Consumers looking to basics, says Wal-Mart ceo

05 October 2009

BENTONVILLE, Arkansas: Consumers around the world are looking to fulfil their "basic needs", but are also displaying considerably higher levels of caution when it comes to making discretionary purchases, Mike Duke, ceo of Wal-Mart, the retail giant, has said.

Around 140 million Americans currently shop at the discounter's stores each week, and it has been one of the few firms to see its sales rise during the recession, as people trade down to cheaper brands.

Despite this, the world's biggest retailer's total revenues declined by 1.4% in the last quarter, as a slight gain of 0.3% in its home market was offset by the decrease of 5.1% posted by its international arm. 

"Our customers are still under a lot of pressure. We can see it by the way they shop, the products that they purchase and the timing of their purchases," Duke said.

Buyer behaviour is also increasingly shaped by the "pay cycle", he added, with the start of each month seeing particularly high levels of demand.

More broadly, certain patterns of activity are being replicated across the various countries in which Wal-Mart operates, its ceo stated.

“There are some global trends. Customers are buying basic needs but are not spending as much on apparel,” said Duke.
"Consumers in mature and developing markets have said, 'I will invest in my basic needs but defer on discretionary items.'"

However, even though sales recently slowed, the Arkansas-based firm will not seek to increase its gross margins; rather "our DNA is to generate savings to pass on to customers," he added.

Earlier this month, Robson Walton, Wal-Mart's chairman, said health and well-being was a sector where the company has seen considerable interest, a trend Duke also drew attention to.

"What is interesting, vitamins have been strong. You might think that would be something customers would cut back on. But customers say, 'I have to stay healthy. I can't afford to miss work. I can't afford to get sick'," said Duke.

Another area of focus for the US firm has been sustainability, where consumer perceptions of its activity have improved dramatically in the recent past.

By contrast, research released last week revealed the messages of many brands attempting to stress their "green" credentials are failing to resonate with Americans.

“The area of sustainability was one where we employed a great deal of advice from outside the company," Duke said.

"And we saw that we could make great progress, that it was good for our business, and as a by-product that it was also good for our reputation, and good for our brand. Sustainability is saving millions of dollars and benefiting our customers and the planet."

Data sourced from Wall Street Journal; additional content by WARC staff