Brands Hit By Wal-Mart's SKU Reductions
By George Anderson, Editor-in-Chief, Associate Publisher, RetailWire
It's tough losing your biggest customer and many brands today are finding that out firsthand as Wal-Mart Stores is aggressively pursuing SKU reduction in its stores.
Advertising Age reported recently that Wal-Mart has decided to go from four plastic food storage bag brands in its stores to two. Pactiv Corp.'s Hefty and Clorox's Glad brand products have been removed from the retailer's store shelves, leaving all the space for SC Johnson's Ziploc and Wal-Mart's own Great Value private label. Wal-Mart's business likely represents a third or more of the individual brands' food bag sales.
The news isn't all bad for Pactiv, however, as the company is manufacturing Wal-Mart's Great Value bags. A spokesperson for the company told Ad Age, "We are currently off the shelf on the food bag business, but we expect to be back on the shelf in that category sometime in
the future."
Bill Pecoriello, an analyst with Consumer Edge Research, said Wal-Mart's cuts in plastic food bags is likely to expand to other categories.
"If you look at the trash-bag category, you really have to ask yourself, 'Is there really a need to have more than one brand and private label?'" he told Ad Age. "I think Wal-Mart is going to make similar moves in some of the cleaning areas and then across the portfolio."
In a separate but related story, Wal-Mart has been testing an expanded selection of spices in stores, taking space from McCormick products. The chain currently represents about 11% of McCormick's sales.
Robert Moskow of Credit Suisse told The Wall Street Journal that private label spice sales grew from 13.5% in 2008 to 14.5% last year.
Discussion Questions: What are the implications for manufacturers in light of significant delisting activity by Wal-Mart and others around the country? Will this situation, for example, hasten manufacturers' move into direct-to-consumer sales?
RetailWire Instant Poll Results:
RetailWire BrainTrust Comments:
If you are not differentiated from competition in a sufficiently compelling way to the shopper, consumer, or retailer, you will not have space. The channel will not change that (online vs. store)--irrelevant is irrelevant. Not being on the shelf at key retailers has to be a significant problem for those manufacturers. I hope they can figure out a way to return based on value offered so that they can earn their way back on the shelf.
David Zahn, President, ZAHN Consulting, LLC
Wal-Mart is certainly too big an opportunity for any manufacturer to ignore and simply say they aren't going to do business with them but in light of the changes it is making with its Great Value brand and SKU rationalization efforts, if you are not one of the top two brands, you had better start thinking about what it's like after Wal-Mart. If you have built your supply chain based on this volume, what happens to it now? My suggestion is that those that don't firm the top two criteria start (if they haven't already) developing a plan "B." Direct-to-consumers may be an option for larger ticket items but I don't foresee any scenarios where many of these items would fit that business model. Lower cost and other bulky items don't work because the shipping cost are disproportionate to the items value.
Steven Montgomery, President, b2b Solutions, LLC
It is all about innovation when it comes to building a brand. Walmart should not sell its customers short. They too want innovative products, and if Walmart continues to reduce its sku selection, I fear their foot traffic will see a reduction as well in the future.
Joel Warady, Principal, Joel Warady Group
Sounds like Wal-Mart has finally figured out there may be too much choice and too little differentiation in a lot of grocery categories. Presumably they've tested this and found the reduced category still fulfills shoppers' needs. Manufacturers need to do more research (some already are) into their category's assortment, both to have recommendations for reductions ready and justifications for their own products remaining (or somebody else will make the decision for them).
Stephen Needel, Managing Partner, Advanced Simulations
What concerns me most is the backlash from all of this as though brands have a RIGHT to exist on the shelf and retailers owe continuity presence to them. SKU and brand rationalization processes, particularly at much-vilified Walmart, get thrown in the "killing the little guy" pile when in most cases, nothing could be further from the truth.
Carol Spieckerman, President, newmarketbuilders
The implications are reduced revenue for the vendor. I guess the saying "don't put all your eggs into one basket" is true across any industry. Especially if that basket is Walmart. They aren't known for their rosy attitude towards suppliers. I know it's a big account but if you can make business without them, you are much better off in the long run.
Doron Levy, President, Captus Business Consulting
It's not just Wal-Mart but other stores as well. One of my local grocers recently added a second private label and is heavily promoting it in order to be more competitive with Wal-Mart and Aldi. Since the store didn't get bigger, it's obvious some name brands had to be removed to make room for all these products. This is just basic supply and demand and if these products that are being removed had a compelling demand, they would still be in the stores. Wal-Mart is just fast forwarding the inevitable.
David Livingston, Principal, DJL Research
Walmart is a smart 800 pound gorilla. They too know that great ideas come from everywhere. Those manufacturing mothers will innovate, as they want their children to thrive. And, Walmart needs the best and brightest of those "children." It's not the time to say "woe is me, I lost shelf space." It's time to view the whole picture, starting with the end consumer, and building it back to Walmart, and other new channels.
Roger Saunders, Managing Director, PROSPER BUSINESS DEVELOPMENT / BIGResearch
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FEBRUARY 2010
Target Bulks Up with New Promotion
By George Anderson, Editor-in-Chief, Associate Publisher, RetailWire
Target says its "The Great Save" promotion gives consumers all the benefits of bulk deals found at warehouse clubs without the need for any membership fees.
"The Great Save is a way for Target to offer our guests exceptional deals on everyday essentials -- just in time for their post-holiday stock-up -- and a treasure-hunt experience with a variety of exciting designer brands," said Kathee Tesija, executive vice president of merchandising, Target, in a press release. "This event is a fresh, innovative approach to meeting our guests' evolving needs and providing them with the opportunity to save even more at Target."
The promotion, which runs January 3 through February 21, is an attempt by the chain to build on the promise behind its "Expect More. Pay Less." tag line.
Consumers will be able to buy products across a host of categories -- from apparel, electronics, food, health and beauty care, housewares and more -- at substantial savings, according to the chain. All items in the promotion will be located in a single "Great Save" location inside the roughly 1,000 Target stores participating in the event. The chain operates 1,740 stores in the U.S.
The chain is also making some of the items in the promotion available for purchase online. Consumers can get more information by going to Target.com/thegreatsaveevent.
Discussion Questions: Do you see Target's "The Great Save" event as anything more than the limited club pack approach that others have taken when dealing with warehouse club competition? Do you see, for example, any format changes either in existing stores or a new concept as a result of this promotion?
RetailWire Instant Poll Results:
RetailWire BrainTrust Comments:
There is nothing wrong with "The Great Save" as a way to reinforce Target's value position. And it's also a good idea to find a new use for the "swing space" that Target has devoted to its "international collection" of furniture for the past few years following Christmas.
However, if the online assortment of bargains is any indication of the execution of "The Great Save" strategy, the actual success of the strategy is less certain. (Check it out at the Target website.) It's a very strange assortment of everything from closeout handbags to remaindered books ("Air Warfare from WWI to the Present Day," anyone?) But there is very little display of the sort of large sizes and multipacks of commodity items that send customers flocking to competitors like Costco.
Richard Seesel, Principal, Retailing In Focus LLC
Other mass merchants and grocers have smaller club pack sections but they really can't compete with Costco and Sam's in terms of selection, price and after service. Although, I would say Target may have an opportunity here if their grocery format doesn't work out. That space in test stores could be used for a bigger club pack section.
Doron Levy, President, Captus Business Consulting
"The Great Save" is a good promotional gimmick, but it does not represent a major format change. Grocery stores have been offering bulk packs for years. It does reinforce Target's tagline, "Expect More, Pay Less", but it does not foreshadow a storewide rollback of prices, like the one Walmart instituted a few months ago. Will it drive more shoppers to Target? Probably not. But it will save money for Target shoppers that want to buy in bulk, and that can build loyalty.
Max Goldberg, Founding Partner, The Radical Clarity Group
In checking prices I have found that Target is lower than its competition today on many items and some promotions. Many retailers including Cheap Central (Walmart) are subtly and blatantly increasing prices. Target still operates the cleanest and most inviting stores, an asset that doesn't necessarily convey cheaper prices...but seems to be moving in that direction. So count me in as a supporter of what Target is trying to accomplish...although they may have waited too long to start their offensive.
Gene Hoffman, President, Corporate Strategies International
Target's "The Great Save" is another win for shoppers, but I am unclear about how it will help them after February 21st when the program ends. Their tag, "Expect More, Pay less" is something shoppers are looking for on a consistent basis (every day). I am not sure "The Great Save" does anything to support "Expect More, Pay Less." If they ran it every month with new deals then it would tie in nicely. Shoppers would know each time they walked in the store that there would be a "Great Save" opportunity which helps them achieve "Expect More, Pay Less." Without running consistently throughout the year, these two tags are separate events and don't support one another.
John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC
Target's approach raises a number of questions. Is this a test by another name? By announcing that you are resetting your entire chain for a limited period of time, it sounds
that way.
While the company has always been a "value" brand, it has been positioned as a place to shop for the absolute cheapest price. Carrying brands and packages it normally doesn't carry may afford it the opportunity to provide additional savings but what is going to be the impact on the competing items it already carries? Will they simply be swapping the sales (and margin) they normally achieve?
Is this an attempt to attract a shopper that normally shops elsewhere in the hope that they will then purchase additional items while in the store? By creating a store-within-a-store format, are they encouraging shoppers to bypass their regular stock?
This reminds me of the c-store industry's flirtation with dollar aisles/sections within the store. Sounded great but failed to have the positive impact they anticipated.
Steven Montgomery, President, b2b Solutions, LLC
Target has run similar promotions in the past, however, even if they hadn't, there's nothing new here. Target has done a great job of switching gears and going pedal to the metal on value..."Job 2" will be to find a way out of the me-too quagmire and reinvent the Target brand in a compelling and differentiated way.
Carol Spieckerman, President, newmarketbuilders
Target is moving in the right direction - communicating the new value proposition to shoppers. But this campaign seems a mixed message. The online assortment of "deals" in the online promotion, as other writers have noted, seems a disconnect to "warehouse savings" in the lead-in.
Target has good products and pricing, but getting their new value message as a reason to believe will have to be much clearer and more unified, showing the new packages/club packs in promos and how it delivers new value. With purchase decisions made in seconds, busy, cash strapped shoppers need clear messaging and visual cues. The "Treasure Hunt" promo somehow seems less compelling in subzero January temperatures to holiday weary shoppers.
Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions
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