Tactics and Strategy: Walmart and the Business of Selling Guns

Gun sales have skyrocketed since the mass murder of 20 school children at an elementary school in Newtown, Connecticut.

Some analysts believe the sales are driven by an atavistic notion of self-defense, a reflexive response to the crime. But another, possibly more compelling type of fear may be at work: the concern that this time really was different and that restrictions on the sale of certain types of military-style assault weapons as well as related accessories may become a genuine possibility. The sales increase, therefore, being driven by an expectation that guns may not, in the future, be as widely and easily available as they are currently.

All of which leads to an assessment of the business of gun sales. As the following article explains, Walmart is the largest retailer in the United States. It leads in the rest of the known world as well, but when it comes to guns, the US is where the volume and the profits are. However, guns are only sold in about 40% of its stores, not as comprehensively as some may think.

And the business of selling guns, though profitable, is not crucial to Walmart's growth. In fact, the company has cut back on gun sales at various times in its history based on changes in demand and its shift in focus to a more suburban, less rural market.

One of the market share trends that has emerged is that those who choose to own guns, tend to own several - and in some cases - many of them. Lots of other households own none. From a business strategy perspective selling guns is not unlike selling lots of other outdoor lifestyle accoutrements; it generates ancillary business which makes such products an attractive positioning item in those markets where such possessions are top-of-mind.

Walmart's growth owes much to its belief in data. It was a pioneer in collecting and applying what it learned about customers to reinforce its relationship with them - and drive repeat sales. Ironically, for the purposes of the policy debate, the company's penchant for gathering hard information has made it the leading source of data about gun owners and their purchases. To the point where its knowledge may become the model for putative registration bases. There have been other examples of corporations who oppose the role of government in aspects of their operations - Exxon's opposition to climate change initiatives but its peerless environmental safety and mitigation performance being one - but who, by their nature, insist on assembling effective data sets in order to better identify, measure and manage.

It may be that such an orientation may shape the debate about requiring more information about gun sales. In other words, retailers and manufacturers may support demands for more registration information because it's just good business. JL

Josh Sanburn reports in Time:

After initially declining to discuss gun policy with the White House, representatives from Walmart met with Attorney General Eric Holder as part of the Obama administration’s ongoing talks on guns and gun control.

Walmart’s apparent reluctance may reflect the extent to which gun sales have become an important part of the retailer’s bottom line. But just how important are they?The U.S.’s largest retailer has what you might call an on-again, off-again relationship with guns. Back in 2006, Walmart stopped selling guns at a third of its stores, citing a lack of demand and “diminished customer relevancy.” Instead, it replaced firearms with other sporting goods like home fitness and exercise products. According to a 2006 New York Times article, this move coincided with Walmart’s shift away from rural areas and toward cities and suburbs.

But when the recession hit in 2009, even “everyday low prices” couldn’t keep sales from slumping. Walmart experienced seven straight quarters of same-store sales declines in the U.S., triggering the retailer to expand its product selection. Among the additions: fishing rods, craft and sewing supplies, and guns.

Selections of rifles, shotguns, and ammunition previously sold at Walmart were back as the retailer tried once again to target customers in more rural parts of the country. Today, guns are sold at between 1,700 and 1,800 of the 4,000 outlets around the country, says Walmart spokesperson Kory Lundberg. At about a third of its stores, the offerings include “modern sporting rifles,” a term that refers to the type of semi-automatic rifle used in the shooting at Sandy Hook Elementary School in December.

Walmart doesn’t release specific gun sales figures, so it’s difficult to determine what share of total U.S. gun sales are made at the country’s largest retailer. But given its broad, national reach, Walmart is likely the single biggest firearms seller in the U.S. And lately, business has been good: Even before reports that Walmart had sold out of semi-automatic rifles following Sandy Hook, chief merchandising officer Duncan MacNaughton said in October that revenue from gun sales increased 76% in the first half of the most recent fiscal year, while ammunition sales had increased 30%.

The other significant gun seller in the U.S. is outdoor retailer Cabela’s. It doesn’t release gun sales figures either, but hunting equipment in general, which includes firearms, comprised 41% of the chain’s sales in 2011, according to Bloomberg News.

While Walmart may be concerned about a possible assault weapons ban or other pieces of gun control legislation from the Obama administration, it’s possible that new gun laws could actually help Walmart. The Huffington Post is reporting that Vice President Joe Biden is likely to propose that independent gun dealers force buyers to go through Walmart’s certified background checks, which could end up driving more foot traffic into Walmart stores.