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UPCOMING EVENTS
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Is Walmart Caught in the Middle?
Advertising Age ran an article last week titled, “Stuck-in-middle Walmart Starts to Lose Share”. When I saw the headline, I had an instant sense of déjà vu, because it struck me that ‘stuck in the middle’ was exactly the problem that department stores began to be faced with a few decades ago. It’s a problem they have never solved.
The irony though, is that Walmart was one-half of the department stores’ problem – those stores were caught between the better selection and service of specialty stores and the better pricing of discounters like Walmart, Kmart, and Target.
The question today is whether Walmart, having lowered the price expectations of shoppers, is now being hoist by its own petard. There are now two categories of ‘deep discounters’ – dollar stores and limited assortment grocers (e.g., Aldo, Save-A-Lot). And some price comparison studies are finding that Walmart is being matched or bettered on price by Target and even by some supermarkets.
These developments cause some to question whether Walmart, in its efforts to upgrade the shopping experience and the look of its stores through Project Impact, through its SKU rationalization efforts, and through efforts to increase its margins, has lost what was once a single-minded focus on low prices.
Walmart lost customers last year that it had gained during the recession by spending more money on transforming the look of its stores and adding more technology. Meanwhile, supermarkets put their focus back on cutting prices. “We believe shoppers no longer consider the price savings offered by WalmArt to outweigh the experience and convenience of shopping at the supermarkets … ” |
Knowing how good Walmart’s data is, we can safely assume that nothing we’re reading is coming as news to Walmart. They knew all this long before anyone else. So what are they likely to do about it? Most likely, of course, they will lower prices – and who will that hurt?
The cycle of price competition, which grocers became steeped in during the recession, will likely continue and escalate now that WalmArt has signaled further price reductions, Hapoalim Securities analyst Ajay Jain said in a research note Thursday. He noted that investors are still too eager to shrug off a growing belief that price wars are a "relic" from last year. "We still don't see any meaningful signs of recovery taking shape at this time," Jain wrote. He said there are still significant risks for the full-year estimates for Kroger, Supervalu Inc. and Safeway Inc. |
Note that the quote discusses Walmart taking on the supermarkets – what about the deep discounters, who are in rapid expansion mode? Beyond that, can even Walmart fight and win a two-front war? Can they upgrade and become a mid-market store, and at the same time be the low-price leader?
Let’s have three exit questions this week: 1) Is Walmart finding themselves caught in the middle between price competition from deep discounters and a need to expand their market into the middle tier; and, if so, 2) Can they price-cut themselves out of trouble; and, if so, 3) Who will get hurt in the process?
Upcoming Events
TPMA has two great webinars scheduled for April.
On Wednesday April 7th, Infosys will present a webinar titled Maximizing Trade Promo Effectiveness by Leveraging Process, Technology & Outsourcing.
Not only do Trade Promotions form the biggest expenditure bucket, 42% of companies do not have the tools or the manpower to analyze promotion effectiveness. This webinar will explain the levers CPG organizations can employ to address key opportunities. These levers include:
- World Class Processes
- Tools (for planning, promotion effectiveness & visibility)
- Workflows (to streamline interaction between sales, finance, S&OP, etc)
- Outsourcing (master data management, promotions, funds, payments, deductions)
- Reporting & Insights
This FREE event will be on Wednesday, April 7, at 2PM Eastern Time. Click here to register.
And the next Wednesday, April 14th, ThinkVine will present Optimizing your Trade Spend within the Context of all Marketing.
This webinar will introduce game changing Trade Promotion Marketing Optimization strategies that will have a huge impact on how your company spends on advertising and trade promotion in the future.
The fragmentation of media and pace of change of today's dynamic marketplace is forcing Trade Promotion Marketers to leverage new strategies. While a majority of marketing investments are in trade promotion, there are many other marketing investments you can make to influence your consumer purchase probability.
- How do you know which one to leverage?
- How confident are you that you have the right marketing plan in place?
- What would happen if you moved a large portion of your trade budget into an emerging media vehicle?
This event, also FREE, will be on Wednesday, April 14, at 2PM Eastern Time. Click here to register.
In Chicago on May 3-4th, we have our Annual Spring Conference, Recovery 2010: Trade Promotion in the New Decade.
The world has changed for trade promotion marketers... Are you poised for recovery?
Click here to view the agenda and register online.
Online: Luxury and Basics
Two articles this week deal with the difficulties some luxury products see in online retailing, and the steps such marketers are taking in selling their products online.
This report, dealing with high-priced watches, notes that only a few brands are selling online. TAG Heuer is cited as a leader:
TAG Heuer followed about six months ago with the roll-out of its e-tailing program, a portal that directs online shoppers to retail partner sites that are constructed and maintained by the brand for a fee. A sign that TAG Heuer is considering additional online models is the December introduction of Tagheuereboutique.com, where the brand sells eyewear, leather goods and accessories directly to consumers. |
Practically no one is selling direct at present. Given the brands’ dependence on their retailers, that seems a wise move. Jewelers, Financial Times tells us, have been slow to embrace the internet.
“One of the biggest challenges facing jewelers is creating the virtual luxury experience online and providing the adequate ‘luxurosphere’,” says Uché Okonkwo, executive director of Luxe Corp in Paris, a specialist strategy and business consultancy. Ms Onkonkwo has just published the book Luxury Online. “Luxury brands have resisted the web for so long and many were hoping that it would just go away,” she says. “But now jewellery brands have finally understood that the internet is here to stay, so they are playing catch-up. But, so far, there is virtually no one in the world of luxury who is doing it well.” |
Meanwhile, at the other end of the spectrum, Alice.com (whom we featured in a report a few weeks back, and who will be speaking at our Conference in May) says that it has now signed up 150 CPG suppliers.
Alice.com Inc., which operates as an e-marketplace for consumer packaged goods like laundry detergent and toothpaste, is adding several clients per week to its community of more than 150 manufacturers who use Alice.com to sell directly to consumers, says CEO and co-founder Brian Wiegand. Alice.com, which launched in January, currently carries about 10,000 items and expects to offer 25,000 to 30,000 SKUs by the end of this year … |
The Postal Service and Direct Mail
As we’ve noted before, the US Postal Service is in dire straits financially, and a decision will be made shortly about dropping Saturday delivery. The financial problems are caused at least in part by declining mail volumes – few of us write letters any more, we pay our bills online or by automatic withdrawal, etc.
This leaves the USPS with an oversized infrastructure (there are over 36,000 post offices, serving on average only 600 customers per week each), and too many employees. Both problems are difficult to rectify for political reasons.
Our concern, though, is not political – it’s marketing. More than half of all mail is now marketing mail of one type or another (I’ve seen estimates as high as 75%-80%). The decline of the Postal Service and the difficulties that will represent for mail-dependent retailers is simply another change that marketers need to prepare for.
Cola Wars: The Effect on Small Bottlers
The takeover by Pepsi and Coke of their largest bottlers will obviously affect the entire beverage marketplace. One effect will be on the cola companies’ relationships with smaller independent bottlers.
One concern for some smaller bottlers is that the big cola makers might now push for more price promotions in the regions they control, a move that could also drive down prices and profit margins at smaller bottlers. There are also questions about how both companies will handle distribution of any new drinks they launch. |
Regulation: FTC Acts on Exclusive Distribution in Lenses
The Federal Trade Commission has issued a consent decree against Transitions, a manufacturer and distributor of photochromic lenses for eyeglasses. According to the FTC, in working with its direct customers (called ‘lens casters’):
Transitions adopted a general policy not to deal with lens casters that sold or promoted any competing products and terminated the first distributor to sell the new product. Transitions also allegedly engaged in the following "anticompetitive acts": (i) entering into exclusive agreements with certain lens casters, (ii) announcing to the industry its policy of dealing only with lens casters that sold its lenses on an exclusive basis, (iii) threatening to terminate lens casters that did not want to sell its lenses on an exclusive basis, and (iv) terminating a lens caster that developed a competing photochromic treatment to apply to its own ophthalmic lenses. |
In addition, relative to trade promotion issues:
Transitions also allegedly induced exclusive dealing through a combination of payments and rebates to indirect customers—i.e., wholesale and retail labs served by lens casters—in exchange for exclusivity, plus agreements making Transitions the "preferred" brand. The FTC charged Transitions with entering into more than 50 agreements with the largest retail chains, offering up-front payments and/or rebates to induce the chains to enter into long term exclusive agreements that were difficult to terminate. The FTC also charged that Transitions entered into more than 100 agreements with wholesale labs that appointed Transitions as the labs' "preferred" photochromic lens, and that withheld normal sales efforts for competing photochromic lenses in exchange for rebates from Transitions. According to the FTC, Transitions' rebate incentives to induce retailers and wholesale labs to purchase more products from the Transitions line on an exclusive basis were anticompetitive because they forced potential new entrants in the industry to offer the same breadth of products as Transitions in order to be able to effectively compete. |
Quickly Noted
Walgreens Emerges as Unsung Hero of Consumer Electronics
When I think of major CE retailers, Walgreens is not a name that springs to mind, but it turns out they move a heck of a lot of “batteries, chargers, blank media, cables, flash memory and photo services [which help] support bigger-ticket items purchased elsewhere, while providing critical sell-through for mass-channel vendors like Jasco and Coby.” Walgreens’ CE sales totaled $74mil last year – not enough to make Best Buy nervous, but still a significant player in the category.
Twice, 8 March 2010
Surveying Property, Mall Stores Try to Shrink
One way to increase sales per square foot is to reduce square feet. That seems to be the thinking of some mall retailers trying to deal with declining mall traffic. AnnTaylor is shrinking store sizes by one-third. Sales per square foot at US malls have declined in the past couple years from $454 to $401.
Wall Street Journal, 19 March 2010
Bargain Shoe Retailer Payless To Launch Beauty Line
Payless Shoe Source wants to also be the cosmetics source for its customers. As another example of ‘you never know where your next competitor is coming from’ the shoe store will introduce a range of beauty products using brand names from one of its shoe suppliers, Zoe & Zac and Unforgettable Moments. "We've had a lot of progress expanding our accessories line with handbags, sunglasses and hats. We feel that this is a product that our customers would appreciate as well."
Style List, 8 March 2010
Bankruptcy Is Blockbuster's Only Hope
Yahoo’s headline is a little stronger than the article, but even Blockbuster admits that it may have to go into Chapter 11. The company lost $435mil in Q4 and has about $1bil in debt.
Yahoo Finance, 17 March 2010
Senior Manager, Shopper Marketing
Kellogg Company
Rogers, AR
The Senior Manager, Shopper Marketing is responsible for proactively building efficient, profitable, share driving sales and promotional programs tailored for Walmart. For more information, click here.
Trade Marketing Manager
Olympus America
Center Valley, PA
The Trade Marketing Manager will lead the development and execution of the Trade Marketing strategy to achieve defined business objectives across all Olympus Imaging America Inc. product categories. For more information, click here.
Director of Channel Marketing
Retail Fashion/Apparel/Textiles
Providence, RI
Great opportunity to join a growing, upscale, retail/wholesale organization in a newly developed role as Director of Channel Marketing. Seeking seasoned creative and analytical marketing leader with experience creating marketing campaigns and supervising teams in multi channel environment. Strong retail brand exposure is needed. For more information, click here.
