Over the last year business pundits, magazines and blogs (myself included) have volunteered to armchair quarterback Private Brand strategy for the nations largest retailer, Walmart. The most recent have focused on the apparent strategic misstep in growing Great Value and sku rationalization/optimization.
The following is one such article from the monthly magazine Canadian Business:
Walmart finds that many customers prefer name brands, even in a recession.
In the depths of the recession, Walmart tried to increase sales of its Great Value private-label products with more advertising, new packaging and better in-store signs. It also yanked many name-brand equivalents from store shelves. Unfortunately, the company grossly underestimated the power of a strong brand.
Walmart thought that customers would respond well to its private-label products, since they are usually 5% to 20% cheaper than their name-brand alternatives. Plus, research company Nielsen Co. had reported a 10% increase in house-brand sales across the grocery sector in the previous year. So, in March of 2009, Walmart kept top-selling merchandise on shelves, and removed a reported 300 other products to call attention to the private-label substitutes. Glad products, for example, were wiped from shelves.
But the company didn’t see the same kind of results as its grocery store competitors, which were successfully pushing their house brands. Instead, Walmart’s sales fell for the forth quarter in a row, with a 1.4% decrease in its first fiscal quarter of the year. While the company has blamed factors such as unemployment and gas prices as the cause of their low sales, they also recognize that they were too eager to axe name brands, and are quickly restoring many of those products to the shelves.
If you are a regular reader, you are certainly familiar with the many questions I have asked about the Private Brand strategy at Walmart, however my questions have focused on their portfolio strategy and not the panic over losing my choice of four different sandwich bags.
The expansion of Great Value and the virtual elimination of Sam’s Choice have created a single monolithic packaged goods Private Brand that is at the same time impressive in its breadth and oppressive in its reach. I can’t help but wonder if Walmart had more tools in its brand portfolio would customers have a better perception of their selection.
Is there room in their portfolio for tactical brands: natural and Organic, Italian, Asian, Indian, Artisanal, Better for You or Local & Regional Flavors and would they give customers a reason to choose Walmart over their competitors and an increased perception of selection.
The recent emergence of the fresh Private Brand Marketside is certainly promising however to date it has remained strictly in produce and fresh foods never crossing into the center store where Great Value reigns supreme.
So what will happen as the strategy unfolds, it is anyone’s guess, but I would bet on the emergence of a premium brand or the relaunch of Sam’s Choice. The eco brand Great Value Terra exists outside the US and could become a nice companion to Great Value in the US.
Whatever happens it is sure to be exciting and generate a lot of debate.