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Walmart offers lesson on driving back-to-school sales

July 22, 2014

Two factors will make 2014 one of the most competitive back-to-school (BTS) seasons ever for retailers. The first, according to the most recent National Retail Federation Back to School Survey conducted by Prosper Insights & Analytics, is that the average American household shopping for BTS will spend five percent more this year on those purchases than in 2013. The second is that fewer households will be shopping for BTS, meaning overall purchases will decline.

NRF's findings serve as a backdrop for the latest news from Walmart including that the retailer has:

  • Increased its inventory of BTS items by 30 percent;
  • Cut prices by 10 percent;
  • Offered an additional 10 percent discount to teachers during its first ever Teacher Appreciation Week (July 25 - July 31).

"Price is going to be extremely important for us, as it always is," Steve Bratspies, executive vice president, general merchandise for Walmart U.S., told Bloomberg News. "It's about the best prices in the market on a large assortment."

NRF's findings suggest price will remain an important factor in BTS purchasing decisions this year.

"Throughout the history of this survey, spending has fluctuated based on family needs each year, and this summer, we expect parents to continue to use caution, but also make smart decisions for their family budget that is a good balance between what their children 'want' and what they actually need," said Matthew Shay, NRF president and CEO, in a statement.

Walmart's Teacher Appreciation Week offers the chain an opportunity to generate some good press along with sales.

"On average, teachers around the country spend about $1,000 readying their classrooms, and half of that comes from reaching into their own wallets to make sure students have what they need," said Mr. Bratspies in a statement. "We've had a commitment to supporting teachers in the communities we serve for many years. This program is one more way we're helping lessen the cost, increase support and set teachers up for success."

FINANCIALS:     [NYSE:WMT] [ ]

Discussion Questions:

Do you see price as being any more or less important to how well retailers will fare this back-to-school season? Will Walmart's plan enable it to gain share of BTS sales? How do you see Walmart's competitors responding?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Will price be more or less important to how well retailers will fare this back-to-school season?

Comments:

For BTS items like paper and markers, price always seems to be very important, if not the most important consideration. Assortment also plays a role. For busy moms, being able to find what you need in one place is a plus.

Walmart is very shrewd in announcing and promoting their strategy early. Teacher Appreciation Week will not only generate more traffic with teachers who spend more, it is great press and brand building for Walmart.

What will be interesting to watch this year is the e-commerce response. For the most part BTS products are known commodities. Amazon and others should be able to compete very effectively on price. Moms seem willing to shop online for bigger ticket items like backpacks, but will they go online to purchase the consumables in quantity for BTS?

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Chris Petersen, PhD, President, Integrated Marketing Solutions

First, let's recognize that nobody can estimate what they are going to spend on BTS—the error range around that estimate has to be huge. Price will not be a factor again—people know who's less expensive and who's more expensive and that's where they'll shop. Walmart's plan may move more volume, but at a lower profit, than in years before. They are clearly hoping that a lower price position will draw in customers from other chains. Either it works, or a price war ensues.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

For most families, for most BTS classroom items, price will be the key determinant. Walmart has it right. Cut prices, increase inventory and give a break to teachers. But not every consumer has easy access to a Walmart. Other retailers can compete by offering fair pricing and using loss-leaders and promotional bundles to add real and perceived value. Most small retailers can trump Walmart and the other big box stores in customer service.

Walmart may have many of the lowest prices on BTS items, but it is possible to compete. It's all about the basics; fair pricing, value, inventory and customer service.

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Max Goldberg, President, Max Goldberg & Associates

Price is only trumped by what's hot in back-to-school. I understand Walmart's aggressiveness on price. And I understand and like the idea of recognizing teachers. But I don't understand increasing inventory by 30 percent. How about increasing inventory 10 percent against a declining market? I see huge discounts coming.

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Gene Detroyer, Professor, Independent

Price is key, and very important to how retailers compete and may become successful during the BTS season. Walmart's push, by focusing on prices, is a great retail position, especially by offering teachers something extra.

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Kai Clarke, CEO, American Retail Consultants

Pricing is ever important, but convenience and "cool" goes a long way. Can mom get all the school supplies, including uniform extras: socks, white button up shirt and cool backpack all from one place? Convenience is king as much as cash is king when it comes to mom's busy schedule.

Bravo to Walmart for their teacher appreciation tactics. I hope their competitors up that ante—it's good for teachers, kids and the rest of us as a whole. Competition in these realms is definitely a good thing!

heather thornswood, Creative Director+Strategist, Good People Branding

By winning over students and capturing household dollars early, merchants stand not only to edge out the competition, they also gain potential new customers early in their life cycles. That can translate to decades of future business.

Here are COLLOQUY's six by-the-book lessons on how merchants can use their loyalty initiatives and insight to improve the back-to-school basket:

Fish for sales: Customer data can reveal unexpected correlations. LoyaltyOne research shows that households with teens are more likely to make seafood purchases. If retailers can identify consumers who buy seafood and perhaps large quantities of frozen pizzas, they can target them for test promotions of laptop cases, backpacks and locker dry erase boards.

Create a pop-up sale: More than 20% of consumers are very likely to buy something if it is a limited-time offer, according to a recent Staples poll. A merchant can build a limited-time, store-within-the-store that features back-to-school products, and offer special discounts to loyalty members.

Inspire fuel for thought: Students who go away to college are likely to make more road trips. Merchants can investigate the viability of programs specifically for college students that will earn them double fuel points for their purchases while in school. The program can also include a gamification component to reward students for achieving pre-determined goals. Ideally, the students will associate the brand with their formative college years, deepening the emotional connections.

Think everyday troubleshooting: When sending kids off to college, parents often think of the obvious needs - towels, slippers and bed sheets. Merchants can use data to show parents what the everyday life of a student is like, and how earplugs, environmentally friendly batteries, detergent, adhesive wall hooks and first aid kits can help.

Add a charitable component: Some merchants give apples to teachers by donating to schools through their loyalty programs. Target, for example, allows members to donate 1% of their Redcard purchases to designated schools. Similarly, Staples Rewards offers parents the opportunity to earn an additional 2% in rewards for the teacher of their choice. Such soft rewards have a relatively long shelf life, since the customer's relationship with the school will likely span several years.

Apply secondary sympathies: Parents who send their kids off to college for the first time typically suffer separation blues. Merchants can make an occasion of the long drive to campus by promoting items that would commemorate the event, such as Polaroid cameras and picture frames, Visine, plants, cookie tins and other items. Parents and students would later relate those items, and the emotional experience, to the brand.

You can read the full article here.

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Bryan Pearson, President and CEO, LoyaltyOne

Price is a major factor, especially for households with multiple school-aged children. There are more ways to save money than getting discounts.

There is no need to buy everything all at once. Buy the minimum before school starts and wait for sales to buy the rest.

Don't automatically think you need to purchase everything on the list the schools provide in advance. Wait and confirm what your students will actually need from their teachers after school starts.

Things like rulers, protractors or pencil boxes can last years. Keep and use school supplies leftover from previous years or hand them down.

If you can afford to, donate supplies to your student's class for those less fortunate and to help teachers from having to buy supplies out of their own pockets.

'RetailRetell'

This is a great move for Walmart.

As our own research has shown, "The back-to-school numbers look very good for embattled retailers, but make no mistake, shoppers are likely to defer purchase decisions until they are absolutely certain that they have the best deal." We can't downplay the effect pricing has on shoppers.

Based on our findings, we can safely predict that Walmart will grab their fair share of BTS sales this season. They have segmented their message to appeal to the two largest groupings of BTS shoppers, parents and teachers. As for the competition, like Thanksgiving day openings, I think we can expect some similar moves to come out in the near future.

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Alexander Rink, CEO, 360pi

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