Wal-Mart
01 March 2010
by Doug
RamsdaleSource:
http://www.opi.net/Currently shoppers in the U.S. are being bombarded with TV and radio ads proclaiming that a 'certain' superstore has 'low prices'. Why are they spending millions of dollars to say something that people used to take for granted? Well, something has changed and it's much more than perception I live just north of the city of Chicago. My neighbours are well-educated and typically work in corporations or run their own businesses. Most of them do some work at home. Fairly typical middle income folks, I'd say, and I'm seeing more and more of them at the local
Wal-Mart these days.
They are not your typical
Wal-Mart shoppers, but when asked why they are now shopping there, their responses should send a strident signal to the Big Box superstores (
Staples,
Office Depot, &
OfficeMax) that they are losing a key segment of their retail customer base.
What happened?
The recession has wiped out jobs, retirement accounts and home values. Americans have reacted with new priorities and habits, elevating value to the top in their buying decisions. This has literally opened the door for
Wal-Mart.
And
Wal-Mart was ready and waiting with the welcome mat when they arrived.
Two years earlier,
Wal-Mart implemented a multi-pronged strategy to address the inroads achieved by
Target and others. Always strong with low-income shoppers,
Wal-Mart's efforts to woo more affluent buyers had fallen flat. Intensive self-appraisal showed that consumers know about low prices, but were put off by narrow aisles often blocked with merchandise and harboured suspicions of
Wal-Mart as a good corporate citizen.
So
Wal-Mart made changes. Aisles were widened and uncluttered, the lighting brightened, and a softer tone is reflected in new signage and ad themes. Once the bad guys of the media,
Wal-Mart is winning over people with its progress on highly charged fronts like labour relations and environmental issues. Last year alone,
Wal-Mart created over 20,000 new jobs.
Wal-Mart has done a great job in boosting 'shopping experience', the 'feel good' factor that is important with more affluent shoppers.
But it's the value proposition that poses the greatest threat to the Big Box superstores, and the one that will keep these new customers coming back.
Here are a few comparisons, not a scientific study, but enough to influence perceptions. At
Wal-Mart, the price on my printer's cartridge is $19.50, 2.5 percent less than the superstore price. Pretty close, but when we look at stationery items, the gap widens considerably.
The
Wal-Mart price for a ream of copier paper is $2.97, from a respected national brand. The lowest price at a superstore was $4.49 for an own brand, a 35.2 percent difference.
On another basic item, #10 envelopes, the
Wal-Mart price for a 40-pack of branded 'peel and stick' is $2.97. The lowest price at a Big Box superstore is 51 percent higher on the smallest pack size, a private label version. On a branded three ring plastic binder,
Wal-Mart is lower by 28 percent.
These spreads are huge, and allowing for differences in pack sizes and specifications, they create a powerful perception with value-minded shoppers.
Equally powerful is the
Wal-Mart emphasis on brands. The stationery aisles feature
3M,
Avery,
Mead,
Ampad, Pilot,
Dymo,
Fellowes and others, while the superstores often promote their own names. Subjectively, the nationally-branded product can look superior and reinforce
Wal-Mart's quality and value proposition.
Vendor support helps
Wal-Mart to garner support from vendors in other ways too. Tough merchants that they are, a proven supplier can expect loyalty and a far simpler business relationship with the
Bentonville crew. An example of this is pricing. While the superstores prefer a combination of product price plus a programme that can reach stratospheric levels,
Wal-Mart is focused on the net invoice cost.
Wal-Mart vendors believe that this is what sharpens the price in the store.
Simplicity lowers costs and errors. How much time and expense do suppliers waste in negotiations on deductions and fees with the Big Box superstores?
Wal-Mart has become a mainstream account for office products suppliers, something we at
OPR can attest to from the help we've provided several clients over the past year.
Their various advertising campaigns are clear proof that the superstores take the threat seriously but it's going to take more than marketing to overcome it. At least they are no longer looking the other way.
Assortment, personal service, product knowledge and an array of new services are important, but in retailing they are not a sharp enough competitive edge. What changes perception? Reality changes perception. Just ask Tiger Woods.
If the superstores can be competitive on branded printer cartridges, why not envelopes? If
Wal-Mart can sell a national brand, why the Big Box obsession with private labels?
Irwin
Helford built Viking into arguably the most profitable office supply business in the world with a simple philosophy. Bring customers in with a low price, then keep them with great service and selection. It is time to ask: "If you don't bring 'em in, how you going to keep 'em?"
For additional savings on office supplies check out America's Office Source.
