Taking Shoppers Back From Wal-Mart
By George Anderson
For grocers who have felt themselves pushed to Howard Beale-like extremes (“I’m mad as hell and I’m not gonna take it anymore!”) from competing with Wal-Mart, there is new hope in a consumer study from Zenith Management Consulting.
The study, An Approach Proven to Bring Shoppers Back to Supermarkets, took a test group of 180 consumers who were infrequent shoppers at Wal-Mart and asked them to become regular customers, purchasing goods for their everyday needs.
What Zenith discovered is that these shoppers quickly became “Wal-Martized.” Consumers who originally placed price as third most important on their list of criteria for shopping quickly moved it to the top of their list. The more consumers saved while shopping at Wal-Mart, the more they wanted to save. Interestingly, consumers’ perception of the service they received at Wal-Mart increased at the same time.
Race Cowgill, a principal with Zenith Management Consulting (and a RetailWire BrainTrust Panelist), told Grocery Headquarters magazine that the perception change that
takes place among consumers who begin shopping at Wal-Mart is behind the reasons they reduce their shopping visits to other outlets. The perception, however, can be overcome,
Wal-Mart uses end-caps and displays to make what Mr. Cowgill calls an “opening price point device” to establish the retailer’s low price credentials.
“This creates a perception in the consumer’s mind that everything in that section is going to be very low-priced,” he said.
The typical grocery store competitive response that it too has low prices or has fresher foods falls largely on deaf ears, said Mr. Cowgill.
“Our test group said, ‘These things don’t matter to us. We care about price. The freshness is just as good at Wal-Mart, and we think the selection is better at Wal-Mart, so there’s no reason to go to supermarkets.’ So the supermarket strategies that have been used for 50 years cannot work,” he said.
Those strategies including “frequent flyers with specials, radio and TV ads, and improved customer service don’t work,” said Mr. Cowgill. “What works is when you explain to consumers how Wal-Mart perception-shaping devices work.”
“That strategy must start with the understanding that Wal-Mart is a public relations machine. That’s why Wal-Mart is successful, not because they have low prices,” he said. “Supermarkets have to educate consumers about how Wal-Mart works. That has to be undertaken at the industry level.”
To achieve this, Zenith’s Cowgill suggests the grocery store industry take a page from pork, beef and egg producers. “All of them realized they had a problem that had to be addressed industry-wide,” he said.
State and other trade associations should be banding together to develop a campaign to bring consumers back to supermarkets. By explaining what Wal-Mart does, retailers will be adding to the negative press surrounding the retailer. Grocery Headquarters reports that between two and eight percent of Wal-Mart shoppers have stopped shopping at the retailer because of the negative press it receives.
Moderator’s Comment: What new strategies do you think would be helpful for grocers looking to stem the flow of shoppers to Wal-Mart and other competitors?
Does the grocery industry have the collective will to develop an industry-wide response to Wal-Mart or others it sees as a competitive threat? –
George Anderson – Moderator