Wal-Mart Ads Drive Sales: CEO

NEW YORK — The advertising campaign comparing basket prices between Wal-Mart Stores [4] and its grocery competitors is resulting in traffic and sales improvements in the 25 markets in which they are running, a top official from Wal-Mart Stores said last week.

In remarks at the Goldman Sachs Global Retailing Conference here, Bill Simon, president and chief executive officer of Walmart U.S., said the campaign, which launched this spring, has been “terrific” for the Bentonville, Ark.-based retailer, resulting in a 1.1% improvement in store traffic and a 1.2% increase in sales versus control markets.

The commercials, shot documentary-style, feature actual shoppers who buy identical baskets of items at Wal-Mart and a local competitor — usually the market grocery leader — and highlight Wal-Mart’s advantage in price.

“These ads have been terrific for us,” Simon said. “They are specific. They are detailed. They are broad because they are the baskets the customers bought, not the ones we selected, not KVI [known value item] focused, not top-50 items. They include the things that the customers buy every day, and the value shows through on these things. We are very, very excited about it.”

Simon’s enthusiasm for the ads runs to the efficiency and speed with which they are produced, saying the commercials cost about 25% of what a traditional television commercial would cost, allowing the company refresh them frequently. “It’s very, very effective and allows us to deliver a far more intense, far more directed message at the customer, and the customer is responding.”

Read more: Price Comparisons, EDLP Drive Wal-Mart's U.S. Sales Growth [5]

Simon also delivered an update on Wal-Mart’s small-format stores, saying the company would accelerate the rollout of its Neighborhood Market and Express stores during the second half of the fiscal year, lauding them for their versatility and effectiveness vs. the dollar, drug, grocery and convenience channels. Wal-Mart, which began the fiscal year with 170 stores of under 60,000 square feet, will add around 100 such stores to its fleet this year — most in the current half of the year, Simon said (Wal-Mart’s fiscal year ends Jan. 31).

Neighborhood Market stores, which offer food and pharmacy, showed 5% comps in the second quarter, greater than Wal-Mart’s U.S. average of 3%, Simon said. He attributed the growth to customer response to lower prices, particularly in pharmacy, as well as the “site-to-store” availability of general merchandise items, making the stores more versatile than grocery chains.

“If you want a 60-inch TV or a vacuum cleaner, you can make that happen on your grocery shopping trip. That’s very powerful. What we’re seeing in some of our stores in certain weeks of the year that [site-to-store] can be up to 20% of the sales for a store.”

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