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Updating the Advice on How to Battle Wal-Mart

Updating the Advice on How to Battle Wal-Mart

When my tenure at Supermarket News began in the early-to-mid-1990s, retailers were anxiously devising plans to compete with the growing threat from Wal-Mart Supercenters.

Strategies under development ranged from staying in the ballpark on price to emphasizing perishables and product variety. These plans largely worked, and many are still in use today.

Now the landscape is shifting as Wal-Mart dramatically changes its culture and game plan. Its new “Project Impact” initiative is described in a story in by associate editor Jon Springer.

This article provides a comprehensive, insightful view of what Wal-Mart is up to, including its new merchandising strategy that picks categories for emphasis and de-emphasis; its renewed focus on enhancing the in-store environment; and a new culture that no longer emphasizes only price.

What do these changes mean for supermarkets? They will need to update their game plans for competing with the chain.

Product Variety: Wal-Mart is calling its new merchandising direction “Win, Play, Show.” In effect, the retailer is picking which categories it will place big bets on, and will cut SKUs in many other categories. This provides an opportunity for supermarkets, which have long tried to trumpet their product variety compared to supercenters. The fact is many supermarkets are now pursuing SKU reduction too. But they can still consider building up some segments that Wal-Mart is playing down, and promoting that fact. This could go a long way to enhancing shopper loyalty.

Marketing Proposition: Wal-Mart is moving beyond a price-only focus with a new slogan: “Save Money, Live Better.” The retailer appears to be embracing the supermarket direction of upgrading stores to appeal to more of a middle-income shopper. Supermarkets should consider accelerating this strategy themselves — growing signature and specialty products and perimeter departments — because they can still address this lifestyle better than supercenters. Any such moves should include value components given the current recession. Supermarkets should also find ways to broadcast that they have a more credible claim to the “live better” message than Wal-Mart, given the breadth of solutions they offer.

Price Strategy: Supermarkets have always aimed to stay within a price-range of Wal-Mart rather than trying to out-price the discounter. But Wal-Mart’s new approach actually adds costs to its system that might weaken its efficiency and pricing competitiveness. It is adopting “pay-for-play” programs that seek more marketing dollars from suppliers, and other new promotion programs that make its system more complex. Supermarkets may have their best opportunity in years to compete with Wal-Mart on price in chosen categories.

One more word of advice: Supermarkets should act quickly on these opportunities. Wal-Mart may be distracted in the short term by its massive shifts, but at some point it will fine-tune its approach.

TAGS: Walmart