The way to consumers' hearts could be through their gas tanks. Wal-Mart (NYSE: WMT) plans to slash prices at some of its gas stations by a dime a gallon for the next three months.
High gas prices have plagued many consumers' pocketbooks, even as they drain corporate profits. With high prices and high unemployment already hammering Wal-Mart's core clientele, the retailer's U.S. sales have begun to slump.
Wal-Mart's chief marketing officer said the move to cut gas prices reflects consumers' worries about this growing expense: "Our customers have told us that high gas prices are a top budget concern, nearly as large an expense to their households as food and groceries." Indeed, the rising price of gas and food has created a grim and precarious situation for many grocery companies.
The discount giant plans to slash gas prices in participating stores in 18 states through Sept. 30. The catch: Only customers who use a reloadable Wal-Mart gift card or Wal-Mart credit card at the pump will get the lower prices.
Wal-Mart usually waits to start price wars until the holiday season, when toys and electronics become its favorite ammunition. This looks like an interesting twist on that familiar theme, as Wal-Mart seeks new ways to lure customers from rivals.
Costco (Nasdaq: COST) has been doing very well despite the languishing economic climate. It offers cheap gas at some of its locations, placing the warehouse retailer squarely in Wal-Mart's crosshairs. Dirt cheap gas could also lure some consumer spending away from Wal-Mart rivals like Target (NYSE: TGT) and Best Buy (NYSE: BBY). After all, high gas prices could also spur consumers' desire to make fewer unnecessary car trips. The convenience of getting everything at Wal-Mart could at least temporarily overrule shoppers' loyalty to other stores.
With its core shoppers suffering, Wal-Mart needs to cultivate higher-end clientele to get its U.S. sales out of the doldrums. The lure of lower gas prices could attract more loyal Wal-Mart shoppers who happen to have more discretionary income.
What do you think? Is Wal-Mart regaining the competitive advantage that it seemed to be rapidly losing? Will this plan ignite Wal-Mart's stalled sales at other retailers' expense? Give us your thoughts in the comments box below.
