Wal-Mart to Double Neighborhood Markets

Pricing Investments

McNaughton said Wal-Mart plans to invest $6 billion in retail pricing by 2017 — after telling investors a year ago it would invest $2 billion in price through 2014.  Though the investments will be broad-based, they will primarily be in food and consumables, he noted.

Wal-Mart will deliver on that promise “through productivity initiatives, logistics initiatives and cost-of-goods savings,” he explained.

Efforts to invest in price leadership through its “Ad Match” program — in which Wal-Mart compares its prices on a basket of goods against those of local competitors — are working well so far, he noted, with same-store sales up 1% and traffic up 1% compared with a control group of stores, “which means those efforts are resonating with customers.”

The company has aired the campaign in 31 U.S. markets that cover about 40% of the company’s food sales, “and our average price gap has been 17% against food competitors and 20% against health and wellness competitors.”

He said the gap was 23% against Safeway, 22% against Albertsons, 15% against Publix and 12% against Kroger, “and since launching this campaign in those 31 markets, we’ve grown our market share 30 basis points above the total chain.”

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In addition to price, Wal-Mart is also focusing on merchandising by stocking basic destination items; offering good, better and best selections; offering relevant brands; and localizing the assortment, McNaughton said.  Those efforts to localize resulted in a sales improvement of 400 basis points in food sales, he noted.

“We’re going market by market, category by category, brand by brand and product by product – diving deep into what products sell for — not shelf prices or average prices but at what decile the product is moving and where we need to be priced.  That’s changing the game for our customers and changing the way we talk to our suppliers, and it’s working because the customer is buying.”