It has been a gloomy month for US retailers. Iconic brands such as Linens-n-Things and Mervyns are in liquidation, while former electrical retail powerhouse Circuit City filed for bankruptcy protection last week. Store sales are down at every major US retailer - except one.
It has been a gloomy month for US retailers. Iconic brands such as Linens-n-Things and Mervyns are in liquidation, while former electrical retail powerhouse Circuit City filed for bankruptcy protection last week. Store sales are down at every major US retailer - except one.
On Thursday Wal-Mart announced a 7.5% increase in sales for the first three quarters of 2008. Chief executive Lee Scott was smiling when he declared his 'optimism' for the upcoming holiday season, and Tom Schoewe, Wal-Mart's chief financial officer, was in an even more cheerful mood.
There are two reasons for Wal-Mart's success: one economic, one strategic.
On the economic front, Wal-Mart is benefiting from the change in the fortunes of the US consumer. In the past six months, the middle classes across the Atlantic have begun trading down in the millions. A recent survey from Bain & Company showed that US consumers are becoming more likely to trade down and that when they do they feel more educated and more satisfied as a consumer. Thrift is the new luxury, and Wal-Mart is enjoying a middle-class renaissance at the expense of its upmarket rivals.
But there is also a strategic reason why cash registers at Wal-Mart are beeping with such fury. It has learned one of the great secrets of branding the hard way. In 2006 the company made a huge, but relatively commonplace error. Frustrated with flat sales and shareholder pessimism, the leadership team at Wal-Mart decided to reposition the brand.
It's a tactic taught daily to business school students, and the theory behind it could not be more simple. Students are shown a perceptual map in which a brand is in close proximity to competitors and associated with lifeless values. Then the student is pointed to a golden land on the other side of the map, where the consumer's unfulfilled needs are and competitors are few and far between. The implication is obvious: change what the brand stands for and become popular and profitable again.
There is only one problem with brand repositioning: it does not work. Never in the history of marketing has a theory been embraced and attempted by so many, and failed so frequently. It's a peculiar kind of arrogance that fools a marketer into thinking that they can get inside a brand's genetic code and change it to improve its circumstances. I was taught a long time ago by marketers smarter than me that most of the brands I would work for were around before I was born, and would live on long after my death. Great brand managers never rate themselves as more valuable than the brands they serve.
In Wal-Mart's case, the brand repositioning was particularly bonkers. Out went founder Sam Walton's philosophy on reducing costs for small-town America. In came organic food, expensive jewellery and $500 bottles of wine. Celebrities like Destiny's Child were brought in to promote the brand, and Wal-Mart even invested in an ill-fated ad campaign in Vogue.
Last year, however, Wal-Mart realised that its repositioning strategy was not working, and shifted to a revitalisation approach instead. Brand revitalisation is a more simple, humble approach to brand change. First, go back to your history and remember what made the brand great in the first place. Second, revisit these associations but in a modern and contemporary way.
It's one of the hardest lessons in branding. To remain consistent to your brand you must change. Not the brand itself, but the way the brand presents its enduring and eternal associations to new consumers experiencing a new set of circumstances.
Mark Ritson is an associate professor of marketing, and consultant to some of the world's leading brands
30 seconds on... Wal-Mart's brand revitalisation
- Wal-Mart shelved its 'Always low prices' slogan in 2007, after 19 years, and launched a fresh campaign. Its motto, 'Save money. Live better', will feature on items from store receipts to plastic bags.
- Stephen Quinn, Wal-Mart's chief marketing officer, said that the campaign is aimed at personalising the chain's low prices. 'People know they can save money by shopping at Wal-Mart,' he added. 'The emotional connection was what the savings allowed the family to do.'
- In two 30-second TV spots, a US family is shown spending the money it saved at Wal-Mart on a car and a family vacation to Orlando, Florida. The ads end with the line 'Wal-Mart saves the average family $2500 per year. What will you do with your savings?'
- An economic study commissioned by Wal-Mart and conducted by research firm Global Insight showed that the retailer's low prices saved customers $287bn last year, an average of $2300 for each US house-hold shop-ping at Wal-Mart.