Wal-Mart Spices Up Private Label - WSJ.com

Private label is growing in dollar sales in the United States. When consumers need to do some belt tightening they look to store brands (Typically lower priced, there are some premium PL brands that sell at higher price points).

A strong brand differentiation is a solid strategy to neutralize consumer private label substitution.

Posted via web from admore's posterous

Shifting Consumer Choices and Preferences

Food is something that is bought on a regular basis by consumers. Each shopping trip is an opportunity to present a mix of products to the consumer.

Target and Walmart have a goal to increase visit frequency per year . Another way of stating this is they want there to be fewer days between visits. It’s a lot easier to close a sale with a customer when they are in your store and already making purchases.

The statement below from the CEO of Target is a good example of what many retailers selling food are trying to do.

"We continue to invest in our food offering in recognition of its importance in driving greater frequency, increasing guest loyalty, and making Target a preferred shopping destination," company CEO Gregg Steinhafel

Three Points

• Frequency
• Loyalty
• Preferred

Frequency is driven by having more items that people frequently purchase. Food and consumer products are excellent examples of items bought frequently. Selling these items at attractive prices gets consumers in the door where higher margin and dollar profit items an be presented to the shopper.

Loyalty is the trust that a retailer earns and maintains with consumers. What is the value proposition and does the retailer consistently deliver on its promise? Retailers that do, build trust and are chosen over competition if their proposition is more compelling than competitors.

Preferred is where there are two or more equally compelling choices and the consumer constantly chooses one retailer over another. There are many different factors that drive being preferred. These factors can shift very rapidly. For a time, style and value pricing was a powerful consumer preference that resonated with shoppers and drove them to Target. At some point, shoppers shifted their preferences to low price. It is in this instance, where the impression of “Every Day Low Prices” drove consumers to shift their buying behavior and choose Walmart.

Takeaway

What will be interesting is to see if there are other preferences that retailers and merchants can deliver a compelling message to consumers. Those that are able to effectively do so will see increasing visit frequency, loyalty and consumer preferences.

 

What are your thoughts on consumer preferences?

BRANDS, ECONOMY & CONSUMER BEHAVIOR

NOTE: This post is written from a Food Marketing angle.

BrandWeek has an interesting article about brands that do well during turbulent economic conditions. It is clear that some brands or segments do better. More meals at home means firms that are ingredient or raw material [Home cooking] oriented should see sales growth. Firms in food service will see shrinking margins and declining revenue as the total [food service] pie becomes smaller.

Assumption: Consumers pull back on dining expenses in an uncertain economy

Back to the article... Why Some Brands Cheer a Sour Economy

Likewise, Wal-Mart, which seemed to be losing brand power only a year ago, today is poised to reap the rewards of consumers who are looking to save some cash. In September, as same-store sales for Kohl's and Nordstrom fell 5.5% and 9.6%, respectively, Wal-Mart's rose 2.4%. Author and branding expert Rob Frankel thinks the retailer's gains will closely mirror the economy: "Wal-Mart is the brand that reminds people they are poor. Nobody shops at Wal-Mart because they want to; they shop there because they have to. The minute the economy recovers, Wal-Mart's sales will drop like a brick."

The snippet above [Ed. bold added] indicates that the writer believes Walmart is a brand for the poor and that people only shop there because they have to. Thirty years ago Walmart was a relatively small regional retailer. The US economy has grown tremendously in the last 30 years. People have continued to shop there during this time frame. Walmart had yearly revenue of $348 billion in 2007.

As people gain in affluence they increase spending at retailers that make them 'feel' like they are part of another demographic 'the Affluent'. Costco is an example of a firm that has done a tremendous job selling that feeling to Americans [some would suggest Starbucks as another, $4 coffee drinks].

Now that people are shopping Walmart more out of need, they are beginning to see what a tremendous value they present to consumers. Category best sellers at much lower prices than other retailers. When the economy picks up [in the next 12-18 months?] people will be hesitant to go back to their freewheeling spending. Walmart will retain most of these new shoppers. The more a shopper saves by shopping Walmart the more money that is left for other things.

Where these saved dollars may go...

• Dining out
• Debt reduction
• College
• Books
• Internet
• Computers
• Travel

Questions:

• What percent of new Walmart shoppers will defect when the broad economy recovers?
• Are you cutting back on eating out?
• Are you preparing more home meals?
• How much do you budget, generally, for dining out, now vs. a year ago?
  

PS: This post was written before reading the comments on the site with the original story. There were ten comments at the time this was posted. Read them, you might find them insightful.

Ed: Walmart has changed the way their name is presented. Formatting of the Brand Week section was left as published.

BRAND AND LOGO DISCUSSION

From: Retail Wire

7/1/08
Wal-Mart's Logo Change (...er, we mean Walmart)

Below are my comments to the discussion.


Brands--and Logos--are what PEOPLE think of them, not what the brand thinks it is.

If you have not already, check out Brand Tags. Participate at this link: http://www.brandtags.net/ and see all brands at this link: http://www.brandtags.net/browse.php

I think you will find the information enlightening.

Hopefully, Brand Tags adds a before and after feature (on a time line of some kind).

Walmart would make an excellent test case. One would think that Walmart will change all their logos in very quick fashion. If they do so, it will be interesting to see if people tag Walmart differently after the change.



Questions

• Have you been to Brand Tags?
• What are your thoughts on branding and logo relationships?