Natural Foods Merchandiser

Wal-Mart Study Offers Insight For All Retailers

Although Wal-Mart is not currently considered a primary competitor for natural products stores, rest assured that the retail juggernaut probably will be in the near future.

The company is adding 8.5 million square feet of store space each year, including a new chain of grocery stores. Wal-Mart's strategy also targets the entire food category, including organic, so naturals merchants can't afford to ignore this retail gorilla.

To help independent stores grapple with this tough competitor, the National Grocers Association, based in Arlington, Va., recently commissioned a study of Wal-Mart customers that explains why people shop there for food, and what independent stores can do to compete more effectively and retain customers. Even though the study was aimed primarily at traditional grocery stores, it provides information useful for all retailers.

By releasing the study, the NGA issued a firm warning to independents: Wal-Mart is a ferocious competitor committed to long-term growth. To compete against Wal-Mart, the study says, independents must secure customer loyalty by providing great selection, an outstanding shopping experience and phenomenal service. The advice embedded in the study goes beyond just how to compete with Wal-Mart.

The study advises: "... Creating a competitive edge means being absolutely committed, if not obsessed, with gaining your customers' loyalty. Why? Because loyal customers find it very difficult to leave the store where they shop ... customers who feel merely satisfied can go anywhere and frequently do."

Naturals retailers, especially, should keep their eyes on Wal-Mart's new Neighborhood Market stores. The company has built 31 of the 50,000-square-foot grocery stores in Arkansas, Texas and Oklahoma. The company won't say how many new stores it plans to build, but the number will be in the hundreds, says Jay Jacobowitz, president of Retail Insights, Brattleboro, Vt., a natural products consulting firm.

"Wal-Mart is getting into the food business in a big way; and they are going to carry organic and natural products," Jacobowitz says.

Wal-Mart devotes 30 feet of shelf space for supplements products in most of its stores. A Wal-Mart spokeswoman says the company is well aware of the growing popularity of organic and natural products.

"Given that the organic market is growing so fast, I don't expect Wal-Mart to look the other way," says Sharon Weber, spokeswoman for the Benton, Ark.-based chain. She says some Wal-Mart grocery outlets carry organic produce.

The NGA study summarizes interviews with 106 loyal Wal-Mart supercenter shoppers in Springfield, Mo. That city was chosen because it is a diverse market and home to many large chain stores, says Fred Martels, president of People Solutions Strategies, which conducted the survey. The Chesterfield, Mo.-based company provides customer and employee loyalty programs.

Respondents answered an 85-question survey during the first week of January; Wal-Mart was unaware that a survey was being conducted. The survey presents a scientifically valid sample applicable nationwide, Martels says.

One section of the survey asked customers to rank 14 items that influenced their decisions to shop at Wal-Mart. Martels says the survey results provided some surprises:

  • Even though Wal-Mart's marketing emphasizes low prices, "competitive prices" wasn't the top criteria for shoppers—it ranked fifth in the standings.
  • Taking the top spot was "product quality and freshness" followed by "product variety."
  • Customers emphasized the importance of how they feel in the store—"being treated with respect" ranked third.
  • "In-stock products" placed fourth in the customers' standings.

Although the questions related specifically to shoppers' experiences at Wal-Mart, Martels says retailers can apply the reasons for customer loyalty to all types of grocery stores.

"Quality ranks very high, no matter where you fall in the socioeconomic scale," Martels says. "Not so long ago location was the main reason people picked a store. Now they go to the places where they feel they get what they need."

The survey results, Martels says, are favorable for specialty grocers that emphasize service and selection over price.

"By providing great service, you're giving customers confidence. That's what they want," Martels says.

Wal-Mart shoppers did register some dissatisfaction with the quality of service. Nearly half the respondents said the store needs more employees to serve customers and that store managers do not solve customer problems quickly enough. More than a third said they wouldn't recommend the Wal-Mart grocery section to others.

Those low marks provide a clear signal for natural foods grocers to redouble their efforts to provide great service in all aspects of the store, Martels says. Employees must be responsive, customers must be able to find everything they need and feel good when they're in the store.

"A customer's consistent total shopping experience drives loyalty," Martels writes in the survey report. "Customers become loyal and feel compelled to shop with a particular store when they consistently receive exceptional value, and have consistent experiences with employees that they love. [Then they] will tell others about [the store]."

Martels also offers some direct advice. Wal-Mart and other chain stores are constantly collecting data and conducting surveys to maintain the latest information on customer needs. In his work with smaller retailers, Martels says few collect this type of information; he says that's a mistake.

"Thriving and not merely surviving in today's market against competitors like Wal-Mart, and having a competitive advantage, requires knowing and acting upon the key motives of customers," Martels writes in the study, but " ... Surprisingly few organizations are taking the time to determine customers' expectation of value and experiences. ... If you are not talking to your customers, listening to what they have to say and learning from them, how can you earn their loyalty[?]"

Even the Wal-Mart spokeswoman offered this advice from Sam Walton, the man who built the retail empire: "I used to hear Mr. Sam say, 'Who's your boss? It's not me. It's the customer, and there's a lot of places for them to shop.'"

Natural Foods Merchandiser volume XXIII/number 4/p. 27-28

Survey Says ...

The Wal-Mart Supercenter Customer Loyalty Study surveyed 106 regular customers of the Springfield, Mo., store. They were asked 85 questions.

In one part of the survey, customers were asked to rank 14 concepts on their importance to the shopping experience. Following is the rank and the percentage of respondents.

The first number indicates the percent who ranked the item "extremely important," the second number is the percent who ranked the item "neutral," the third is the percent who ranked the item "extremely unimportant."

  • Product quality, freshness: 94 percent, 0 percent, 6 percent;

  • Product variety, products that fit my lifestyle: 92 percent, 6 percent, 2 percent;

  • Being treated with respect: 91 percent, 0 percent, 9 percent;

  • In-stock products: 90 percent, 8 percent, 2 percent;

  • Competitive prices: 89 percent, 8 percent, 3 percent;

  • Store conditions (space, lighting, temperature, cleanliness): 87 percent, 0 percent, 13 percent;

  • Pleasant place to shop, enjoyable: 86 percent; 0 percent, 14 percent;

  • Having enough employees to serve customers: 85 percent, 4 percent, 1 percent;

  • Friendly employees: 84 percent, 5 percent, 1 percent;

  • Experienced, knowledgeable and competent employees: 81 percent, 18 percent, 1 percent;

  • Store located close to home: 80 percent, 13 percent, 7 percent;

  • Advertised specials: 61 percent, 32 percent, 7 percent;

  • Helpful managers: 70 percent, 25 percent, 5 percent;

  • Recognized as good customer: 54 percent, 37 percent, 9 percent.

Natural Foods Merchandiser volume XXIII/number 4/p.

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