How To Beat Walmart: Ambience, Private Label

While there's no denying that it's hard to compete with Walmart, a new report from Kantar Retail says that stores with personality, plenty of private-label choices and steady attention to low prices may actually be more appealing.

Its study, "Challenging the Behemoth," compared Walmart to Market Basket, a growing regional grocer with some 60 stores in New England. Like Walmart, it's made low prices the heart of its positioning, using a "no frills" store layout and a "More for Your Dollar" tagline to appeal to shoppers. On the same day, Kantar execs visited both a Market Basket and a Walmart Supercenter in Epping, N.H., comparing the two stores on four dimensions: Basket analysis, merchandise assortment, endcap promotions, and store ambiance.

The verdict? While Walmart was "decidedly less cluttered, it's one thing to be clean and another thing to be antiseptic and sterile," Leon Nicholas, director of retail insights for Kantar and one of the report's authors, tells Marketing Daily. "Walmart can run that risk in some of its stores, where it has cleared out 'Action Alley.' It may have created too much white space."

In most ways, Walmart was the clear winner on price, with a basket of identical branded items coming in 9.5% less expensive than Market Basket's. (The price differences were most pronounced in health and beauty, with five of the six branded products at least 30% cheaper at Walmart.) But Market Basket's prices were also aggressive and competitive, particularly in edible grocery. And it did better on private-label offerings, which were 5.3% more expensive at Walmart.

Perhaps more surprising was that the smaller store also offered more variety, with more choices in both brands and private labels in two of three categories it measured.

But the biggest difference, the study's authors say, was in the store's mood and personality. "Market Basket employed several means to suggest a more personal, authentic atmosphere," they write, including personalized interaction, such as handwritten signs, live announcements over the store's public address system, and employees assisting shoppers in the aisle. None of those occurred on the Walmart trip.

While the décor was seen as somewhat more downscale, it was also warmer than Walmart's, which is "cold and crisp at the same time," with digital signs and SmartTV displays coming across as impersonal, they write. "Walmart was so clean that it became almost sterile and so uniform that it turned almost faceless."

That said, Nicholas certainly isn't counting Walmart out when it comes to developing smaller, friendlier formats. "It knows very well how to run smaller formats-it does so all over the world, and many in the U.S.," he says, adding that Marketside, a smaller, more upscale format that it began testing in Phoenix just before the recession began, may turn out to be a victim of poor timing as much as anything else. "Phoenix turned out to be one of the worst housing markets in the country," he says. "Going forward, I think you will see Walmart continuing to try smaller format stores."