Wal-Mart has insisted it will remain a “house of brands”, despite increasing private-label sales as US consumers look to economise.
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Delivering a 1.4% drop in second quarter net sales yesterday (13 August), the world’s largest retailer said that consumer spending had been altered by recession in the US and fears over unemployment.
Speaking during a conference call, CEO Mike Duke illustrated how consumer spending had altered, suggesting that shoppers are increasingly opting for bigger pack-sizes and purchasing more own-label goods.
“Overall, our customers are more disciplined in their spending. There’s a “new normal” now where people are saving more, consuming less, and being more frugal and thoughtful in their purchases. Customers are shopping smarter. They want quality products that are cost-effective, sustainable and provide real value,” he said.
While Wal-Mart has seen an increase in own-label purchases, a spokesperson for the company told just-food that it remains committed to its strategy of being a “house of brands”.
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By GlobalData“The customer is really forced to do more with less and is expressing a need for greater value. Our own-label range is a reflection of what people want but Wal-Mart remains a house of brands,” the spokesperson said.
Part of Wal-Mart’s mission is to ensure price leadership in the US market and this can sometimes mean tough negotiations with branded suppliers.
“We are an advocate for our customers… We are committed to the everyday, low-price model,” the spokesperson explained.
In response to the recession, Wal-Mart has looked to reduce prices. However, the retail giant has not increased promotional activity – referring to specific sales – the spokesperson revealed.
Wal-Mart’s focus on delivering value enabled it to successfully increase customer traffic over its second quarter. An important factor in its ability to attract new customers was its move to increase advertising to convey its value positioning.
“We are advertising more in print and particularly in broadcast. This has been a factor in our traffic,” the spokesperson said.
In order to ensure that it retains the new customers it has attracted, the group is also investing heavily in improving its US store base.
“It’s not just remodelling, its about re-engineering the stores to improve the overall shopping experience.”
In stores that have been revamped, Wal-Mart has seen an increase in consumer spending of between 100 and 150 basis points, the spokesperson said.
