Wal-Mart tightens grip on US retail industry

01 April 2010

BENTONVILLE: Wal-Mart, the world's biggest retailer, has tightened its grip on numerous areas of the US retail industry, helped by a focus on price and its marketing strategy, according to a new study.

Colloquy, the consultancy, surveyed 3,500 people in the US in order to gain an insight into where they were making purchases, and to establish which chains commanded the highest levels of loyalty.

It found that "low prices" was the number one priority among its panel at present, followed by "customer service" and "quality products".

By contrast, factors such as "location" and offering a "wide selection" had fallen down the list when compared with a similar analysis conducted two years ago.

Some 52.7% of the sample agreed that having a household budget was now "more important than ever", while 46.6% were taking active steps to save money, like collecting coupons.

With regard to grocery shopping, Wal-Mart was the most widely-used outlet in every region except the north-west, when it slipped to second behind Safeway.

"Wal-Mart's decision to rebrand itself and change its mass advertising strategy seems to be paying off," Kelly Hlavinka, author of Colloquy's report, argued.

"Moreover, the message of low prices and value resonates with customers and leaves behind a feeling that Wal-Mart is partnering with its customers to get them through difficult times."

Despite this, when it came to the supermarket chain which generated the most loyalty, Wal-Mart only led the index in the north-east and north-west, with scores of 9.1 points and 8.5 points out of ten in turn.

Kroger took the honours in the mid-west on 8.8 points, as did Publix in the south-east on 9.0 points, and H-E-B in the south-west on 9.1 points.

These results were almost exactly reflected in the personal care segment, with Wal-Mart dominating the frequency and index standings, a considerable improvement from 2008.

Walgreens, which claimed pole position in the mid-west and finished in a tie with the discounter in the south-east, was the sole company to pose a real challenge.

"A national loyalty strategy eludes most of these chains ... which we believe has opened the door for Wal-Mart to make significant inroads in this sector," said Hlavinka.

She added that CVS is the only major operator in this category to have built a successful loyalty card scheme programme to date, with firms like Rite-Aid also heightening its focus on this area.

In further demonstration of the broader impact of the recession on consumer preferences, Wal-Mart was named as the "department store" which participants visited most often.

This is a consequence of the "increasingly blurred distinction between department stores and mass merchant," according to Hlavinka.

It also headed the loyalty league in the north-east and mid-west, with index totals of 8.3 points and 8.5 points respectively, and was in second in the other three markets.

Target took the top spot in the south-east on 8.5 points, while Macy's was afforded this status in the south-west on 8.6 points, and Costco in the north-west on 9.1 points.

While Macy's, Saks and JCPenney have started to roll out various loyalty platforms, none has done so in a manner that has replicated the best practices established elsewhere.

"It may be time for traditional department stores to learn from other retail categories," Hlavinka suggested.

Data sourced from Colloquy; additional content by Warc staff