Walmart Pressures Brands To Advertise On New Network
Guest Contributor, Bill Collins, DecisionPoint Media Insights
According to an article published this week in the U.S. advertising-industry publication Advertising Age, Walmart have launched a new initiative which is pressuring brands sold in its U.S. stores to spend more money on the Walmart Smart Network.
The Smart Network is Walmart’s new in-store screen network which has been rolled out to several hundred of Walmart’s stores in the USA.
According to the July 20 Advertising Age article, the “implied threat” from Walmart is that brands which do not pony up more funds for the Smart Network and other Walmart-owned media channels risk having their products removed from store shelves.
The article did not cite any specific examples of brands that Walmart has forced to advertise involuntarily on the Smart Network however, the article did cite some evidence that earlier this month the Arm & Hammer brand of liquid detergent stepped up its marketing spending on Walmart’s TV advertising and print circulars because of this “implied threat.”
Walmart, acting like an ad agency, wants to pull 15% of brands from its shelves
According to the article, this current initiative is part of a larger “Project Impact” through which Walmart is “culling product assortments around 15% on average and as much as 80% on some low-priority items.”
The article quotes heavily from Leon Nicholas, the director of retail insight at Management Ventures, Inc. (MVI). Cambridge, Massachusetts-based MVI is a retail research and consulting firm which issues reports about the retail industry on a regular basis. MVI is a unit of the WPP Group, the international conglomerate of marketing/advertising agencies.
Nicholas said that the effect of these new initiatives by Walmart is to cast the giant retailer into a new role as an advertising agency.
Nicholas said that brands sold at Walmart are being asked to “pony up marketing dollars in order to get more favorable treatment and placement in any number of Walmart promotional vehicles, so that they’re advertising through Walmart almost as if Walmart were an ad agency now. And as that happens,” Nicholas said, “yes, decisions have been reversed” [about product assortment].
July 25th, 2009 at 12:36 @567
Bill,
I’m sure there are many who wouldn’t be surprised to hear of this development. Retailers strong-arming suppliers to provide more support? Tesco tried similar on their suppliers in the early days of Tesco TV but that tactic failed when suppliers wanted “screen advertising performance data” from Tesco and it wasn’t forthcoming, so they played their bluff and pulled their “support”. Tesco trading quietly withdrew and handed the job to their (Internal) Media Services business and outsourced media sales suppliers.
A little further clarity would be helpful as clearly there are many sub-plots at play here. Are Walmart simply charging back a fee-per-facing to the suppliers in order to price out weak/non committal brands or is this a proper move towards some sort of sustainable advertising model.
Anyone?
July 25th, 2009 at 13:29 @603
Yeah, but it’s worth reading the comments on this version of the story:
http://adage.com/article?article_id=138010
The approach ain’t all that new, or unique to Wal-Mart.
July 25th, 2009 at 17:14 @759
Barnaby:
Thanks for your note. Yes, I did read those reader comments published by Advertising Age, commenting on their story that I rewrote (with full attribution) for the Daily DOOH.
Because of those reader comments, and because the Ad Age article was not able to cite any specific cases where any specific brand was pressured to buy any more time on the Walmart Smart Network than it wanted to buy, that’s why I frankly did not hype this story. Still, to my knowledge, this is the first time that a major industry publication in the USA has reported a clear link between Digital OOH advertising at retail and pressure (regardless of its severity or its uniqueness) from that retailer which implies that SKUs might be removed from the shelves if that brand did not “play ball” with the retailer.
The way I see it, that’s news.
I think we all know that, in the relationships between brands and retailers, these relationships are defined (by their very nature) by a lot of pushing and shoving. That’s business. But, again, until this week I had never seen a major ad-industry publication in the USA report on this link between retailer pressure on brands and that brand’s deciding to buy more advertising on an in-store screen network than it would otherwise budget for.
Thanks again for your comment. It’s always good to hear from you, Barnaby.
July 25th, 2009 at 18:30 @812
Chris:
Thanks for your comment. It’s great to hear from you.
You asked, “Are Walmart simply charging back a fee-per-facing to the suppliers in order to price out weak/non committal brands or is this a proper move towards some sort of sustainable advertising model?”
The Advertising Age article did not speak to this issue. And, beyond that, I don’t know the answer to that question. If anybody else out there in Daily DOOH land can answer that question, I agree with you, Chris, that it would be helpful to get more detail here.
Again, I am not surprised that a retailer would pressure a brand to spend trade money (or brand advertising money) with them, and raise the possibility of that brand being “delisted,” as they say, if the brand does not play ball with them. However, to my knowledge, this sort of thing has never been reliably REPORTED in the trade press in the USA in the area of in-store digital media.
That’s why I think this story is news — at least for the USA market (maybe it’s different in Europe). Again, if anybody out there has seen this kind of thing reported via reliable sources in the U.S. press, as per in-store screen networks, please let me know. This is an important discussion and Chris Heap raises a good question. So hopefully we’ll get more input to this discussion from other folks that can add their knowledge and insights to this thread.
Best regards,
Bill Collins
http://www.decisionpointmedia.com