When Chief Marketing Officer Bob Connolly retires later this year, he'll be the latest in a growing group of "old guard" Wal-Mart Stores executives to exit-a sea change some close to the company believe is responsible for a shift away from the chain's core everyday-low-price marketing strategy.
Mr. Connolly, 61, who announced earlier this month he'll leave by the end of the year, is the latest of five senior Wal-Mart officers to depart or announce retirements in the past year (see chart, P. 38). That leaves only a few senior executives-albeit one of them CEO Lee Scott-who worked alongside founder and EDLP champion Sam Walton, who died in 1992.
Some close to Wal-Mart believe growing pressure on the company, including scrutiny of sluggish same-store sales and such hot-button issues as the nationwide class-action sex-discrimination lawsuit, may have hastened several of the recent departures.
The departures have accelerated churn, which would be substantial anyway at such a fast-growing company. And with that churn comes an influx of and more influence for executives schooled elsewhere. "Everybody who comes into Wal-Mart brings their high-low [promotion philosophy] baggage to an everyday-low-price retailer," said one Wal-Mart veteran. "When the going gets tough, and you're holding a hammer like that, every problem looks like a nail. They very easily fall back to what they've always known."
When going did get tough over the holidays for Wal-Mart, as November sales results disappointed, that high-low mindset was evident in the item-price ads Wal-Mart quickly deployed on TV, newspaper and radio starting in December and continuing into the post-holiday period and new fiscal year, he said.
The approach is surprising to Wal-Mart veterans and vendors for two reasons. Not only does it smack of how countless supermarket and department-store retailers have advertised through decades of decline in their industries, but it also has Wal-Mart putting more money into radio and newspaper-media it has long avoided as inefficient and needlessly targeted for what may be the most mass-market brand ever, they said.
Wal-Mart did not comment for this story. Still, the new approach is the latest in a series of increasingly rapid marketing and communications shifts for the world's biggest company. Through most of 2004, Wal-Mart veered from its "Always Low Prices" message by relying heavily on image ads, from Omnicom Group's GSD&M, Austin, Texas, aimed at countering negative publicity.
The item-price ad blitz appeared to compensate for a surprising decision not to mail the December circular but distribute it only online and in stores-surprising for a crucial sales month.
The new wave of item-price ads might seem a boon to brand marketers, but "If you have a premium brand, it's not exactly welcome," one marketer said, noting the nationwide ad and in-store display program with Wal-Mart means a cost-inefficient shifting of gears in production and logistics. It's equally inefficient for Wal-Mart, said some vendor and company veterans, who believe the increased advertising and supply-chain costs will drive prices higher or-the unthinkable-lower margins for Wal-Mart.