NEW YORK (CNN/Money) -
Wal-Mart scrimped on holiday discounts this year and it paid a price: shoppers snubbed the retail behemoth over the crucial Black Friday sales weekend.
But prices may not be the Number One retailer's only problem. Consumers may be getting tired of Wal-Mart's product selection, especially in hot holiday categories such as electronics, computers, apparel and athletic footwear.
"It's great if you attract lower income shoppers looking for low prices, but what if those shoppers who were really struggling between 2000 and 2003 now have jobs? They might be spending more and looking for different merchandise...maybe something Wal-Mart doesn't have," said Richard Hastings, retail analyst with Bernard Sands.
While early reports indicated the strong shopping weekend topped projections, the world's largest retailer Wal-Mart (Research) issued a surprisingly downbeat read on its sales for the day after the Thanksgiving holiday -- the kickoff to the holiday shopping season.
The retailer said sales at its stores open at least a year -- a key retail measure known as same-store sales -- would grow an anemic 0.7 percent in November, falling far below the 2 to 4 percent increase it projected earlier in the month.
Wal-Mart and other retailers are expected to report November comparable sales results on Thursday.
Industry watchers suggest that Wal-Mart did not promote as aggressively as it has in the past on a wide variety of merchandise.
"Those retailers who promoted like mad got the business and they won," said Howard Davidowitz, an independent retail consultant and president of Davidowitz & Associates, a New York-based national retail consulting and investment banking firm. For instance, department store chains Sears (Research) and J.C. Penney (Research) lured holiday shoppers with blockbuster sales that started early in the month.
Sears also gave its customers two-day doorbuster deals to ensure that Black Friday shoppers would return for second helpings on Saturday.
Wal-Mart went against the grain and wasn't adequately promotional, Davidowitz said. "And that comes at a time when the entire discount sector, including the dollar stores, are already hurting for sales because the low-income consumers are feeling the pressure of higher prices at the pump," he said.
Being the biggest is one thing, being everything is another. "The simple fact is this: Wal-Mart is not everything to everybody 'always'," Hastings said.
While Wal-Mart has been busy knocking some competition out of the ballpark, the retailer has failed to touch their biggest and best competition like Costco (Research), Best Buy (Research), Target (Research) and Gap (Research) just to name a few.
Wal-Mart instantly undercut the competition on DVDs with its Black Friday sale of $3.88 each, compared to Best Buy's advertised special of five DVDs for $25. "But, what's Wal-Mart's assortment and customer experience compared to Best Buy? That's an important deciding factor for consumers," said Hastings.
"Market share is a nice thing if you have the same merchandise as the competition," he added. "The difference is between a Sony plasma TV for $5,000—a knee-jerk slam-dunk brand—and good quality similar products under brands that do not generate equivalent customer reactions."
For example, Wal-Mart's challenge to the Sony plasma screen TV is a slightly lower-priced alternative priced at $4,935 from Tatung. "Wal-Mart doesn't have the type of brands that generate consumer excitement. "
"This holiday season Wal-Mart hasn't been able to differentiate itself from the competition or really take advantage of the early wave of promotional activity," Hastings said.
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