New price/assortment ads hitting at ideal time
The timing of Walmart’s new ad campaign couldn’t be better with Easter a week away, and a considerable amount of sales volume associated with that holiday still in play. Walmart should be able to get its share of that spending as the heavy rotation of ads reminds shoppers of its everyday low prices on the broadest assortment in the land and an easy price match guarantee.
The spots should allow the company to capture a larger share of wallet from existing customers and increase traffic at its stores, since Walmart will re-enter the decision set of those who in recent years decided to shop its stores less frequently or defected entirely. Walmart put its customers through a fair amount of turmoil the past few years as it deviated from some of the core principles of its business model in pursuit of Project Impact, and now that some course corrections have been made, the company has gone big with a national ad campaign reminding the nation what it stands for.
In the short term, meaning the Easter holiday and the second quarter, Walmart will almost certainly see an increase in shopper traffic. That’s the good news for the company. The bad news is the issue of whether existing or new shoppers will have any money to spend. Gas in many parts of the country is already around $4 a gallon, and it’s not even summer yet. Who knows where prices will head next; but if history is any indication, energy prices tend to consistently move in an upward direction, and that trend has been accelerated this year by more turmoil than normal in oil producing countries.
Walmart could end up with a situation where store traffic is up as measured by the number of transactions but the average transaction size is down as shoppers disposable income is consumed at the pump. That would be a victory of sorts as over time average transactions could build.
That leads to the other potential fly in the ointment. With Walmart spending millions to remind shoppers who it is and regain those who strayed from the fold, what happens when they return to the store? Will they be delighted by the experience, dazzled by the amazing assortment of attractively merchandised quality products and the noticeable price savings when they check out? Or will they be reminded why they left in the first place, as they push a shopping cart with a bum wheel through a grease-stained parking lot after an hour of dodging in-aisle displays and other shoppers only to realize Walmart’s prices aren’t that much lower than other places that are nicer or closer to the house.
These matters will be resolved over the course of the next several months. By mid-May when Walmart reports first-quarter results that include April sales the market will get an early read on the effectiveness of the campaign to restore traffic. However, more meaningful data won’t be available until late summer when issues related to the effectiveness of the ad campaign, consumers’ perception of and reaction to in-store changes and impact of higher gas prices play out.