Scott: Rollbacks Trump Gas Hikes
Wal-Mart’s CEO Lee Scott is keenly aware that the price of gas has hit an all-time high ($3.015 per gallon, according to the Lundberg Survey).
Even with gas prices moving higher (up nearly two cents in the past two weeks, according to Lundberg), Mr. Scott is confident in his company’s ability to continue achieving growth in its core categories.
Mr. Scott’s confidence is largely rooted in his belief that what has made Wal-Mart attractive to so many will become even more important to a greater number of consumers.
Wal-Mart, said Mr. Scott, will do “what we’ve been doing for years, sell for less. As the customer pays that price for petroleum, energy, they have to save money somewhere.”
As a report by Bloomberg News points out, however, not everyone is as confident as Mr. Scott in Wal-Mart’s ability to keep growing its business considering its core customer is hit hardest by rising prices at the pump and elsewhere.
David Abella, an analyst at Rochdale Investment Management, which owns shares in Wal-Mart and Target, said the average Wal-Mart household earns about $40,000 a year compared to $55,000 or more at Target.
The more affluent consumer base at Target, some say, puts it in a better position to weather steep increases in energy costs.
Wal-Mart, for its part, has begun targeting more affluent consumers with a focus on trendier and higher quality merchandise, without abandoning its “sell for less” heritage.
An example of Wal-Mart’s commitment to attracting more affluent shoppers is its new multi-million dollar ad campaign for organic foods using television, radio, print and online media. The campaign — “Introducing Organics at the Wal-Mart price” — makes clear that, while the retailer may be entering a new product category, it isn’t abandoning what has made it successful to date.
Janel LaMonica, VP-creative director at Bernstein-Rein, the advertising firm that developed the organics campaign for Wal-Mart, told Advertising Age, “This is an awareness message, but we didn’t want to downplay price because it’s one of the key barriers to people buying organics because they don’t want to see their grocery bill skyrocket. The two barriers to organics has always been one, finding it, and the other, affording it. Wal-Mart has taken down both these barriers.”
Discussion questions: Has Wal-Mart found the right mix of price, product quality and marketing message to expand its customer base without abandoning
it core? What are the most significant impediments to Wal-Mart’s goal of expanding its customer base and capturing a greater share of total consumer expenditures in retail outlets?
- Wal-Mart chief exec predicts growth despite higher
energy costs –Bloomberg News/The Morning Call
- Wal-Mart Rolls Out Multi-Million Dollar Ad Campaign for Organic Foods – Advertising Age/Organic
- Gas Prices Move Past $3 to All-Time High
– The Associated Press/MSN Money