A slow ride on the Walmart Express
BENTONVILLE, Ark. — The new small-format Walmart Express stores that opened earlier this month are an interesting concept with intriguing growth potential. But for the time being, and possibly for much longer, competitors need not concern themselves with the small stores.
At least that’s what Walmart wants the marketplace to believe following the opening of the first few of the 15,000-sq.-ft. stores earlier this month in northwest Arkansas.
The product mix is squarely in Walmart’s sweet spot of food and consumables, and from a shoppers’ perspective, the store experience is consistent with the look and feel of a supercenter. Investment analysts and media were given a preview tour of the stores prior to the company’s June 3 shareholders’ meeting, which led to inevitable speculation around how many of stores the company could open and the time frame in which it could open them.
If Dollar General can open 625 new stores annually, which it is doing this year, what would Walmart be capable of?
If a comparable or even greater rate of growth is in the cards, Walmart executives made it clear it will be years before a rollout occurs, with the greatest near-term opportunity being further supercenter expansion.
During a meeting with analysts after touring the Walmart Express, Bill Simon, president and CEO of Walmart U.S., said, “I hope you didn’t take the tour of small stores as an overemphasis on small stores. The supercenter is and will remain our best growth vehicle. The returns on the supercenter are better than anything else we’re building.”
With supercenters as the company’s primary driver of domestic growth, Walmart Express isn’t even the next concept in line, according to Simon. That concept would be the Neighborhood Market, recently rebranded as Walmart Mart, which measures between 30,000 and 40,000 sq. ft.
“That has been a format we’ve been building over 10 or 12 years now, and in the last two or three years have gotten it to be a really good return vehicle for us,” Simon said. “We reported in the first quarter that that format is delivering positive comps in the 4% range, and [we] are very happy with what it’s doing from a sales and a productivity standpoint.”
Even Walmart Stores president and CEO Mike Duke sought to temper expectations around the expansion potential of the Express concept after an analyst raised the issue of how it would take thousands of the small stores to move the needle on financial results given Walmart’s size. Duke agreed and reminded attendees at the meeting that the smallest of the company’s small formats is a long-term project.
“If you look at the way Walmart has built formats in the [United States], we’ve been patient,” Duke said, referring first to the supercenter development and then the initial Neighborhood Markets. “I wouldn’t be counting on in the near term a great deal of impact from the very small stores,” Duke advised analysts.
Who’s using coupons — and where
Who’s clipping coupons? Ironically, coupon redemptions in the wake of the Great Recession are heaviest among higher-income, better- educated Americans, researchers reported.
“With the value offered by coupons, one might think that the lowest income households would be among the heaviest users,” noted The Nielsen Co. “In fact, more affluent households dominate coupon usage.”
Indeed, 38% of “super heavy” coupon users and 41% of what Nielsen described as coupon “enthusiasts” come from households with incomes that exceed $70,000, according to the company. And households with incomes of $100,000 and up “were the primary drivers of coupon growth in 2009,” Nielsen reported. “The enthusiast category also attracts a disproportionate number of households with incomes between $50,000 and $69,999.”
One reason is higher levels of newspaper readership among better-educated and higher-income households, since “newspapers remain a key vehicle for delivering coupons,” according to Nielsen. Another differentiator: “promotions are generally targeted in areas with more affluent consumers,” Nielsen reported.
“Beyond income levels, more than half [51%] of larger households … are ‘enthusiasts,’ while roughly one-third of non- and lighter coupon users are single-person households,” the company added. “Younger female households use coupons more, while male-only households use them less. Older users [65-plus] are also important … coupon users.”
Supermarkets remain the primary savings arena for those enthusiasts, according to research, software and consulting firm Inmar. “The majority of coupons [65%] were redeemed at conventional grocery stores,” Inmar reported. “But all classes of trade — dollar stores, mass merchandisers, convenience stores, military commissaries and drug stores — posted double-digit redemption growth.”
Indeed, much of the growth activity in consumers’ coupon use rates has been outside the food aisle. In 2009, for instance, “nonfood coupon redemption growth escalated from a rate of 9% in the first quarter to 46% in [the] second quarter, and continued growing throughout the year, rising 45% in [the] third quarter and 37% in [the] fourth quarter,” Nielsen reported. “A total of 1.2 billion nonfood coupons were redeemed in 2009, representing one-third [of] all coupons.”
A recent nationwide survey commissioned by Coupons.com, and conducted by Harris Interactive, highlighted Americans’ renewed interest in coupons. “The survey found that incorporating coupons was the most popular planned activity to offset rising food prices, cited by nearly three-quarters [72%] of U.S. adults,” the company reported. Coupon use outweighed all other cost-saving measures among consumers, including unit-price comparison at the store shelf (71%) and shopping at discount stores (66%), Coupons.com found.
John Freeland, president and CEO of SymphonyIRI, said the rise of couponing and other money-saving efforts by consumers pose both challenges and new opportunities for retailers and manufacturers. “An economy in transition to recovery is as tricky to navigate for CPG, retail and healthcare leaders as an economy moving into recession,” Freeland said. “Some shoppers are retaining their frugal ways, others are spending more freely across the board and others still are spending more on some types of products, but remaining tightfisted about others. They are also re-evaluating where they purchase their products.”
However, he added, “outstanding opportunity” could open up “for manufacturers and retailers willing to analyze carefully discrete shopper microsegments.”
Added Nielsen, “manufacturers and retailers have real opportunities to reach different groups with coupons and promotions, particularly African-American and Hispanic households. While this may require adjustments to existing tactics, the potential payoff, in terms of volume growth and winning new customer loyalty, can be significant.”
Consumers rediscover coupons
The humble coupon is back, in a big way.
Two years after the nation’s economy hit bottom in the most wrenching tailspin since the onset of the Great Depression, coupon use in the United States has staged a remarkable comeback.
Fueling the recent explosion in coupon redemptions is the Great Recession, which cut a huge hole in consumers’ budget for groceries, health and beauty items and everyday household needs, and a nimble coupon distribution industry that has fostered and exploited a massive rise in Internet-based coupon redemptions through personal computers and mobile devices.
“In 2010, marketers distributed more consumer packaged goods coupons than the prior year, reaching 332 billion,” noted NCH Marketing Services, a division of Valassis, in its Annual Topline U.S. CPG Coupon Facts Report. That marks a 6.8% increase over 2009, and “the largest single-year distribution quantity ever recorded in the United States,” NCH reported.
U.S. consumers redeemed 3.3 billion of those CPG coupons last year for a total savings of $3.7 billion. That’s a 5.7% increase from 2009, according to the research firm. “Consumer demand for coupons remained high in 2010 as shopping habits created during the most recent recessionary period sustained throughout the sluggish economic recovery that occurred during the year,” said Charlie Brown, NCH VP marketing. “In fact, [one]-third of the respondents in NCH’s Annual Consumer Survey said that they used more coupons in 2010 than the prior year.”
Retail experts agreed. “Coupon use has been increasing exponentially during the recession,” said David Fikes, director of consumer affairs for the Food Marketing Institute. “It leveled off a little bit over this past year, but it is continuing.”
“It’s like the trend of eating more meals at home,” Fikes told Drug Store News. “Some people are saying that even after the recession they’re going to continue doing that.” In addition, a younger generation has discovered coupons, “particularly with Internet couponing, which has taken off,” he said.
It’s a striking turnaround. Coupon use had been dropping precipitously for decades — from a peak of 4.6 billion coupons redeemed in 1999 to a nadir of just 2.6 billion per year during the three-year period ended in 2008, according to The Nielsen Co. But “the Great Recession of 2009 changed all that and marked a sort of renaissance for the coupon,” reported Todd Hale, SVP consumer and shopper insights for Nielsen.
The trend is likely to continue. “Fewer consumers are switching brands to catch a sale and trading down to private-label options, hinting at glimmers of optimism in a marketplace still marked by high levels of caution and frugality,” noted SymphonyIRI Group in its inaugural MarketPulse Survey report, unveiled March 30. “However, the number of consumers engaging in preplanning activities, such as coupon clipping and list making, remain virtually unchanged [from 2009] and are very much a part of consumers’ grocery shopping rituals.”
All signs point to a long-term shift in consumer behavior, said Susan Viamari, editor of Times & Trends for SymphonyIRI. “I think consumers, before the recession, were perhaps a little too carefree or free-spending. And now they’re saying, ‘We can save money relatively easily using coupons, and it’s not all that painful a process. So why would we want to abandon that just because the economy is a little better?”
The MarketPulse survey found that “just about half of consumers (47%) [said] they’re using more coupons today than they have in the past, which is consistent with 2009, when 49% said they were using more coupons than in the past,” Viamari told Drug Store News. “We also asked consumers … if they would continue to do so in the coming year, and just about everyone, more than 90%, said they will continue to do so in the coming year.”
A recent report from CouponSense.com also foresaw a long-term shift in consumer behavior. “Looking at 2011, a combination of the recession, [the] ‘Extreme Couponing’ reality show, new product labeling and a new general attitude in America that saving money is socially responsible, 2011 will be a record year” for coupon redemptions, the company noted.