When Hurricane Katrina hit New Orleans, it changed perceptions for countless Americans, about persistent poverty, community, even how we maintain our balance with nature. It also affected John Fleming, Walmart’s evp and CMO, who’s brand had its own perfect storm of controversy: over Walmart’s treatment of women, its impact on local economies, sweatshop manufacturing, low pay and health benefits, and the list goes on. But Fleming’s company marshaled such a multitiered material response to the tragedy, to aid the city and its dispossessed with goods, services and money, that even many of the company’s often vitriolic critics paused a moment to applaud. Walmart’s CEO, Lee Scott, was prompted to say:
“Katrina asked this critical question, and I want to ask it of you: What would it take for Walmart to be that company, at our best, all the time?” he said a few months later in a widely disseminated speech to the company’s directors and executives. “What if we used our size and resources to make this country and this earth an even better place for all of us: customers, associates, our children, and generations unborn? What would that mean? Could we do it? Is this consistent with our business model? What if the very things that many people criticize us for—our size and reach—became a trusted friend and ally to all, just as it did in Katrina?”
A big what-if, indeed, evincing a self-reflection and an air of detente that would’ve been unthinkable from the so-called Beast of Bentonville just a few years ago. Walmart, the world’s largest retailer, is the world’s most polarizing commercial entity.
And while naysayers still watch for the company to make good on Scott’s purported epiphany, few can argue the potential impact of the kind of commitment the company has made, especially given the massive scale of its economy. The retailer operates more than 6,500 stores in 16 countries, with 370 more on the way in the U.S. this year, and rings up nearly $313 billion in annual sales; it saw an 11.9% net sales gain to $163 billion for the first half of 2006 alone.
But where the behemoth once simply lumbered about its business, shrugging off mounting concerns over its economic impact, the New Walmart has awakened to the notion that it cannot simply rely on “Always Low Prices” and a doctrinaire business model. “We’ve made a lot of progress,” said Fleming, who has spearheaded the communication of this glasnost-era Walmart. “In some cases, some of the criticism was valid and we reacted to it. It makes us a better company.”
While there remains plenty more to address (see sidebar, this page), Fleming has joined Scott’s multidisciplinary attempt to make the company responsive to both critics’ and policymakers’ concerns, and to its increasingly diverse array of 21st century consumers. Fleming, initially as president/CEO of Walmart.com, served on the team of execs that, as much as a year before Katrina, he personally led into “listening” meetings with customers, store employees, non-governmental organizations, grassroots groups and policymakers.
From those dialogues, Walmart, working in tandem with long-critical NGOs, has embarked on an ambitious program to be supplied 100% by renewable energy, to create zero waste and sell products that sustain the world’s resources and environment. Just last month, as a capper to former President Clinton’s Global Initiative, the company announced it would begin monitoring its 60,000 suppliers for both reduction of packaging and reducing the environmental footprint of their production processes. With the volume of shipping that Walmart handles, the company believes the material reduction will prevent countless tons of trash from entering landfills and keep an estimated 667,000 metric tons of carbon dioxide out of the atmosphere—with a cash payoff of $11 billion in savings.
“Our cause has always been about offering people great prices so they can live better lives and effectively improve the standard of living in all the markets where we operate,” Fleming said. “But beyond that, the sustainability initiative is going to give us an opportunity to talk about a greater cause and something that is important to all of us.”
Fleming seems the right man at the right time for a company intent on recasting itself as connected and responsive, and not just in its grander socioeconomic impact. He joined Walmart in 2000 as chief buyer and supplier relations manager of its Silicon Valley e-tail startup, bringing with him a merchandising background from 19 years at Marshall Field’s. Described by colleagues as a quick study, he found that translating the retail experience to digital media proved instructive.
“That experience really brought me closer to the customer,” Fleming said. “As a merchant you think about products and as a marketer you think about customers. The online channel is incredible because it gives you visibility to customers immediately. . . . Online, there are things like search terms, and you can see the click-through paths to see how they actually navigate the site. There is all this technology that gives you incredible visibility to customers and their behaviors, and the needs and wants they have. My time out there took the merchandising experience that I have and teamed that up with what marketing could do to even drive more loyalty with customers.”
That would serve the broader brand well when Fleming, 48, made the move to Arkansas and Walmart’s CMO office in May 2005. The chain, after all, is still in the process of transitioning from its plain-folksy rural roots to suburban and urban locations, with the broader cultural and demographic segmentation that come with them, and more diverse notions of relevance to each.
“It was clear to me that the marketing function a year and a half ago was really a support group to help merchants implement their marketing programs,” he said. “We were dealing with many different segments of customers, and I don’t feel that our marketing had the capability to really deliver on that. When I came in, the plan was to build marketing capability so that we can really focus . . . on multiple segments to be able to offer great prices to many segments based on what their needs are.”
With 130 million customers walking through the stores every week, that’s a tall order. Fleming beefed up his department with cross-disciplinary hires Stephen Quinn, the former Frito-Lay CMO who joined the company as svp-marketing in September, and Julie Roehm, recently director of marketing communications at Chrysler. He also put a new focus on market research, staffing up that unit to better parse Walmart consumers both extant and prospective.
Ensuing research identified three broad swaths, or “buckets,” of its customers: the “loyal” customer, who shops the store frequently across multiple categories; the “infrequent” shopper, who shops Walmart in a targeted manner; and the “selective” customer, in the middle, who shops frequently but in few categories. Identifying the cues that each responds to becomes even more key as Walmart’s own terrestrial footprint diversifies. Fleming sees Walmart stores as “our best channel to be able to talk to customers.” That fits well into the company’s efforts to make its stores reflective of local communities and to distance itself from its historic standard as the template of Big Box sprawl.
Walmart, for example, has done up the exterior of its store in tony Naples, Fla., in a fisherman’s-pier motif. A new three-story location in Baldwin Hills, Calif., preserves the host building’s art-deco details. A store in Middlefield, Ohio, caters to Amish residents with hitching posts for horses and by selling block ice. Appealing to the tastes of an upscale Dallas suburb, the much-hyped new store in Plano, Texas, runs the demographic gamut, offering fine wines and sushi, Godiva ice cream and plasma TVs. Still, because it’s Walmart, there’s something for everyone.
“We see all kinds of people shopping there,” said Al Meyers, svp at Chicago consultancy Retail Forward. “Walmart isn’t letting up on its low prices, but consumers needed more benefits to shopping there. They’ve done an exceptional job focusing on those groups through the design of the store, which is well laid-out and customer friendly.”
Roy Spence, president of GSD&M, Austin, Texas, one of Walmart’s lead advertising agencies, likens Fleming’s strategy to that of founder Sam Walton, who grew the business big by thinking small. “Visionaries see things that aren’t there,” Spence said. “Fleming saw it instinctively. A lot of the training he got was at Walmart.com, where it is one-to-one marketing. He got everyone saying, ‘Look, we are a mass marketer but instead of doing mass marketing, we needed a collection of segments.'”
Broad-stroke, almost boilerplate ad themes (Smiley Face bouncing around and slashing prices, and the overly earnest employee testimonials of the company’s beneficence) have been retired. Replacing them is a savvier use of Walmart’s nearly $600 million in ad spending (per Nielsen Monitor-Plus) with an array of creative that puts a more relevant face on the Walmart image. Fashion-forward print cropped up in Vogue and Glamour last spring, testimony that Walmart is now “Beyond the Basics,” as its recent ad campaign claims. Earlier this year, Smiley returned but in lifestyle-themed TV spots showing consumers using Walmart home decor, fitness equipment and other merchandise over the theme, “The more you save, the more you smile.”
“We’re refining the media mix,” Fleming said, “[to] be able to talk specifically to segments about products or prices or services that are important to that segment. You’ll see us do things that we haven’t done before to be able to be where our customers are.” Case in point: Walmart partnered this fall with ESPN’s first year of Monday Night Football, riding the rich demographics of the tech-savvy cable sportsnet to communicate the next-gen HDTV technology.
Walmart’s grander image issues, of course, remain its employee healthcare woes, its ardent anti-union stance, etc. But, as its CEO posited nearly a year ago, it has taken steps toward realizing a more benign side to its power and influence. Though it may be untoward to find serendipity in the awful spectacle that was Katrina, it’s difficult for those inside Walmart to downplay its effects as a galvanizing event.
Lee’s post-hurricane mobilization “came at a good point in time because prior to that was probably the low point,” Fleming said. “That showed everybody the kind of company we are. It was a reflex. We saw people in need, and we responded. It happened automatically. That was also a big driver in terms of sustainability because at the same time we could see that there are a lot of issues out there in terms of how quickly we all are using the resources available and, if you do the trend lines out, it doesn’t look good. Changes have to be made.”
Photo by Marc Henning