Walmart: An example for the wine business

Retailer holds the line on prices, focuses on less expensive items, and makes more money

What does one of the world’s most successful companies do when faced with inflation, declining sales, and all the rest that is going on today?

Find a way to make more money, of course – without raising prices.

Are you paying attention, wine business?

The company is Walmart, and for all of its many failings as a corporate citizen, it knows how to boost the bottom line – over and over and over. The rest of U.S. retailing may be running around in a panic, but not Walmart. To quote one news report: “Walmart topped analysts’ expectations for earnings and revenue in the fiscal second quarter, even as consumers pulled back in discretionary categories like apparel.”

The company did it by holding the line on prices – even cutting some and taking smaller margins — and focusing on less expensive items. Its reward was not only more profit, but a 5 percent jump in its stock price.

In other words, it did exactly the opposite of what the wine business is doing.

Now, before some of you start saying this isn’t exactly an apples to apples comparison, that’s true. But there are enough similarities to make the comparison worthwhile:

• Walmart has noticed many customers, even high-end ones, “trading down” — buying less expensive products as inflation bites. This, of course, is anathema to the wine business, which insists we buy more and more expensive products because it wants us to.

• Demand at Walmart has remained steady, if not a little higher. It is seeing an increase in wealthier customers looking for bargains. The wine business, as we know all too well, hasn’t seen an increase in demand in years.

• Wine is a discretionary product; we don’t need to buy it. Walmart found a way to make more money despite a decline in the sales of discretionary products. What does that say about wine’s near-term health?

I don’t write these things to be spiteful or vindictive, and I wish I didn’t have to to write them at all. But someone needs to remind the wine business that it’s not 1995 anymore – and hasn’t been for a long time.