Wal-Mart’s UK entry has prompted predictions of price wars and mergers across the retail sector in Europe.
The US retailer has built its reputation on offering competitive pricing, but it would be a mistake to assume Wal-Mart’s offering in Europe will centre on price alone. Rather, it will hinge on a commitment to delivering customer satisfaction.
In the autumn of 1995, Grey published the first in a series of studies which track shifts in consumer behaviour. The pilot, conducted in Germany, detected the first signs that Europe’s consumers were paying more attention to the relationship between price and performance. It found their motto was increasingly: “more value for less money”. The old concept of added value, under which retailers could automatically charge a higher price for brand names, was no longer acceptable. This new phenomenon became known as “smart shopping”.
During the past four years, Grey’s “smart shopping” study has documented not merely a trend but a structural change in the consciousness of European consumers.
Smart shoppers are characterised by their determination to make up their own minds about value, interpreting the concept in the context of their personal situation. Factors such as time, service and convenience play as important a role as product performance.
And, as for advertising, the smart shopper is an “amateur expert”, quickly and impatiently decoding and rejecting superficial imagery, and quick to see through unsubstantiated claims.
These demanding customers have developed a multidimensional marketing intelligence which casts a critical eye over every offer. Smart shoppers grew up as marketing’s children. Today they herald a revolution in future concepts of retail marketing.
With its belief in putting the customer first, Wal-Mart should be well placed to meet the needs of smart shoppers. The company’s performance in Germany, where it now has about 95 stores, has proved that skillful marketing, low pricing and a commitment to the customer are a powerful combination.
Wal-Mart has successfully introduced its famous “people culture”, with staff treated as “associates” in the business and rewarded with cash bonuses for outstanding service. It has even challenged an outdated German law prohibiting refunds on products if they are found to be cheaper elsewhere. It has used aggressive advertising and shown the clarity of vision required to establish a powerful position.
Wal-Mart will be equally aggressive in the UK. Its competitive edge will come from an unwavering philosophy of understanding the consumer and, above all, putting them first. In the age of the smart shopper, Wal-Mart looks well placed to succeed.