Below you’ll find my coverage of Andrea Thomas’ (Walmart’s Senior Vice President of Private Brands) presentation as part of the Bentonville Bella Vista Chamber’s Champion Speaker Series.
Remember when any brand that mattered was provided by a vendor? When the terms “private label” and “generic” were synonymous? A time when Andrea Thomas’ lead question, “What is a brand?” was a lot easier to answer? Luckily, the audience of over 200 Walmart suppliers in attendance was given only a beat or two to ponder the weighty possibilities before Ms. Thomas provided her elegant answer: A brand is “a promise that we make with our customers.”
Cool . . . but wait a minute . . . whose brand is making the promise and what exactly are the promises being made? Forgive me for going all Barbara Walters on you so early in the blog, however, the answers to these questions go a long way toward explaining the radical transformations that have occurred in the retail branding world over the past couple of years. And perhaps no other retailer can claim more responsibility for the transformation than Walmart. Did you think I was going to say Starbucks? Apple? Nah. After all, maintaining a monomaniacal focus on a single brand is one thing. Balancing and managing a huge portfolio of brands—your own and others—in thousands of categories, is quite another.
Speaking of portfolios, two years ago, Walmart took at look at its private brand portfolio and saw a tremendous brand-building opportunity. At the top of the heap is Great Value, the largest packaged goods brand in the country though all of the remaining brands in Walmart's portfolio, from Equate to Ol’ Roy to Special Kitty and Parent’s Choice, enjoy enviable “national brand scale.” That means national brands aren’t the only ones that can fulfill brand promises and earn consumer loyalty (as brands such as Costco's Kirkland have proven). According to Ms. Thomas, Walmart’s private brand portfolio is uniquely suited to “address opportunities in quality, ease of shopping and elevated freshness and taste."
Prior to coming to Walmart, Andrea Thomas worked in the national branding world, fulfilling executive-level innovation roles at Hershey and Frito-Lay. She was quick to point out that working on retail brands is “different,” but I’ll throw in that it’s LESS different than it’s ever been as retailers get better and better at manufacturing, sourcing and marketing their own products and brands. Bringing in someone of Ms. Thomas’ caliber would have been overkill if Walmart’s only aspiration was to perfect being a store that has brands; Walmart’s determination to BE a brand in every sense of the word raises the stakes, particularly in private label. After all, according to Ms. Thomas, Walmart’s private brands are how Walmart shoppers “take the Walmart brand home” and 54% of Walmart customers see the quality of private labels as a “reflection on the quality of the store” (versus 35% for national brands).
Therefore, if Walmart’s private brands aren’t of the highest quality, then neither is the perception of Walmart. And quality doesn’t stop at ingredients and formulations; it “comes through in every aspect of customer experience” with Walmart’s private brands and must be consistent across all touch points from advertising to in-store experience, according to Ms. Thomas.
Brand quality is great; however, Walmart won't get credit for quality when a brand isn't top-of-mind with shoppers. In the case of Great Value, Walmart learned that there was a disconnect between the purchase rate for the brand and its awareness. In other words, boxes of Great Value cereal and cans of Great Value corn were parked in consumer’s cupboards fulfilling only one baseline brand promise: that of low prices. Customers had no emotional engagement or particular loyalty to Great Value; the price was registering but the brand wasn’t. Rather than accepting the status quo, Walmart saw an opportunity to up the ante by “building the brand and moving toward recognition," and without abandoning the“10 words,” mantras guiding Wal-Mart’s efforts in merchandising (“Win, play, show”), marketing (“Save money. Live better.”), and operations (“Fast. Friendly. Clean.”).
That’s a tall order made even taller when you factor in the “major changes” that shoppers are making. Changes that, depending on who you ask, are temporary or here to stay. As usual, Walmart plans on winning regardless by maintaining its customer-centric mindset and course-correcting its strategies.
Addressing current realities, Ms. Thomas painted a picture of a “deal-sensitive” customer who is more worried about finances than terrorist attacks or climbing interest rates. Yet that same customer feels “empowered” to creatively “meet any challenge,” and Walmart is a big reason why. When Walmart asked shoppers to complete the sentence, “Life without Walmart would feel like ______,” respondents gave “intensified responses,” Ms. Thomas said. Life without Walmart for one shopper would feel like “a hole in my soul,” according to the survey. Wow, we knew things were bad out there but clearly there's an opportunity to make emotional connections!
Walmart’s goals for building those connections were illustrated as a progression from the baseline of “Unbeatable prices, easy shopping, quality products” graduating to “When I shop at Walmart, I feel like a smart shopper,” then finally to the “Emotional pinnacle” of “By shopping at Walmart, I can live better.”
It’s no coincidence that a version of “Save money. Live better” is the ultimate end game, since, for Walmart it’s “more than a tagline; it is a philosophy” that serves as a litmus test for every product that Walmart delivers to its customers and every brand that gets space in its stores. Private label is no exception and in fact it has become the ultimate embodiment of SMLB and of the remaining six words that comprise Walmart’s “10 words” mantras. “Fast, friendly, clean,” Walmart’s guiding principle in operations, speaks to how products are presented to the customer in the store; Great Value’s post-revamp packaging features the brand much more prominently and otherwise is a noise-free study in minimalism, making it easy for customers to find the brand and quickly assess the value. “Win, play, show,” Walmart’s merchandising growth strategy, speaks to how products and brands will drive growth for Walmart by addressing customer’s evolving tastes. A glimpse at any Walmart grocery aisle will tell you that Great Value isn't always a "show" brand and recent painstaking reformulations, quality upgrades and flavor extensions are setting a new standard with already-discerning shoppers.
At a time when shopper touchpoints are no longer predictable or fixed, retailers can't be content to leave the relationship at the cash register. Walmart is completing the loop by offering product guarantees for its brands and it has built out a professionally-staffed customer hotline that strives to trouble-shoot issues within as few as two phone calls.
As Ms. Thomas pointed out, “A transaction is different from a relationship” and that goes for suppliers, too. Not satisfied with simply slapping a new brand on an existing product, Walmart is raising standards for suppliers of its private brands through ongoing quality testing and grading on sustainable practices. While the term supplier may or may not refer to a national brand provider going forward, clearly the bar has been raised for any national brands that want to participate in private label opportunities. Ms. Thomas mentioned the fact that Walmart is “building manufacturing capability” (what better way to “gain visibility into the supply chain”?). The brand playing field has been leveled and private label is leading innovation, not following.
When I asked Ms. Thomas about her specific expectations for private brand suppliers and the role of national brands after the presentation, she went back to the Walmart customer. National brands play a role in category and product elevation ("We love it when national brands succeed."), and national brands that understand and incorporate Walmart customer-centric strategies will be the winners, according to her.
While some have groused that the new Great Value packaging harkens back to the day of "generic" private labels, a trip to Europe will tell you that it is modeling a more modern and miniminalist aesthetic (not coincidentally, Walmart's packaging was developed by a “fabulous” UK-based agency), one that Target has also pursued in its relaunch of the Up & Up brand (see previous blog posts). Walmart brought in the experts for many more reasons: each design has to compete, not just exist, within its category; packaging has to be consistent across over 100 categories in multiple packaging materials; it has to appeal to kids, adults, and everyone in between; and standards have to be effectively communicated and executed across the entire supplier base in order to ensure consistency. I’ll add that with so many suppliers involved in any given private label program with Walmart, the need for coordination and playing well with others within the supplier community will always be paramount for success.
When asked during Q&A whether Great Value could influence store preference, Ms. Thomas spoke about the opportunity to better satisfy Walmart’s already-large customer base by focusing on the customer inside the store. I thought this was an important take-away: private label is about exceeding the expectations of customer already in the store . . . To me that spells opportunity for national brands to do the same while driving incremental opportunities with those yet-to-be-wooed shoppers.
It’s clear that Walmart does not view private label as a temporary, margin-building solution, but more so as a future-seeking strategy that will fulfill quality, execution, and engagement promises that were once the exclusive purview of national brands. Will Walmart succeed in transforming its private brands from savvy shoppers' secret to loud and proud brand preference? Stay tuned!
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