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© Kantar Retail 2016
Walmart Neighborhood Market:
March 2016
Doing Business in Bentonville
Leon Nicholas, SVP and Knowledge Officer
Laura Kennedy, Director
Assessing Its Prospects in a Changing Landscape
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© Kantar Retail 2016
Copyright © 2016 Kantar Retail. All Rights Reserved.
501 Boylston St., Suite 6101, Boston, MA 02116
T: +1 (617) 912 2828
No part of this material may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photography, recording, or any information storage and retrieval system now
known or to be invented, without the express written permission of Kantar Retail.
The printing of any copies for backup is also strictly prohibited.
Disclaimers
The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The
views expressed do not necessarily reflect the views of the management of the retailer(s) under
discussion.
This seminar is not endorsed or otherwise supported by the management of any of the companies
covered during the course of the workshop or within the following slides.
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Agenda: Assessing Neighborhood Market’s Prospects
Source: Kantar Retail research and analysis
Shopper
Assortment
Prototype
Competition: Spotlight on Publix
Conclusion and Supplier To-Dos
‒ Add or delete points as
needed by inserting or
deleting rows
‒ Align with the image
‒ Reach out to creative for
assistance if needed
Replace w/
topical image or
reach out to
creative
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Neighborhood Market’s Expansion Will Continue 4
Source: Company presentation and reports, Kantar Retail analysis
Sales (USD millions) Stores
“I am really excited about what we can do with Neighborhood Markets. But we have got to
fix some of these basic things and then we can get into them.” –Greg Foran, October 2015
About 35% of WMT’s U.S. sales added through 2020 will be from small formats
Closed 102 12,000
square foot NMKTs, 24
“traditional”
Note: Neighborhood Market store closures in January 2016 occurred before the end of the fiscal year and are accounted for in 2015. Sales impact is accounted for beginning in 2016.
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Establishing “Development” Leadership
Neighborhood Market has equal footing with Supercenter in ops structure
5
Judith McKenna
Chief Operating Officer,
Walmart US
As COO, now also oversees all
Walmart associates in addition
to leading small format strategy
and the Development Team
Previously EVP strategy and
international dev. for WMT
International (M&A, real estate,
format development)
Before, COO and CFO of
ASDA; as COO, oversaw
logistics, eCommerce, financial
services
Source: Company reports, Kantar Retail research and analysis
“Ignore [Neighborhood
Markets] at our peril” –Judith McKenna, June 2015
Julie Murphy
EVP, Neighborhood
Markets, Walmart US
Previously EVP and
President, Walmart West;
divisional SVP; and various
store operations positions
Replaced Mike Moore in
May 2015—Moore now
oversees Supercenters
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Julie Murphy
EVP, Neighborhood Markets,
Walmart US
Looking for More Autonomy for Merchants
Neighborhood Market structure has focused on ops
6
Steve Bratspies
Chief Merchant
Lea Jepson
Senior Director, Merchandising,
Small Formats
15-20+ reports,
and growing
PLUS: Market managers for
each district exclusively
focused on NMKTs
Larry Mahoney
SVP, Logistics
Marc Lieberman
VP, Small
Formats
Brian Hooper
VP, Real Estate
Small Formats
David Norman
SVP, Ops West
Glenda Fleming
SVP, Ops East
Regional VPs
Regional VPs
Source: Company reports, Kantar Retail research and analysis
Jesica Duarte
VP, Neighborhood
Market
Development
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Fill-in Trips
Fresh
Fuel
Pharmacy
Pickup
Retooling Neighborhood Market
“There are opportunities for us to significantly update and improve things like
space allocations; adjacencies; ambience; navigation; and flow in both of our
formats. We’re working on this now” –Greg Foran, April 2015
Source: Kantar Retail research and analysis
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8
Shopper
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68% 62%
9%
17%
3% 10%
28%
60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ja
n-0
7
Ma
r-0
7
Ma
y-0
7
Ju
l-0
7
Se
p-0
7
No
v-0
7
Ja
n-0
8
Ma
r-0
8
Ma
y-0
8
Ju
l-0
8
Se
p-0
8
No
v-0
8
Ja
n-0
9
Ma
r-0
9
Ma
y-0
9
Ju
l-0
9
Se
p-0
9
No
v-0
9
Ja
n-1
0
Ma
r-1
0
Ma
y-1
0
Ju
l-1
0
Se
p-1
0
No
v-1
0
Ja
n-1
1
Ma
r-1
1
Ma
y-1
1
Ju
l-1
1
Se
p-1
1
No
v-1
1
Ja
n-1
2
Ma
r-1
2
Ma
y-1
2
Ju
l-1
2
Se
p-1
2
No
v-1
2
Ja
n-1
3
Ma
r-1
3
Ma
y-1
3
Ju
l-1
3
Se
p-1
3
No
v-1
3
Ja
n-1
4
Ma
r-1
4
Ma
y-1
4
Ju
l-1
4
Se
p-1
4
No
v-1
4
Ja
n-1
5
Ma
r-1
5
Ma
y-1
5
Ju
l-1
5
Se
p-1
5
No
v-1
5
Ja
n-1
6
Walmart/Walmart Supercenter
Walmart.com
Neighborhood Market*
9
Neighborhood Market Needs to Recapture Trips
Amazon.com
Percent Shopped Walmart during Past Four Weeks, by Format
Analysis for Neighborhood Market is limited to states in which Neighborhood Market had a presence as of January 2016
Source: Kantar Retail ShopperScape® , January 2007- January 2016
Continued decline in Supercenter penetration, despite stores added
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‒ Compared to Supercenter
shoppers, Neighborhood Market
shoppers…
Live in denser market areas
Are younger
More likely to be Hispanic,
African American
NMKT’s Shoppers Are Younger than the Supercenter’s
Shopper Profile: Past 4-Week Shoppers
Walmart SC Walmart NMKT
Annual HH Income
<$25k 27% 26%
$25k-$49.9k 27% 27%
$50k-$74.9k 18% 19%
$75k-$99.9k 11% 12%
$100k+ 17% 17%
Mean income $58,180 $58,720
Locale*
Rural 17% 9%
Small Town 21% 13%
Large Town 13% 15%
Suburban 36% 43%
Urban/City 13% 21%
Kids in HH Yes 28% 29%
No 73% 71%
Generation
Gen Y 20% 25%
Gen X 31% 32%
Boomers 38% 34%
Seniors 11% 9%
Mean age 49.3 46.8
Race/Ethnicity
White Non-Hispanic 68% 59%
Black Non-Hispanic 14% 17%
Hispanic 13% 17%
Analysis limited to states in which Neighborhood Market was present as of January 2016
Note: highlighting indicates significant difference between column percentages (95% confidence level)
Source: Kantar Retail ShopperScape®, January-December 2015
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NMKT and Supercenter Shoppers Overlap
Cross-Shopping Between Walmart Banners (among past four week shoppers of retailers)
Analysis limited to states in which Neighborhood Market was present as of January 2016
Source: Kantar Retail ShopperScape®, January 2011-December 2015
Though over time NMKT shoppers become less likely to cross-shop the SC
73% 75%
67% 65% 64%
4% 5% 7% 8%
10%
2011 2012 2013 2014 2015
NMKT shopped SC SC shopped NMKT
2011-2015 % Change: -12% 2011-2015 % Change: +136%
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Describes experience
at NMKT
Describes experience
at Supercenter
Knowing that I'm paying a low price 59% 68%
Feeling like I got a "good deal" 57% 64%
Ability to get in and out quickly 53% 36%
Fast checkout 52% 45%
Store is clean and looks nice 49% 35%
Specific items I want being in-stock 46% 63%
Availability of high-quality fresh foods (e.g., meat, produce) 41% 51%
Availability of my favorite national brand products 39% 43%
Can get everything I need across a variety of categories 37% 31%
Availability of high-quality private label brands 30% 29%
Store associates are available and helpful if I need them 28% 23%
Good variety of pre-prepared "to-go" foods available 25% 26%
Fun and pleasant shopping experience 25% 24%
Offers unique products I can't find elsewhere 16% 15%
Ability to use the retailer's app on my smartphone while in the store to
make the shopping trip easier 14% 12%
Offers "meal solutions" to help me figure out what to buy/cook 13% 13%
Wide variety of organic products available 11% 13%
Opportunities to engage with products in the store (e.g., through
sampling stations, interactive displays, etc.) 4% 12%
12
For Shoppers, NKMT Beats Supercenter on Efficiency
Source: Kantar Retail ShopperScape®, May 2015
How Shoppers Describe the Shopping Experience at Walmart, by Format (among past four-week shoppers of each retailer)
Green=
NMKT is
better
Orange=
WMSC is
better
Legend
But lacks on some key convenience measures
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Describes experience
at NMKT
Describes experience
at Supercenter
Knowing that I'm paying a low price 59% 68%
Feeling like I got a "good deal" 57% 64%
Ability to get in and out quickly 53% 36%
Fast checkout 52% 45%
Store is clean and looks nice 49% 35%
Specific items I want being in-stock 46% 63%
Availability of high-quality fresh foods (e.g., meat, produce) 41% 51%
Availability of my favorite national brand products 39% 43%
Can get everything I need across a variety of categories 37% 31%
Availability of high-quality private label brands 30% 29%
Store associates are available and helpful if I need them 28% 23%
Good variety of pre-prepared "to-go" foods available 25% 26%
Fun and pleasant shopping experience 25% 24%
Offers unique products I can't find elsewhere 16% 15%
Ability to use the retailer's app on my smartphone while in the store to
make the shopping trip easier 14% 12%
Offers "meal solutions" to help me figure out what to buy/cook 13% 13%
Wide variety of organic products available 11% 13%
Opportunities to engage with products in the store (e.g., through
sampling stations, interactive displays, etc.) 4% 12%
13
For Shoppers, NKMT Beats Supercenter on Efficiency
Source: Kantar Retail ShopperScape®, May 2015
How Shoppers Describe the Shopping Experience at Walmart, by Format (among past four-week shoppers of each retailer)
Green=
NMKT is
better
Orange=
WMSC is
better
Legend
But lacks on some key convenience measures
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Extremely/somewhat
important when shopping
Describes experience
at NMKT
PPT Diff
(Actual – Ideal)
Knowing that I'm paying a low price 86% 59% -27.1
Availability of high-quality fresh foods 85% 41% -43.9
Feeling like I got a "good deal" 83% 57% -25.8
Fast checkout 81% 52% -29.5
Store is clean and looks nice 81% 49% -32.6
Can get everything I need across a variety of categories 81% 37% -44.0
Specific items I want being in-stock 80% 46% -33.5
Ability to get in and out quickly 78% 53% -25.5
Availability of my favorite national brand products 70% 39% -31.1
Store associates are available and helpful if I need them 68% 28% -40.0
Fun and pleasant shopping experience 64% 25% -39.1
Availability of high-quality private label brands 52% 30% -22.3
Offers unique products I can't find elsewhere 42% 16% -25.4
Good variety of pre-prepared "to-go" foods available 38% 25% -12.9
Wide variety of organic products available 34% 11% -22.5
Opportunities to engage with products in the store (e.g.,
through sampling stations, interactive displays, etc.) 28% 4%
-23.6
Offers "meal solutions" to help me figure out what to buy/cook 26% 13% -12.5
Ability to use the retailer's app on my smartphone while in the
store to make the shopping trip easier 20% 14%
-6.6
14
Overall, Big Gaps Between Expectations and NMKT’s
Delivery of Fresh, Service, Variety
Source: Kantar Retail ShopperScape®, May 2015
Ideal Shopping Experience vs. Experience at Neighborhood Market (among past four-week Neighborhood Market shoppers)
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Assortment
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Fill-in Trips
Fresh
Fuel
Pharmacy
Pickup
Recapturing the Fill-In Trip
Source: Kantar Retail research and analysis
Redirecting the “mass” model
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Food Merchandise Ladder
Source: Kantar Retail store visits and analysis, 2016
Half as many SKUs at Neighborhood Market, but higher proportion of
smaller sizes
Fill-in Trips
Mustard
Assortment:Neighborhood Market Supercenter
% Private Label 22% 23%
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Non-Edible Grocery Ladder: Paper Towels
SKU culling, more thoughtful pack sizes at NMKT
18
Source: Kantar Retail store visits and analysis
Fill-in Trips
Paper Towels
Assortment:Neighborhood Market Supercenter
% Private Label 28% 28%
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HBA Ladder: Mouthwash
Higher share of private label at NMKT, but mostly identical pack size
distribution
19
Fill-in Trips
Source: Kantar Retail store visits and analysis
Mouthwash
Assortment:Neighborhood Market Supercenter
% Private Label 20% 14%
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Private Label Initiatives Crystallize at NMKT
Elevating brand, emphasizing quality; central to operating model
20
Best
Basic
Fill-in Trips
Source: Kantar Retail store visits
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Adult Beverages Are a Trip Driver
Clear fill-in, quick trip role; create excitement Fill-in Trips
Creating excitement,
solutions
Source: Kantar Retail store visits
Shelf guidance for
types of beer,
suggested food
pairings for wine
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Co-merchandising Encourages Routine, Impulse Solutions 22
Fill-in Trips
Moving fresh
through the store
Source: Kantar Retail store visits
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General Merchandise Becoming a Better Complement
Using Pickup to extend the aisle Fill-in Trips
Source: Kantar Retail store visits
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Prototype
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Go-Ahead Prototype Floor Plan
Walnut St., Rogers, AR
25
Including self-
checkouts
Drinks To Go
station
Source: Kantar Retail store visits, company reports
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Rogers Prototype Store Revolves Around Fresh
Low sightlines, layout give full view of perishables on entry Fresh
Source: Kantar Retail store visits
“We’ve seen fresh penetration expand in this store
[prototype] relative to its peers.” –Greg Foran, November 2015
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Meat Moves Up Front, Produce Artfully Displayed Fresh
Source: Kantar Retail store visits
“We’re encouraged by our newest prototype,
which features better sightlines and displays.” –Greg Foran, November 2015
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Deli and Bakery Elevate Fresh, Quick Trip Message 28
Fresh
“All Neighborhood Markets… will open up with a bakery and a deli because we
absolutely believe that’s important in the future” –Judith McKenna, April 2015
Source: Kantar Retail store visits
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Stores Within the Store Add Meaning to Assortment
Tapping into special health needs, young families
29
Fill-in Trips
Source: Kantar Retail store visits
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Grocery Pickup Is Expanding to NMKT
Online grocery could be key cog in quick-trip message
30
Pickup
• Curbside grocery pickup
now available in 20
markets, across Walmart
formats; adding another
20 in 2016
• Features drive-up kiosks
for calling up an order
and parking spaces
where orders can be
loaded
Marketing in-store
reminds shoppers of
online grocery option
Source: Kantar Retail store visits
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Competition: Spotlight on Publix
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Recapturing the Fill-In Trip in the Portfolio
NMKT
Pressure continues on “mass” model
Source: Kantar Retail research and analysis
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Neighborhood Market’s Supermarket Competitive Set
Varies by Region
Top Grocery Retailers Also Shopped by Neighborhood Market Shoppers, by Region
West
Walmart/WMSC 59%
Costco 46%
Safeway 33%
Trader Joe’s 32%
Albertsons 28%
WinCo Foods 23%
Southwest
Walmart/WMSC 75%
Kroger 31%
Albertsons 30%
Sam’s Club 28%
Sprouts 22%
H-E-B 21%
Northeast
Walmart/WMSC 64%
Food Lion 30%
ALDI 27%
Sam’s Club 21%
Kroger 20%
Trader Joe’s 17%
Central
Walmart/WMSC 83%
Sam’s Club 35%
ALDI 32%
Hy-Vee 20%
Kroger 15%
Whole Foods 13%
Southeast
Walmart/WMSC 74%
Publix 61%
Winn-Dixie 39%
Sam’s Club 25%
ALDI 20%
Costco 15%
Source: Kantar Retail ShopperScape®, January-December 2015
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Fill-in Trips
Fresh
Fuel
Pharmacy
Pickup
Where Can NMKT Learn from Competitors?
Keeping in mind NMKT’s points of focus “When we are up against
someone who is really
good at running
supermarkets, frankly
our fresh offering has
not been on par with
what it takes to win.” –Greg Foran, October 2015
Source: Kantar Retail research and analysis
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Source: Aggdata, Kantar Retail analysis
Case Study: Neighborhood Market vs. Publix
March 2015, Tampa, FL
40% are within
2 miles of a Publix
Charlotte
Miami
Jacksonville
Atlanta
Lakeland
(rest of Florida)
Among the Neighborhood
Markets in the six states
Publix has a presence…
53% are within
5 miles
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‒ March 2015, Tampa, FL
‒ Basket of 12 fresh items, 16
grocery items, 12 HBA items
‒ Neighborhood Market was
less expensive in all three
sub-baskets
Biggest differential in fresh
Only three items cheaper at
Publix overall
‒ No Rollbacks, 3 sale items at
Publix
Neighborhood Market vs. Publix: A Price Comparison
Source: Kantar Retail store visits
Segment Product Brand NMKT Publix Index
(Publix-NMKT)
Raspberries - - $2.78 $4.49 162
Bread 100% Whole Wheat (Whole Grain) Arnold $2.98 $4.29 144
Chicken breast Perfect Portions Fresh Perdue $6.98 $8.99 129
Hot dogs Bun-sized premium beef franks Oscar Mayer $3.98 $4.99 125
Tomatoes Cherry Campari $2.48 $2.99 121
Apples Granny Smith - $1.67 $1.99 119
Bananas - - $0.59 $0.69 117
Cheese Provolone Land O' Lakes $3.98 $4.39 110
Butter Salted - 4 sticks Land O' Lakes $3.96 $4.29 108
Bacon Black label original Hormel $4.78 $4.99 104
Orange Juice Homestyle, Some Pulp Tropicana $3.98 $3.99 100
Grapes Green - $2.98 $1.99 67
Glass Cleaner Regular Windex $2.83 $3.99 141
Ice Cream
French Vanilla, Cardboard cartoon, tub - black
label Breyers $3.94 $5.49 139
Cereal Corn Flakes Kellogg's $2.98 $3.99 134
Canned Tuna Chunk Light, packed in water, can Starkist $0.75 $0.99 132
Pasta (dry) Angel Hair Barilla $1.38 $1.69 122
Diapers Little Snugglers - size 2 Huggies $8.97 $10.49 117
Soap Pads Steel Wool pads - Lemon S.O.S. $1.88 $2.19 116
Foil Heavy Duty Aluminum Foil Reynold's $5.92 $6.79 115
Soda Cans - fridge pack Coca-Cola Classic $4.48 $4.99 111
Soup Chicken Noodle Campbell's $0.88 $0.97 110
Infant Formula Sensitive, for Fussiness and Gas, with Iron Similac $24.98 $26.99 108
Dog Food Adult Complete Nutrition Pedigree $12.97 $13.99 108
Ketchup Plain, Squeeze bottle - inverted Heinz $2.22 $2.39 108
Wipes Disinfecting Wipes, Fresh Scent Clorox $4.63 $4.79 103
Laundry Soap 64 loads Tide $11.97 $11.99 100
Baby Food
plastic jar - strained Peas "All Natural", 2nd
foods Gerber $1.08 $1.07 99
Hand Soap Crisp Cucumber and Melon Softsoap $0.98 $1.79 183
Vitamins Gummy Vites, Complete - natural flavor Lil Critters $3.98 $5.49 138
Floss Satin Complete - mint Oral B $2.27 $2.99 132
Hair Coloring Colorsilk - Beautiful Revlon $2.97 $3.79 128
Razors Women's - Hydro Silk, 3 Razors, 5 blades Schick $9.97 $12.49 125
Antiobiotic
Ointment Plus Pain Relief antibiotic cream, tube Neosporin $4.44 $5.39 121
Mouthwash Cool Mint Listerine $5.97 $6.99 117
Diaper Cream Rapid Relief Diaper Rash Cream - Blue tube Desitin $5.27 $5.89 112
Painkiller Ibuprofen, 200 Mg Advil $5.94 $6.29 106
Shampoo Dandruff Shampoo - Classic Clean
Head and
Shoulders $7.26 $7.49 103
Eye Makeup
Remover Oil-Free, blue bottle (liquid) Neutrogena $6.47 $6.49 100
Shaving Gel Extra Moisture Gel, with Vit. E Edge $2.97 $2.55 86
Total $150.35 $170.44 113
NMKT Publix
Index
(Publix-
NMKT)
Fresh basket 42.44$ 50.08$ 118
Grocery 91.86$ 102.80$ 112
HBA 58.49$ 67.64$ 116
Total 150.35$ 170.44$ 113
March 2015 Results
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Within Categories, Publix’s Average Prices Are Higher Too
What is the price differential worth to shoppers?
Source: Kantar Retail store visits and analysis
NMkt Publix NMkt Publix NMkt Publix
% Private
Label26% 18% 9% 13% 11% 13%
Retailer Merch Ladders
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But Publix Is Strong in the Perimeter and in Service
Fresh is throughout the store, cross-merchandising guides the shopper
Source: Kantar Retail store visits
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‒ Perishables, fresh continue to elevate
Investment on the rise as shoppers demand it
‒ Driving differentiation with departments
Greater importance on categories and merchandising
placement
‒ Keying on digital, not just eCommerce
Online grocery will become a more important factor
‒ The wild card: Lidl
Where price and assortment will be center stage
Source: Kantar Retail research and analysis
Competition Will Necessarily Go Beyond Price
New thinking, new innovation driving differentiation in marketplace
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Conclusion and Supplier To-Dos
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Is Walmart Differentiating This Format?
A closer look at the “Neighborhood” message
Selection
emphasizes local ties
“Available at your local
Supercenter and
Neighborhood Market”
Some attention to local connection,
distinguishing the store… …Marketing largely remains parallel
with the Supercenter
Ad is the same as at the
Supercenter Source: Kantar Retail store visits
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42
Neighborhood Market’s Prospects: To-Dos for Suppliers
Source: Kantar Retail research and analysis
‒ Add or delete points as
needed by inserting or
deleting rows
‒ Align with the image
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assistance if needed
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creative 1
Resources: • Evaluate your team size and structure, including roles in category
management, supply chain, analytics, and marketing.
• Capitalize on expertise already in your company around BIC
supermarkets and other small formats (e.g., drug).
• Include these teams in joint business planning.
2
Differentiation: • Build merchandising skills outside the pallet, selling off the shelf.
• Dedicate resources to assortment and endcap planning for this format.
• Craft solutions at Neighborhood Market that are different from the
Supercenter, especially focused on to-go and fill-in trip missions.
3
Prototype-driven growth: • Target merchandising that orients around fresh and perishables.
• Develop an online grocery and broader assortment Pickup strategy to
build baskets and send the convenience message.
• Link solutions with services to highlight the convenience message.
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At this two-day workshop, our Walmart and Sam’s Club experts will dig into the retailers’ efforts to
significantly evolve their propositions for a rapidly changing and demanding shopper base, and will
deliver implications for suppliers’ business planning and growth opportunities.
Kantar Retail
Walmart & Sam's Club Workshop
© Kantar Retail 2016
Apr 5-6, 2016 Bentonville, AR
You’ll walk away from this Workshop with:
‒ Forecasts for Walmart’s store expansion and sales
growth heading into the end of the decade
‒ Insights into where Walmart is investing to drive
relevance and what the retailer will demand from
suppliers as investments continue to pressure profits
‒ Understanding of the extent, purpose, and plausibility of
Sam’s current member and merchandise evolution
through 2020
Featuring Kantar Retail Experts:
Laura Kennedy, Director
David Marcotte, SVP
Leon Nicholas, SVP & Knowledge Officer
Sara Al-Tukhaim, Director
Tim Campbell, Jr. Analyst
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For further information please refer to
KantarRetailiQ.com
Contact:
Laura Kennedy
Director
T: +1 (617) 912 2851
@LauraWK_KR
@kantarretail
Leon Nicholas
SVP and Knowledge Officer
T: +1 (617) 912 2871
@leonnicholas7