now. If you find value in information like this, and you believe your business would be better, and you could survive longer with two guys like us in your corner, whispering the best strategy in your ear at the perfect moment, keeping you on track, in the game, growing and not slowing....well, next week will be a big week for you.

Next week, for one week only, our Rich Dealers program will open its doors to the dealer public at large for one final enrollment period for 2008. If you've considered it in the past, but haven't acted, next week will be the moment. So keep a keen eye out next week for the messages from us.

Until next time, we're looking out for you,

Jim & Travis
Creators of Gravitational Marketing and founders of the Rich Dealers program

References (3)

References allow you to track sources for this article, as well as articles that were written in response to this article.

Reader Comments (3)

Great read, guys. If there is anyone teetering on the edge, unsure about joining the Rich Dealer program, let me encourage you to seize the day! We've been on the program for almost a year, and I can't recommend it strongly enough. Don't let events out of your control rule your business. Take control of what you can control. And let Jimmy and Travis help!

Brian Leach
Northstate Motors, Inc
Orland, CA

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