How Walmart Turned the Tide Against Archrival Target
The ad captured people's imagination and went viral, catapulting Walmart into this new and hip world. As people tweeted, emailed and blogged about it, the ad generated over 2 million views and became one of the top viral videos on the Web.
Target's Forgettable Ad
On the other hand, Target's current TV spot features a bespectacled man in a drab brown suit talking up the "Found $20 in the Laundry Collection." If you don't remember it, that's because it's dull, and unmemorable.
That's a dramatic image reversal. Just a few years ago in 2005, in a bid to copy Target, Walmart placed an eight-page ad insert in fashion bible Vogue and sponsored a fashion show in Times Square. A spokeswoman said they showed the store was "trend-right and fashion-forward," as it launched a trendy fashion line called Metro 7. It bombed, and Walmart's sales slowed, and even turned negative.
Around that same 2005-2006 period, Target was flying high and continued to reel in the well-heeled customer with its splashy ads and hot designer fashions and home goods. Month after month, Target's sales growth outpaced a lumbering Wal-Mart.
Shoppers Closed Their Wallets
And then, the long economic recession started at the end of 2007, and as job losses started to skyrocket, consumers closed their wallets for everything but the basics. "Being cool doesn't matter anymore when you're losing homes," says Patricia Pao, CEO of the Pao Principle, a retail consultant.
Target wasn't able to shift its marketing message quickly enough and highlight its stores as a place to buy discounted goods. It saw sales fall 2.9% in 2008, and decline another 2.7% in 2009.
Meanwhile, Wal-Mart was well positioned to capture customers who were looking for basic goods at the lowest prices. Its sales rose 3.3% in 2008. Wal-Mart will report full year numbers this week, but its sales for the first nine months of the year were up 0.6%.
"Real Resonance" With Customers
"Walmart has worked at creating its image as a place where people can get value and the brand has had some real resonance with consumers," says Robert Passikoff, president of brand consultant Brand Keys.
Walmart has certainly come a long way since former CEO H. Lee Scott said he wasn't a big fan of marketing. A few years ago, its ads had only one purpose in their messaging: Everyday low prices. Today, Walmart wants to be known not as a destination for "cheap" goods, but rather as a place where people can get great value. Its tag line, too, has changed: Save Money. Live Better.
Perhaps Walmart's confidence stems from the fact that it's one of the only retailers to have managed to increase sales and profits during an economic downturn that has led to the shuttering of thousands of stores. Retailer after retailer has struggled, and many filed for bankruptcy like Circuit City and Linens 'N Things.
But Walmart is also preparing for an economic recovery. Worried that it will lose some of the customers it attracted during the recession, it's positioning itself not just by changing its image with fun ads. In 2009, the company started a plan called Project Impact through which it's focusing on making the shopping experience better for its customers by reducing the clutter in its stores.
Walmart Chief Operating Officer Bill Simon recently said in a presentation that it has "designed a friendlier store," where customers have more space to shop and can get easier access to departments like apparel.
Target, meanwhile, caught on to the fact that the cheap-chic mantra wasn't working and is changing its message. But as it tries to present itself as a place for value, Target could be treading on treacherous ground. The drab ads could end up changing its image from the carefully crafted "Tar-zhay," a destination for cheap-chic, to just another place for cheap goods.
"While it's important to adapt the marketing message to meet the economy, there is a great danger of taking the message away from what the brand stands for," says Passikoff. "You don't want to be a surrogate for cheap, because there are lots of places that offer cheap stuff." Walmart has figured that out. Will Target?