Walmart Gets Back to Basics

In the couple of years since Walmart's Project Impact push seemingly alienated its core customer base, the Bentonville, Ark.-based mass merchandiser has returned to focusing on its traditional moderate-income shopper without completely abandoning the more upscale customer it had been targeting.Under the watchful eye of the retail industry, Walmart has recommitted to its "Everyday Low Price" standards and revived Action Alley, while moving aggressively into social media and mobile marketing as smartphones become more ubiquitous, even among those of modest means.Walmart is competing with the growing dollar-store segment to win back any shoppers it might have lost, especially since customers of limited means seem to be pinching pennies more than ever as the moderate recovery continues.Aaron Elleman, director of shopper marketing for Walmart at Kellogg Co., figures Walmart's core shopper earns between $25,000 and $75,000 per year, comes from a young family with "multiple children," and makes several trips per month to the store. During Project Impact, with Action Alley closed and thousands of SKUs removed, "What they found was, many shoppers couldn't find specific items they wanted," Elleman says. "Walmart has taken a step back and said, 'You know what? We need to design the store for our core shopper' – the person who is driving the majority of the dollars through their store.""As they backed away from Project Impact, you saw them really go to their core shopper – the price-value shopper," says Robin Sherk, lead analyst on Walmart for Kantar Retail, Cambridge, Mass. "You saw a lot of dollar-store SKUs going in." Walmart now seems to be trying to find a balance, she says, talking about an "hourglass" assortment that reaches out to both low- and high-end shoppers. "They're reaching across but not alienating the core, which was the mistake they made last time."David Incao, vice president of global Walmart for Elmer's Products, sees the retailer reaching out across the spectrum. "They're trying to reach everyone with a renewed commitment to lower everyday prices," he says. "It sure seems like their baskets are trending in a different direction than 12 to 18 months ago. They've improved their assortment." That includes the craft and fabric category, where Elmer's is often placed, "an area where they've walked away from consumers in the past," Incao says.Richard Moulton, director of shopper marketing for Walmart at Kimberly-Clark, agrees that Walmart has returned to its core competency without "walking away from brand-aspirationals. They're putting more merchandising back into Action Alley, expanding SKUs they took away, adding more to the shelf, [and] focusing on core customer needs, which I think is very smart." During Project Impact, "maybe folks came in to cherry pick [one item], and they probably alienated more of their core customers."Some of those core customers walked away, Moulton says, while others still shopped there but reduced their basket size. To continue winning them back, Walmart needs to further integrate merchandising and marketing, he says, a move they're starting to emphasize recently. Specialty competitors like Petco, Kroger and CVS/pharmacy have found ways to compete besides price alone, such as with the use of loyalty cards, another idea that could benefit Walmart, Moulton suggests.Landon Nobles, chief operating officer at Kendal King Group, Kansas City, Mo., says Walmart has gone back to its "product, price and assortment" roots. "The focus today is on increasing assortment, reintroducing products and lowering prices. It's simple and straightforward. They're trying to reach out to any customers they may have lost when they changed strategy a few years ago. "The reintroduction of Action Alley has helped to spur impulse purchases, Nobles says. Taken together, Walmart's adjustments are "definitely" working. "The proof is in their numbers. Sales are on the rise."Online, Social and MobileWalmart began paying more attention to its website, as the company's most common competitor for its regular shoppers' dollar has shifted from Walgreens to Amazon.com, Sherk says. But "Walmart is acutely aware they're not an online retailer. It's a new type of threat."Moulton believes Walmart has an opportunity to grow its e-commerce in categories like baby products, one of Kimberly-Clark's main spaces and which Amazon.com and specialty online retailers like Diapers.com have moved into aggressively. "There is opportunity to get into that game and grow a little faster," he says. "I'm not sure they'll ever get their fair share of the online presence. It's something they're way behind on." Moulton adds that Walmart has done a "nice job" of building up its Facebook presence, with a goal of 30 million fans.The mass merchandiser has become more aggressive with social media and mobile, Sherk agrees, because "they realize the importance of those two technologies to how we shop. We've seen them put in a lot of big investment." In addition to putting out messaging, the company tracks Facebook and other social media to find out what's "trending," she says."They are as active as any retailer in social media," Nobles says. "Staying on top of the latest trends keeps them relevant with the customer. It's a forward-thinking approach."Incao sees the active use of Facebook as part of a "360 approach" that continues to include traditional media like TV or print. "They leverage all the media available to them," he says. "They've become more of a multichannel marketer." This extends down to local stores, which have set up Facebook pages that offer promotions – like a blast suggesting that fans of the store come in and buy iced tea on a warm day.Elleman sees the local-store Facebook pages as key to the social media strategy. "It's been really trying to leverage social media to talk about relevant messages in relevant markets," he says. "They're going to a place where, if it's Michigan and it's winter and it snows, they can update the Michigan stores with de-icer. When it's back-to-school in the South, they can talk about regionally appropriate messages via these Facebook pages, using that to connect back to the store and into Walmart.com."With mobile, Walmart's shoppers probably have roughly average adoption despite their moderate-income profile, Sherk says, adding that the superstore chain hasn't done much yet to integrate mobile apps with in-store through the use of QR codes; she figures it's a couple of years away.Moulton figures nearly half of Americans have smartphones, and that blacks and Hispanics tend to over-index on them. But Kimberly-Clark's categories don't necessarily lend themselves to promotions via QR codes. "When you're buying an $8 package of paper towels, we get some interaction, but the jury is still out from where I sit," Moulton says. "I'm not sure we have a great sense of what's next as it relates to scanning. Mobile is going to emerge quickly. We've just got to figure out how it applies to our business and be ready for change."Elleman sees mobile as a major focus, whatever the case may be about smartphone adoption among Walmart's core customer base. As one example, he mentions the "Meal Solutions" mobile app, which resulted from the insight that "a large percentage of moms who are preparing dinner didn't know what they were going to cook that night." The app provides a short grocery list at Walmart with a solution.Walmart refers to women as the target customer in-store, Nobles says. But men are not left out. "If you're in the door, you're a target," he says. "Convenience and impulse are a key focus in terms of modular strategy. … If you are in the store, there's a path for you, no matter who you are."Incao believes multicultural families and men are receiving greater focus than in the past, although overall, "My perception is they're focusing on the activities that are important to people and not being as concerned about who that person is. They've expanded fishing, sporting goods and guns in a big way, and you can make the leap and say, 'It's mostly guys that buy guns.' But probably not exclusively."The Reshuffled CompetitionVis-a-vis competition like Target, supermarkets and dollar stores, Walmart sees and sells itself as a one-stop shop, Sherk says. It has a greater assortment, wider range of categories and more services than dollar stores or grocery stores, and it provides a greater value than Target and other higher-end retailers, she says. And the company's messaging about providing the fresh produce that dollar stores don't has become more front and center in recent years.Incao sees Walmart as refocusing on its historic status as the "low-price leader," and he points to a recent TV spot in which actual shoppers are intercepted at other stores, brought to Walmart with their receipts, and shown how much they might have saved. "They've gotten focused on what made Walmart big, and that's what they're talking about," Incao says, "whether it's solutions for easy meals for a family where both parents work, or a simple way to upgrade your house by painting, or simple craft projects."Walmart recognizes that its diversity of offerings and confidence as the No. 1 mass merchandiser are its strengths, Nobles says. "I don't think they like to compare themselves to anybody," he says. "They're tailoring their offering to the customer's needs and not to what the other retailers are doing. Certainly they're paying attention, but the attitude is that Walmart leads the charge and everybody else follows.""They're going after that shopper for whom price is important," Elleman says. "We've seen the focus: 'We're going to get back to what worked well for us historically, everyday low cost leads to everyday low price – which leads to more people in stores.'"

Walmart Gets Back to Basics

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