Can a former Target marketer help Walmart attract higher income shoppers?
Stephen Quinn is retiring next month as Walmart’s chief marketing officer, a position he has held since 2007. While no formal replacement has been named, Walmart announced it has hired Michael Francis, a former executive at Target, as a consultant to help revamp its marketing group. Mr. Francis is also expected to work closely with the person who eventually replaces Mr. Quinn.
For those not familiar, Mr. Francis is widely credited with helping to develop Target’s cheap chic image during his 27-year career at the chain. On the downside, he was also the person put in charge of leading Target’s move into the Canadian market.
In 2011, Mr. Francis was personally recruited to lead J.C. Penney’s marketing, merchandising, planning and allocation, product development and sourcing functions by the department store’s then-CEO Ron Johnson, who also holds a Target pedigree. Mr. Johnson replaced Mr. Francis after less than a year on a job, concluding that he himself could do a better job of communicating Penney’s new everyday low price strategy to consumers.
Michael Francis – Photo: Dreamworks
Mr. Francis joins Walmart in his new consulting role after serving as the chief global brand officer at Dreamworks Animation SKG since 2013. According to a Wall Street Journal report, Walmart is looking to court more middle class and upper income consumers and the company believes Mr. Francis can help the company achieve those goals.
Speaking of his new assignment, Mr. Francis said (via the Journal), "I’m committed to building on the strength of that [Walmart] brand, and I couldn’t be more excited about the opportunity."
Discussion Questions
Is Walmart right to focus on attracting more middle-class and upper income shoppers? Do you think Michael Francis is the right person to help Walmart achieve its marketing goals?
Poll
BrainTrust
Walmart already attracts everybody, so it’s not like they are missing out on this group completely. To the extent that they want to grow their business with higher-income shoppers, they will only screw this up — there’s my 2016 prediction.
Is he the right person? Don’t know, but his resume summary above would suggest not. Being associated with Target Canada and J.C. Penney is not the best of backgrounds.
Makes sense — news just the other day reported stats showing that in the U.S., the middle class (from an income perspective) was now smaller than those at the lower and higher income ranges. It’s like I’ve said before, the U.S. is dividing market-wise into two segments and that doesn’t lend itself well to general merch. Walmart owns the low-price space, so why not grow via a separate strategy targeting upper-income consumers? Mr. Francis may be the right person, who knows? I’d expect Walmart to attack this space via a different banner or brand though, given the segmentation that necessitates that approach — in my view anyway.
Can a tiger change its stripes? Can Walmart successfully try to chase a more upscale, aspirational customer? I’m not so sure that trying to out-Target Target is appropriate to the Walmart brand, when it needs to do a better job executing its core strategy.
As to Mr. Francis being the right person for the job: His experience at J.C. Penney raises a huge red flag. He tried to turn a lower-moderate, promotional department store into something that its loyal customers categorically rejected. His decisions (in partnership with Ron Johnson) to eliminate sale pricing, to drop the company’s biggest private brand (St. Johns Bay), and so forth, had far-reaching consequences from which J.C. Penney is still trying to recover.
Mr. Francis has a checkered record, with some success at Target but not much beyond that. Walmart should be careful about tweaking its demographic base. With a report yesterday that the middle class is shrinking while upper and lower classes grow, does the chain risk alienating its most loyal shoppers?
Michael Francis is a smart guy with good instincts and a track record (J.C. Penney’s problems were not of his making.) The opportunity here is to Costco-ize Walmart, which might be doable.
Expanding Walmart’s reach into new demographies addresses only a sliver of the issues that Walmart faces longer term. Walmart was built and designed for the “price” shopper. These shoppers thrive on large stores and the hunt of finding bargains across both food and soft goods categories, on the same trip.
Upscale shoppers have different priorities. They are looking for service, quality and above all, good stewardship of their time. Mr. Francis will only be as successful as Walmart’s commitment to revamp the in-store shopping experience, which will necessarily include store downsizing, a commitment of perishables and training of food experts.
Marketers know that there is much risk in attempting to expand customer acceptance beyond the retailer’s established core competencies. Whole Foods is in the process of reach expansion, but going in the other direction with their new 360 format. Target, on the other hand, is looking to become more gourmet in their food offerings.
Traditionally, retailers who have attempted to “be all things to all people” fall victim to losing their identity altogether, resulting in losing more existing shoppers than gaining new ones. These current experiments in reach expansion will be interesting to watch, knowing the deck is stacked against them.
Walmart is right to try to attract all segments of shoppers — so long as it is not to the exclusion of any other segment. And these stories about Walmart trying to attract more middle-class and upper-income shoppers come out every so often. I don’t, however, think Michael Francis is the magic bullet. Walmart’s ability to attract and retain a more upmarket customer base has less to do with marketing and more to do with a consistent in-store shopping experience — one that’s clean, updated, pleasant across fresh and general merchandise. And by the way, didn’t I just read again that the middle class is shrinking even more?
Not for me, and as you know I’m no fan of Walmart. That being said, it would not be the place I would go for higher-end stuff. Their help is not going to give you much advice on anything in this category, and Best Buy for the same money is the way to go for me. Stick to the pallet deals of cheap merchandise and the folks will still come, but high-end, in my opinion, won’t fly.
We’ve seen this movie.
It didn’t end well.
Walmart’s willingness to continually test and expand is a core strength in my assessment. What will make the difference here is whether they try to make all Walmart shoppers feel like they are having a little bit better experience, or whether they alienate bargain price shoppers by trying to replace good value with higher price alternatives. “Trade up” is not in the Walmart shopping experience — no matter the income of the shopper in the store at the time.
I like Cathy Hotka’s speculation on Costco-izing Walmart as the opportunity. If Michael starts small with pallets of unique-to-the-Walmart shopper higher-end merchandise or something else to surprise and delight, who knows what the benefit at scale could be. But critical to his success will be to see if he can successfully create a unique voice and look in advertising, especially TV, like he did at Target. Of course, all of Target’s direct competitors are now knocking off what he and the agencies created. What are possibilities for something radically new in advertising at Walmart that reinvigorates the base, and prompts the non-shopper to give the retailer a try? I expect the creative community in Minneapolis, where I live, is up to the challenge, and I expect Michael will look to his former co-creators to launch something unique.
While consumers of all economic backgrounds may shop in Walmart, its core customers are not middle and upper-income. To attract more shoppers from these groups Walmart would have to do a significant repositioning in the marketplace. Doing so would run the risk of losing its core customers and place it in competition with a new set of retailers.
If the company wants to attract middle- and upper-income clientele I agree with Gib, it’s best done with a new brand.
I am sure Michael Francis is very skilled. But the real question is, why would Walmart move their focus upscale? You can’t serve two masters especially when you own one of them.
Walmart’s look to expand in the direction of the dead and dying middle class, maybe not the best plan. Adding to the losing formula by supplying leadership with little or no previous wins in a completely new environment should pretty much guarantee a loss. The company is searching for sales and revenue when the need is profit dollars and cash flow. E-commerce and entry into new markets, like convenience stores and/or high end specialty shops, with another company label is where the “paying too much” customers are.
Walmart has built its business targeting the lower middle-income consumer. Target has built its business on the higher middle-income consumer. We know this just based on the product selection offered by these two retailers. For years Walmart has said it wanted to target a higher-income consumer. Costco is the only mass retailer that has successfully attracted a higher-income consumer. The problem for Walmart is the middle class is getting killed in this economy. The middle income has lower disposable income than they had before. Walmart is targeting a shrinking market segment and going upscale will not work unless they want to drop their current customers. Further, the upper middle income group is smaller in people and dollars spent than the lower middle income. Walmart needs for the middle income group to prosper, otherwise they must increase their market share of a smaller market.
The key takeaway in the midst of the inevitable tomato-throwing is that digital = upscale. Global e-commerce, and digital integration with its physical scale, is what will move the needle for Walmart. For the foreseeable future, digital shoppers will be higher-income shoppers.
As for Mr. Francis, my sincere hope is that he will shine a fresh light on Walmart’s apparel proposition, particularly from a brand perspective. Walmart does eye-popping volume in apparel but how much better could it be? That should be keeping someone awake at night. Greg Foran, Judith McKenna and other recruits have done a great job of awakening the organization to block-and-tackle opportunities in fresh, workforce management, store-level process optimization, etc. Now it’s time to put some icing on the cake. A few years back, Walmart dared to upgrade apparel, a much-maligned move that was followed by an over-correction. With the possible exception of active wear, Walmart’s apparel offering still screams “mass” and “meh.” Apparel is the billboard for “better” shoppers so let’s hope Mr. Francis sets a bold vision there.
If Walmart thinks it has maxed out its share of the low end of the market and its growth will only come from increased share from middle- and upper-income segments, then that’s what it must do. Or maybe not.
I don’t know Michael Francis. He seems like a smart guy. He was around when Dayton chose to focus on discount retailing and Target carved a niche vis a vis Kmart and Walmart. He was schooled in creating a differentiated discount brand which was unique in using “design for less” as its positioning. It was successful when the economy boomed. When it stalled, Target stalled too. He owned some of that too.
What Johnson and Francis did to JCP was atrocious. Their partnership proved they didn’t understand the importance TO CONSUMERS of high-low pricing among mall-based, mid-tier department stores. They were blind to the “coming apart” of the U.S. Johnson knew high end, Francis knew low end. They blew it in the middle. And he learned something valuable there.
Among Walmart’s challenges is that the dollar stores are taking share. Seems to me Walmart needs to bolster its relationship with its core customers before it shifts to an “aspirational” positioning. Walmart struggled when the stores were “cleaned up” by Fleming.
I think Walmart needs to make crystal clear to leadership what its customers want from Walmart, and provide a “Joly-esque” plan to surprise and delight its base. Staunch the loss to the low end, and take share from Target.
The recent PEW study proves the fundamental shift occurring in the U.S. The low end is growing while the middle shrinks. Francis could be the right guy at the right time for Walmart, as long as he remains true to a customer whom he should know from his 27 years at Target. At the same time he must speak truth to leadership.
Its simple, “retail ain’t for sissies!”
To steal a political phrase: “you can’t put lipstick on a pig.” Many things will have to change and it’s doubtful that you can change the trash image that has been developing around the Walmart/Sam’s Clubs in the past 10 years. Why they think that people will order online and then drive to a store and park (like at Target) to pickup goods, is beyond comprehension when on Amazon it’s just a mouse click and at your door.
Nothing against Mr. Francis, but in a word, NO!
And that’s my 2 cents.
Much like the RadioShack question the other day, this seems like a trick question, because the answer is there is no person who can accomplish that goal…it’s unattainable. As others note, anybody who wants to shop at Walmart is doing so already; if they aren’t, it’s because they don’t want to, and that has to do with dislike for either the WM business model or customer base, or both. (Of course, the movement to online presumably reduces the issue of the latter, so maybe this will become less of an issue in the future).
But ultimately, WM is facing the issue that more and more companies that have merged — or otherwise risen — to market dominance will have to face: you can’t keep growing faster than the economy forever.
Been there. Done that. Some might remember Walmart tried a “cheap chic” type of go-to-market play back in 2005, complete with 8 page “Walmart fashion” spread in Vogue Magazine….
Not a big surprise that the journey from EDLP to Cheap Chic turned out to be somewhat problematic, with mixed results for Walmart.
Walmart has decades long investment in their current brand position and it’s not middle upper income. Good luck changing that perception without alienating current shoppers. As many have pointed out, history has shown how easy it is to lose an existing loyal customer when switching strategies to attract a different one, and how long (if ever) it takes to attract the new ones.
As has been said already, many middle to upper scale customers shop at Walmart already. They are not looking for different merchandise or marketing, just a clean, well run store. This is where they drop the ball in my town. Even the newer, more contemporary location is getting so battle worn and is so poorly managed that the demographic has changed.