January 30, 2008
Economic Downturn? Wal-Mart to the Rescue
While much of the retail industry is hoping that Congress will pass a stimulus package that will get consumers shopping again, Wal-Mart is looking to jumpstart spending with a price rollback of 10 to 30 percent on thousands of items in its stores and on its website.
“We all know economic times are tough so our plan is to help with added savings throughout the year, focusing especially on what people want, when they need it,” said John Fleming, chief merchandising officer, Wal-Mart, in a press release. “Shoppers are depending on us to deliver the best price so they can stick to their plans, no matter what the economy throws at us. We won’t let them down.”
According to the retailer’s release, Wal-Mart is focusing its rollback on “unbeatable prices for the big game, fitness needs and home products.”
While Wal-Mart may be looking to make life easier on consumers going through a rough economic patch, it is also a well-timed marketing move.
“Super Bowl is a sales driver for Wal-Mart, particularly for consumables and electronics. For Wal-Mart to piggyback off that event is a smart marketing strategy,” Michael Niemira, chief retail analyst with International Council of Shopping Centers (ICSC), told CNNMoney.com.
“The extent to which Wal-Mart can use these extra discounts to drive [store] traffic and pick up market share is a good thing,” he added.
Melissa O’Brien, a spokesperson for Wal-Mart, said the current price cuts are simply the beginning. “We will have more of these during the busier shopping periods of the year like Valentine’s Day and Easter,” she said.
Discussion Questions: How effective will Wal-Mart’s latest rollback public relations effort be in driving traffic to its stores and grabbing market share in the short and longer term? What will be the response from Wal-Mart’s competitors? Can they handle a prolonged price war with Wal-Mart?
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Two Words: Buy Stock
Say what you will about Wal-Mart, but they certainly know how to spot an opportunity and take advantage of it. Plus, it’s very brand right AND just a good thing to do right now. Harmonic business convergence, good for them.
Sam Walton is purported to have said, “if you see your competitor drowning, go over there and stick a hose down his throat,”…guess they’re on course.
Price Rollback: A favorable occasion for grasping financial opportunity from a disappointing economy. And when Wal-Mart is the “muscle beach” initiator it thins down the conventional competition and modifies shares of market.
It’s actually the manufacturers and trading partners that take the hit, so you hope it doesn’t cause a fallback on the economy, however the massive rollback, albeit a bit of a contradiction to the solid EDLP image and philosophy, will serve as a short term stimulus because of Wal-Mart’s size and influence on other retailers.
Ah…saving the Super Bowl! How noble! I’m sure that campaign will be successful, but let’s face it–if Wal-Mart wants to make the lives of its shoppers better it could have a much broader impact by extending the number of deep discounted prescription drugs or slashing prices on core grocery items like bread, milk, etc. Somehow I can’t shake the image of those new big screen televisions sitting on the curb outside a series of foreclosed, subprime-financed homes. The idea that you can give people great savings “when they need it”–i.e., coincidently timed around your promotion calendar–is touching, but still patently self-serving.
You have to hand it to Wal-Mart, this is a great marketing idea and will reap big dividends for them. The timing is perfect. The CPG companies are probably participating in the program which is a win/win.
The average consumer wants to get as much out of their budget as possible and with the announcement of an additional price decrease, consumers will be enticed to shop at Wal-Mart. Competitors will have to follow suit, probably with other types of promotions like buy one/get one or bundle pricing discounts, etc. Consumers that prefer Target over Wal-Mart will not pay a 15% premium. It also makes sense with gas prices the way they are to get them in with discounts on many staples and to become the one stop place for all the household/food items.
Wal-Mart’s price rollback is sure to win market share from other retailers selling commodities and basics. Once these rollbacks build the traffic back, consumers will buy more per visit because they want to optimize their investment in gas to get to the store. When they receive their checks from the government and their tax refunds, they’ll continue buying from Wal-Mart.
On the supply side, Wal-Mart is the master of being in stock and driving down costs to the bare minimum. Inventory turns should increase.
Meanwhile, Wal-Mart is managing its energy expenses better than any of its competitors and improving its employee loyalty.
2008 is looking good for Wal-Mart despite the economy’s woes and despite the efforts of its many great competitors.
When business is at its weakest, it is the best time for a market leader to jump in and exercise its financial muscle to grab away market share. Wal-Mart is investing in the short term in its long term financial success.
Wal-Mart saw the economic slowdown coming before many of its competitors. Management was quoted recently saying that their ad tagline (“Save Money. Live Better.”) was developed in response to rising gas prices–and anxiety–early in 2007. Looking at the results for December, it’s clear that the competitors who took a more upscale and aspirational position didn’t fare as well.
So it makes perfect sense for Wal-Mart to continue this strategy into 2008. There is no sign of an economic uptick anytime soon (at least until the second half), so a strategy to price seasonal categories aggressively plays right into Wal-Mart’s brand position and ability to gain share in tough times.
This is another brilliant marketing move on Wal-Mart’s part. By being proactive with the economic concerns that are on their customer’s minds, they reinforce their low price positioning and also give themselves a platform to deliver targeted seasonal promotions.
Whether you are a fan of Wal-Mart or not, you have to concede that they have transformed retail in terms of delivering the best price possible to the consumer. If they are looking at the upcoming rough patch of the economy as an opportunity to give up some margin points in order to win more foot traffic, it could put another nail in the coffin for Kmart and some of the other regional hypermarts.
First off, this is a marketing activity, not a PR tactic. PR is just used to promote the rollback. Semantics, maybe, but as a PR person I can tell you we have precious little to do with pricing.
How effective will this marketing tactic be? It will keep consumers thinking about Wal-Mart when they make their shopping decisions, so the retailer will be successful with the primary purpose of the effort, at least in the short-run. Competitors will be quick to address the perceived price inequities and will work to retain customers with their own mark-downs, even if it looks like they’re jumping on the “Save here during the economic downturn” bandwagon. Wal-Mart’s competitors can also use location and convenience to attract shoppers as long as gas is above $3 a gallon. A prolonged price war, however, will have one winner, and it’s based in Bentonville, Ark.
Ryan absolutely nailed it. You have to wonder why these items weren’t discounted before, since Wal-Mart likes to give the impression that it holds nothing back and, at least on price, acts as “the shopper advocate.” But consumer memories are shot, and everyone still has 8 or 9 credit cards, by the last study I read. This is not to knock Wal-Mart. Their strategy will work, and they’ll gain some sales and some share. But how many rabbits can there be left in the hat?
The two biggest economic drivers impacting retail sales across different sectors are Employment and Inflation (“Economics of Consumer Demand“). The impact of these two on retail sales are almost equal in magnitude and act in opposing directions. Other factors like interest rates and housing have some impact but nowhere near the effect of these two. Since prices and inflation are synonymous, Wal-Mart’s slashing prices should counter softness in the economy (coming from declines in employment and the resulting decline in personal income).
The difference in this economic downturn vs. other recent ones is the risk of ‘stagflation’ (rising prices with declining incomes). In such an economic setting, Wal-Mart’s move of cutting prices has the makings of a master-stroke and Wal-Mart has deep enough pockets to pull it off!
During market downturns, companies with strong cash reserves invest heavily in building market share. This is what Wal-Mart is doing, and capitalizing on its leadership as a “low price leader.” The move is smart, timely, and most importantly it is congruent with their vision and mission.
Ted Hurlbut is dead-on with this one. The folks in Bentonville know that when the industry is struggling, that’s the best time to strengthen your position as the price leader. Competing retailers couldn’t keep pace with Wal-Mart on price before. What options do they have now?
Clever marketing at an interesting time in the season.
Post Christmas/New Year holiday, pre-Valentines day.
Super Bowl is now another national holiday.
“Lowest prices every day” is not the WM mantra that WM wants being echoed at this time when they are “dropping prices.”
So now they’re pricing lower than “lowest”?
The basic marketing elements of the plan are pretty good–using “economic stimulus” in a time when the term is all over the news, piggy backing on the Super Bowl, and the like–however the actual price rollbacks are pretty meaningless.
Why? Well, they are rolling back prices on things most of their customers can’t afford to buy–or won’t buy–right now. (I know, that’s the point, get them to spend by lowering the price.)
Not good. The typical Wal-Mart shopper just can’t afford much more than basic grocery, clothing and related purchases right now. In fact, even wealthier consumers are cutting back. The luxury goods market is beginning to take a hit. (Time for shopping shuttles to fly in folks from the United Arab Emirates I fear.)
If Wal-Mart really wanted to use the “Economic Stimulus” language to its full (and real) marketing advantage–they would package this marketing initiative as a set of discounts on basic food and grocery items, including health and beauty care.
MOn, pop and th kids might not be able to buy a new TV, iPod or washing machine, even if stimulated–but give them some decent discounts on toothpaste, cosmetics, food and similar items–and they will spend more. They also will buy some non-essential groceries–snacks, higher-end hair shampoo, lotions, etc, than they would without the “REAL” economic stimulus campaign.
So, I will watch the Super Bowl on my four-year old TV. During the game I’ll wash my clothes in our 8 year-old washing machine and dry them in the 4 year-old dryer (had to break down and buy a new one of those 4 years ago)…
But give the masses some “real” economic stimulus on soda pop, snacks, and some basic grocery items Wal-Mart, and I promise I will spend at least an extra 30 bucks more than I will without it on my next trip to the SuperCenter. I have to say that figuratively of course, since there isn’t one in my city. But if there was…well, you get what I mean.
My first thought was “I thought they were an EDLP retailer?” If they are already selling at the lowest every day low price, how can they afford to drop prices? Of course, we all know that they aren’t really selling at the lowest price or even lower than much of their competition. But, they have done a masterful job of selling the image that they are the lowest.
I am neither a WM lover or hater, but have always been very impressed with their operations and successes. They do run a very tight ship with impressive cost controls and buying power. I do think that this is a brilliant marketing move and will really put the squeeze on their competitors.
Wal-Mart’s aggressive roll back program picked up steam this past fall when they announced rollbacks on hundreds of items in the toy department well in advance of Christmas, followed by announcements in Electronics towards holiday. Another bullet was fired before the traditional black Friday shopping frenzy when Wal-Mart announced that to make it more convenient for their customers they would make their special deals available a full week prior.
Wal-Mart is cementing (or perhaps is re-cementing) their traditional image as a price leader and it seems to be resonating with their traditional customer base. Wal-Mart reported stronger than expected comps over the holiday period, beating Target in the process.
While roll backs are not a new tool in Wal-Mart’s arsenal, what is new is their aggressive marketing of the price reductions. It is likely that this tactic was a best practice coming out of ASDA who, like their competitor Tesco, use the press and price reductions in their attempt to achieve price leadership with the consumers.
The time is ripe for Wal-Mart to reestablish their low price image. There are millions of Americans whose disposable income is greatly impacted by the rising cost of living here and Wal-Mart is ready to reassert themselves in the public’s eye as THE place to SAVE money.
The BIG just get BIGGER, don’t they?
So big whoop, they will now be selling 4 12 packs of Pepsi 12 oz cans for 10 bucks.
A&P and its family of banner stores does that for less, every other week.
So I don’t think many shoppers in the Northeast, anyway, will be wasting their precious gallons of gas to drive out of their way to a Wal-mart to save pennies any time soon.
After all, true savings is in the overall quality, selection, perceived value, and customer service provided by a store, not just pure price points.
Just hoping the American consumer sees through this sham.
Every retailer struggles to find an attractive angle or hook or theme for “Stuff on sale: buy today!” Wal-Mart has constant price increases and decreases. Instead of the same dreary Valentine’s Day Sale or President’s Day Sale or Football Madness like 125,000 other stores, some creative person came up with a theme taken from the news headlines. Bravo!
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Two Words: Buy Stock
Say what you will about Wal-Mart, but they certainly know how to spot an opportunity and take advantage of it. Plus, it’s very brand right AND just a good thing to do right now. Harmonic business convergence, good for them.
Sam Walton is purported to have said, “if you see your competitor drowning, go over there and stick a hose down his throat,”…guess they’re on course.
Price Rollback: A favorable occasion for grasping financial opportunity from a disappointing economy. And when Wal-Mart is the “muscle beach” initiator it thins down the conventional competition and modifies shares of market.
It’s actually the manufacturers and trading partners that take the hit, so you hope it doesn’t cause a fallback on the economy, however the massive rollback, albeit a bit of a contradiction to the solid EDLP image and philosophy, will serve as a short term stimulus because of Wal-Mart’s size and influence on other retailers.
Ah…saving the Super Bowl! How noble! I’m sure that campaign will be successful, but let’s face it–if Wal-Mart wants to make the lives of its shoppers better it could have a much broader impact by extending the number of deep discounted prescription drugs or slashing prices on core grocery items like bread, milk, etc. Somehow I can’t shake the image of those new big screen televisions sitting on the curb outside a series of foreclosed, subprime-financed homes. The idea that you can give people great savings “when they need it”–i.e., coincidently timed around your promotion calendar–is touching, but still patently self-serving.
You have to hand it to Wal-Mart, this is a great marketing idea and will reap big dividends for them. The timing is perfect. The CPG companies are probably participating in the program which is a win/win.
The average consumer wants to get as much out of their budget as possible and with the announcement of an additional price decrease, consumers will be enticed to shop at Wal-Mart. Competitors will have to follow suit, probably with other types of promotions like buy one/get one or bundle pricing discounts, etc. Consumers that prefer Target over Wal-Mart will not pay a 15% premium. It also makes sense with gas prices the way they are to get them in with discounts on many staples and to become the one stop place for all the household/food items.
Wal-Mart’s price rollback is sure to win market share from other retailers selling commodities and basics. Once these rollbacks build the traffic back, consumers will buy more per visit because they want to optimize their investment in gas to get to the store. When they receive their checks from the government and their tax refunds, they’ll continue buying from Wal-Mart.
On the supply side, Wal-Mart is the master of being in stock and driving down costs to the bare minimum. Inventory turns should increase.
Meanwhile, Wal-Mart is managing its energy expenses better than any of its competitors and improving its employee loyalty.
2008 is looking good for Wal-Mart despite the economy’s woes and despite the efforts of its many great competitors.
When business is at its weakest, it is the best time for a market leader to jump in and exercise its financial muscle to grab away market share. Wal-Mart is investing in the short term in its long term financial success.
Wal-Mart saw the economic slowdown coming before many of its competitors. Management was quoted recently saying that their ad tagline (“Save Money. Live Better.”) was developed in response to rising gas prices–and anxiety–early in 2007. Looking at the results for December, it’s clear that the competitors who took a more upscale and aspirational position didn’t fare as well.
So it makes perfect sense for Wal-Mart to continue this strategy into 2008. There is no sign of an economic uptick anytime soon (at least until the second half), so a strategy to price seasonal categories aggressively plays right into Wal-Mart’s brand position and ability to gain share in tough times.
This is another brilliant marketing move on Wal-Mart’s part. By being proactive with the economic concerns that are on their customer’s minds, they reinforce their low price positioning and also give themselves a platform to deliver targeted seasonal promotions.
Whether you are a fan of Wal-Mart or not, you have to concede that they have transformed retail in terms of delivering the best price possible to the consumer. If they are looking at the upcoming rough patch of the economy as an opportunity to give up some margin points in order to win more foot traffic, it could put another nail in the coffin for Kmart and some of the other regional hypermarts.
First off, this is a marketing activity, not a PR tactic. PR is just used to promote the rollback. Semantics, maybe, but as a PR person I can tell you we have precious little to do with pricing.
How effective will this marketing tactic be? It will keep consumers thinking about Wal-Mart when they make their shopping decisions, so the retailer will be successful with the primary purpose of the effort, at least in the short-run. Competitors will be quick to address the perceived price inequities and will work to retain customers with their own mark-downs, even if it looks like they’re jumping on the “Save here during the economic downturn” bandwagon. Wal-Mart’s competitors can also use location and convenience to attract shoppers as long as gas is above $3 a gallon. A prolonged price war, however, will have one winner, and it’s based in Bentonville, Ark.
Ryan absolutely nailed it. You have to wonder why these items weren’t discounted before, since Wal-Mart likes to give the impression that it holds nothing back and, at least on price, acts as “the shopper advocate.” But consumer memories are shot, and everyone still has 8 or 9 credit cards, by the last study I read. This is not to knock Wal-Mart. Their strategy will work, and they’ll gain some sales and some share. But how many rabbits can there be left in the hat?
The two biggest economic drivers impacting retail sales across different sectors are Employment and Inflation (“Economics of Consumer Demand“). The impact of these two on retail sales are almost equal in magnitude and act in opposing directions. Other factors like interest rates and housing have some impact but nowhere near the effect of these two. Since prices and inflation are synonymous, Wal-Mart’s slashing prices should counter softness in the economy (coming from declines in employment and the resulting decline in personal income).
The difference in this economic downturn vs. other recent ones is the risk of ‘stagflation’ (rising prices with declining incomes). In such an economic setting, Wal-Mart’s move of cutting prices has the makings of a master-stroke and Wal-Mart has deep enough pockets to pull it off!
During market downturns, companies with strong cash reserves invest heavily in building market share. This is what Wal-Mart is doing, and capitalizing on its leadership as a “low price leader.” The move is smart, timely, and most importantly it is congruent with their vision and mission.
Ted Hurlbut is dead-on with this one. The folks in Bentonville know that when the industry is struggling, that’s the best time to strengthen your position as the price leader. Competing retailers couldn’t keep pace with Wal-Mart on price before. What options do they have now?
Clever marketing at an interesting time in the season.
Post Christmas/New Year holiday, pre-Valentines day.
Super Bowl is now another national holiday.
“Lowest prices every day” is not the WM mantra that WM wants being echoed at this time when they are “dropping prices.”
So now they’re pricing lower than “lowest”?
The basic marketing elements of the plan are pretty good–using “economic stimulus” in a time when the term is all over the news, piggy backing on the Super Bowl, and the like–however the actual price rollbacks are pretty meaningless.
Why? Well, they are rolling back prices on things most of their customers can’t afford to buy–or won’t buy–right now. (I know, that’s the point, get them to spend by lowering the price.)
Not good. The typical Wal-Mart shopper just can’t afford much more than basic grocery, clothing and related purchases right now. In fact, even wealthier consumers are cutting back. The luxury goods market is beginning to take a hit. (Time for shopping shuttles to fly in folks from the United Arab Emirates I fear.)
If Wal-Mart really wanted to use the “Economic Stimulus” language to its full (and real) marketing advantage–they would package this marketing initiative as a set of discounts on basic food and grocery items, including health and beauty care.
MOn, pop and th kids might not be able to buy a new TV, iPod or washing machine, even if stimulated–but give them some decent discounts on toothpaste, cosmetics, food and similar items–and they will spend more. They also will buy some non-essential groceries–snacks, higher-end hair shampoo, lotions, etc, than they would without the “REAL” economic stimulus campaign.
So, I will watch the Super Bowl on my four-year old TV. During the game I’ll wash my clothes in our 8 year-old washing machine and dry them in the 4 year-old dryer (had to break down and buy a new one of those 4 years ago)…
But give the masses some “real” economic stimulus on soda pop, snacks, and some basic grocery items Wal-Mart, and I promise I will spend at least an extra 30 bucks more than I will without it on my next trip to the SuperCenter. I have to say that figuratively of course, since there isn’t one in my city. But if there was…well, you get what I mean.
My first thought was “I thought they were an EDLP retailer?” If they are already selling at the lowest every day low price, how can they afford to drop prices? Of course, we all know that they aren’t really selling at the lowest price or even lower than much of their competition. But, they have done a masterful job of selling the image that they are the lowest.
I am neither a WM lover or hater, but have always been very impressed with their operations and successes. They do run a very tight ship with impressive cost controls and buying power. I do think that this is a brilliant marketing move and will really put the squeeze on their competitors.
Wal-Mart’s aggressive roll back program picked up steam this past fall when they announced rollbacks on hundreds of items in the toy department well in advance of Christmas, followed by announcements in Electronics towards holiday. Another bullet was fired before the traditional black Friday shopping frenzy when Wal-Mart announced that to make it more convenient for their customers they would make their special deals available a full week prior.
Wal-Mart is cementing (or perhaps is re-cementing) their traditional image as a price leader and it seems to be resonating with their traditional customer base. Wal-Mart reported stronger than expected comps over the holiday period, beating Target in the process.
While roll backs are not a new tool in Wal-Mart’s arsenal, what is new is their aggressive marketing of the price reductions. It is likely that this tactic was a best practice coming out of ASDA who, like their competitor Tesco, use the press and price reductions in their attempt to achieve price leadership with the consumers.
The time is ripe for Wal-Mart to reestablish their low price image. There are millions of Americans whose disposable income is greatly impacted by the rising cost of living here and Wal-Mart is ready to reassert themselves in the public’s eye as THE place to SAVE money.
The BIG just get BIGGER, don’t they?
So big whoop, they will now be selling 4 12 packs of Pepsi 12 oz cans for 10 bucks.
A&P and its family of banner stores does that for less, every other week.
So I don’t think many shoppers in the Northeast, anyway, will be wasting their precious gallons of gas to drive out of their way to a Wal-mart to save pennies any time soon.
After all, true savings is in the overall quality, selection, perceived value, and customer service provided by a store, not just pure price points.
Just hoping the American consumer sees through this sham.
Every retailer struggles to find an attractive angle or hook or theme for “Stuff on sale: buy today!” Wal-Mart has constant price increases and decreases. Instead of the same dreary Valentine’s Day Sale or President’s Day Sale or Football Madness like 125,000 other stores, some creative person came up with a theme taken from the news headlines. Bravo!