The 46-year-old former Target executive (he joined Wal-Mart in 2000 and was named to his new post May 2) copped to his bull's-eye jealousy in an exclusive, wide-ranging interview with Advertising Age.
And who can blame him? Although Wal-Mart's sales are six times those of Target, the last year has been a good one for the smaller chain and a lackluster one for the world's largest retailer.
Wal-Mart's sales growth at stores open at least a year was just 3%, compared to 5% for Target. Once reliable for double-digit sales growth, Wal-Mart hasn't delivered since 1993, and the trend line isn't promising. From 2002 through 2004, sales growth steadily declined, from 6% to 3%.
Analysts agree Wal-Mart's uncompromising rollback strategy makes it tough to deliver growth, which explains why its stock is trading at 1999 levels. The retailer is relying on marketing more than ever-reporting its highest increase in advertising in fiscal 2004-a 42.9% jump. Wal-Mart's ad costs are fast approaching the billion-dollar mark.
In early June, CEO Lee Scott laid out a plan to court the middle-class shoppers who snub Wal-Mart's apparel and home fashions even as they load their carts with toothpaste and bleach. Wal-Mart doesn't exactly want to make The Robb Report. It just wants to start selling 400-thread-count sheets, and for less than everyone else.
It's a game plan that sounds exactly like the formula that created Target, a $45 billion retailer and the undisputed purveyor of cheap chic.
Wal-Mart's formula since Sam's day has always been about owning what Mr. Fleming referred to repeatedly as the "opening price point" during a recent interview at the retailer's Bentonville, Ark., headquarters.
Mr. Fleming joined Wal-Mart in 2000 as chief merchant of Walmart.com and rose to CEO of the Web unit, overseeing gangbuster growth.
Things are dimmer in the stores division, though, and not just because of his windowless office, where the only view comes courtesy of blown-up photo of the San Francisco Bay-the view from his old desk at Walmart.com.
Advertising Age: You've been quoted as saying Wal-Mart's marketing lacks "clarity of message," even calling it fragmented. What's the first step to fixing that?
Mr. Fleming: We do two big things in terms of marketing. One is TV, and the other is the circular. They don't really look like each other. That's what I mean by fragmented. Obviously they have different roles, but I do believe they need to hang together. Our messages are pretty broad and what we will try to do is identify key segments and customers and identify their needs and talk to them about solutions.
AA: How do you do this?
Mr. Fleming: Customers have little time these days, especially our key segments-working women that have very busy schedules. So there's an opportunity for us to pull together solutions. How do they redo their entire bathroom? Outdoor living is a major trend that people are actually spending more money on fixing up their backyards. We are seeing it's not just about grills and patio sets, but outdoor decor and lighting, things we never really considered. But how do we pull that together in a marketing message? It's not just selling an item.
AA: When I was in the Pineville, Mo., store, a kind of "next-generation" Wal-Mart, the decor was much nicer yet everything is still so linear. Will that change?
Mr. Fleming: There's an opportunity to better define the worlds the customer shops in. We've done some of this, such as different flooring in apparel to define the ambience. Obviously, the garden center looks different and you are starting to see an evolution. But what we want to do is incorporate more customer research and combine that with what are the product trends in the industry and be able to pull together solutions for customers with these big stores that right now can be somewhat confusing. We are going to focus on navigation, so we can help customers get to where they want to go more easily.
AA: Your appointment was touted as key to better integrating Walmart.com with the store. How does that play out?
Mr. Fleming: The online channel has changed the way people shop. The old model was, you get these customers to frequent your store based on their needs and then through merchandising and signage you get them to consider what they want. Now what is happening with electronics, people are going to the Internet first. Then they choose the retailer. It's important for us to be there with these categories they are considering online first and then it just works organically. As we built our business online, we are in front of Wal-Mart customers now and we want to become a source for non-customer, too.
AA: With Wal-Mart's plan to court more upscale shoppers, how do you tweak that with your advertising without losing focus?
Mr. Fleming: It goes back to if you have clear segments and clear objectives by segment. Then we don't just have the same message and we are able to target key businesses. Over time, more gets spent locally. One of our strengths is the store is in the community. So you might have stores that are in very upscale markets that have a completely different sort of customer set than something that might be in a lower-income market. And how do we build our assortments to really address that customer's need and then how do we then talk to them about the stuff that is in their Wal-Mart? We will evolve the way we talk to customers. We have a base business that we won't abandon. We will continue to play at opening price points. At the same time, we can evolve our assortments to carry more 300-thread-count sheets or plasma TVs; there's a whole level of product that we can play in that we haven't been that aggressive with, especially in telling our story.
AA: Whom do you see as your competitors?
Mr. Fleming: All the competitors that are left are very good. Target does an excellent job. Best Buy on the electronics side does a very good job. Someone like Walgreen's does a very good job, the way they talk about convenience.
AA: Any advertisers you particularly admire from a creative standpoint?
Mr. Fleming: I'm sort of partial to Target.
AA: What's your favorite breakthrough category product this year?
Mr. Fleming: The music category has been outstanding. It goes back to that solution-based thing. It's not one thing. Our CD sales are very good, which goes against the industry norm. We have a digital music store at Walmart.com, there's a great integration between the two. We are also selling a lot of MP3 players and portable music devices.
AA: How do you get suppliers to bring you different product?
Mr. Fleming: It's an evolution. We've had some success stories. We are talking about the success stories because that gives other merchants more courage to try things. When everything is said and done, we always can sell opening price-point. And by the way, we built a pretty nice business model doing that. But now the competitors who are left are all very, very good and focused on what they do well. Now it is up to us. Everyone that comes into Wal-Mart buys consumables, but not everyone buys apparel and home furnishings. So we just need to choose the things we are going to focus on and build and really cultivate the customers we already have.
AA: Target has the luxury to focus solely on its store brand. Right now, Wal-Mart really doesn't. The corporate-image campaigns are taking a lot of time and money. How do you wrest priority back to what's in stores?
Mr. Fleming: We have to focus on our business. And as we better identify segments we really want to cultivate and come up with product strategies to align with those customer needs, it will take care of itself.
Mr. Fleming: Oh, yeah, but they are very good partners. We have very good relationships and continue to work together.
AA: Any chance for a review?
Mr. Fleming: Every day is a review.