John Fleming, exec VP-chief marketing officer of Wal-Mart's Wal-Mart Stores Division, said the retailer is working to base product selection in stores more on the needs of the local community rather than taking a one-size-fits-all approach.
"We have to get smarter on how we edit the [product] categories" based on store location, he said.
Mr. Fleming, keynote speaker today at Advertising Age's The American Consumer Conference in New York, said the mandate fits into Wal-Mart's overlapping goals of better managing inventories, improving the shopping experience, offering higher-quality goods and trying to win over "skeptical" consumers.
130 million consumers
More than 130 million U.S. consumers -- approaching half the population -- already shop at Wal-Mart, the nation's biggest store, Mr. Fleming said. But the challenge, he said, is to get those customers to shop more often and across more departments.
On this score, Wal-Mart now is categorizing its customers in three groups:
- Loyalists, who on average visit 57 times a year, spend 77% of their grocery dollars at the store and shop across more than five product categories.
- Selective customers, who come through the doors 26 times a year, spend 28% of their grocery dollars and shop two to four categories.
- Skeptics, who shop five times a year, do less than 10% of grocery shopping at the store and shop departments for only their most pressing needs.
A key goal, he said, is to win over those skeptics. That's one reason he said Wal-Mart has changed its ads to focus more on product quality and the shopping experience. Consumers already assume Wal-Mart has low prices, he said, so the retailer has an opportunity in advertising to talk about issues other than price.
Mr. Fleming brought up five key consumer insights along with Wal-Mart's response:
- Issue: Disposable income is shrinking as health care, education and fuel costs rise while traditional pensions disappear. Response: Keep the prices down, and use Wal-Mart's efficiencies to offer great values on better products that consumers want to buy.
For example, Mr. Fleming said, Wal-Mart is using its buying clout and efficient supply chain to drive down the premium on organic foods to within 10% of regular foods, making organic goods available to more consumers.
- Issue: Customers are moving to different life stages -- young families; empty nesters -- with new needs. Response: Stock better and more relevant goods to get a bigger share of their spending. That means bigger baby departments -- stocked with products such as organic-cotton goods at unbeatable prices -- in communities with many young families. And that means a wide selection of TVs to appeal to every life stage.
- Issue: Hispanic consumers are Wal-Mart's fastest-growing demographic. Response: Refit the stores to meet the needs.
In 350 stores where Wal-Mart serves a Hispanic-dominant population, Mr. Fleming said, the retailer has reworked the grocery aisles to add more foods like peppers and mangos and, in some pilot stores, tortillas made in store. Wal-Mart also is expanding baby departments at stores in large Hispanic communities. On the ad front, Wal-Mart has doubled spending in Hispanic media in the last two years, Mr. Fleming said.
- Issue: The consumer is in complete control. "This is one that took us a little time to realize," Mr. Fleming acknowledged. But he said Wal-Mart is adjusting its approach. Response: Make the shopping experience faster and easier, and make the stores more relevant to local residents.
He cited a store Wal-Mart opened in upscale Plano, Texas, with wide aisles, stylish displays and features such as an expanded wine department. That store is "an active laboratory" to improve the shopping experience, he said.
- Issue: The world is consuming resources faster than they can be replenished. Response: Build sustainability into the business model. Mr. Fleming cited efforts by Wal-Mart to slash its use of energy and reduce packaging waste. Those strategies will help control costs, he noted, but also appeal to consumers.
"Our future customers, younger people, really care about this issue," he said.
In his speech, Mr. Fleming did not address how Wal-Mart is responding in marketing and communication to controversial issues, such as the constant assault it faces from unions and other critics on how it treats employees.
In answer to a question from the audience, Mr. Fleming offered a comment about media choices that might be unsettling to ad sellers hoping to get on Wal-Mart's schedule. Said Mr. Fleming: "The most important media channel we have is our store."
Wal-Mart's channel has a captive audience of 130 million, far bigger even than the 91 million viewers that Nielsen Media Research says watched this year's Super Bowl.