Wal-Mart to soften stance on major brands

19 August 2010

BENTONVILLE, Arkansas: Wal-Mart, the retail giant, is planning to expand the range of national brands available on its shelves in an effort to more accurately reflect the needs of shoppers.

Bill Simon, recently appointed as president and ceo of the company's US arm, argued the industry landscape is currently characterised by a variety of "challenges and opportunities".

He added: "Customers continue to spend cautiously, especially on discretionary products, and the paycheck cycle remains pronounced.

"We believe it will take some time to see significant changes in comp[arative] sales, but we are beginning to see more encouraging traffic trends."

In a bid to respond to the evolving preferences of consumers, Wal-Mart introduced Action Alleys containing goods being sold on special offer, with mixed results.

"The deep rollbacks we featured in May and June did improve price impression, but they did not generate the level of top line sales we had hoped for," said Simon.

"In July, we put the emphasis back on our core EDLP [Everyday Low Price] model."

One of the hallmarks of Wal-Mart's strategy during the downturn has been delisting under-performing national brands in favour of own-label alternatives or simply to reduce clutter.

However, it is making targeted revisions to this approach, working both with its suppliers and using in-house data to inform its activity in this area.

Such an increase in its inventory, Simon suggested, is primarily intended to "meet the needs of our customers", who require a balance between affordability and a wide selection of goods.

"We are restoring thousands of products to our assortment and adding new items. We plan to ... let customers decide through their purchase decisions what to include in our assortment," said Simon.

"In the coming weeks and months, our assortment will be more relevant to our customers, with the right mix of new and innovative products."

E-commerce has been identified as a key future source of growth by Wal-Mart, and its online hub received 35.5m visitors from PCs in June according to ComScore, the research firm.

A further 2.23m people logged on via mobile phones in the same month, figures from media monitoring company Nielsen have shown.

"Walmart.com continues to grow at a rapid pace," said Simon. "Average order size was essentially flat, but traffic increased significantly.

"Sales of many categories were strong, including health and beauty, home, and entertainment. We moved many large items such as playground equipment and pools to the online channel and saw significant upticks in sales of these products."

Turning to advertising, Simon revealed Wal-Mart had cut its outlay on communications having previously allocated an unusually high level of resources to this aspect of its operations.

"We changed our advertising strategy and brought media expenditures back in line with historical trends," he said. "Advertising expenses were up significantly last quarter versus previous periods."

Sustainability will be another major subject of focus going forward, building on the momentum gained by the creation of a scorecard against which to measure its suppliers and other partners.

"We will continue to broaden and accelerate key sustainability initiatives, as they help make us a better company and contribute to expense savings," Simon said.

"Our logistics team continues to deliver more improved fleet efficiency. We are also expanding our use of fuel cell technology to power our stores."

Data sourced from Seeking Alpha; additional content by Warc staff