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Stack of Books

oil on canvas
22 x 20 in

Penny Machines
oil on canvas
23¾ x 29¾ in

Stack of Books
oil on canvas
30 x 24 in

Seven Suckers
oil on canvas
19 x 23 in

Twin Jackpots
oil on canvas
30 x 46 in

oil on canvas
20 x 26 in

Cake Slices
oil on canvas
20 x 16 in

The hegemony of Big Retail

One of WPP’s media partners sells 10% of its cover sales through Walmart. To the media owner, this is life or death. To Walmart it is a rounding error and the province of the third or fourth level of procurement, making the publisher’s life a misery. More people visit Walmart in the US in a week than go to church on a Sunday, leading some to suggest that the supermarket chain is the new religion. Walmart, with $408 billion of sales, is the seventh largest ‘country’ by retail sales, just after China. It accounts for 10% of US retail sales, while Tesco takes 14% of UK retail sales. Both enjoy 30% of grocery sales in their domestic markets. At a recent Microsoft CEO conference, Lee Scott, then boss of Walmart, targeted a doubling of its US market share to almost 20% of retail sales.

Some 15% or $12 billion of Procter & Gamble’s worldwide sales already go through Walmart. If this was a business unit on its own, it would rank among the world’s top 50 FMCG companies. Other examples include Kellogg at 21%, Kraft at 16% and PepsiCo at 13%.

Influence over and control of distribution is not a new issue. After all, advertising was developed in the 19th century by manufacturers to appeal over the heads of wholesalers or retailers direct to consumers. Increasing retail concentration – not only in the US but also in Europe and Latin America – will emphasise the importance of focusing on product innovation and branding, along with better understanding of point-of-purchase consumer behaviour and emphasis on packaging, display and retail design. As a senior Asia Pacific Procter & Gamble executive has said, depending on which P&G brand you are talking about, something between 30% and 80% of purchasing decisions are made at the point of sale. Procter calls it ‘the first moment of truth’.

PepsiCo chief executive Indra Nooyi calls for concentration on ‘retail theatre’, rather than lavish, costly TV commercials. Other FMCG leaders call for agencies to start with the shelf and not a 60-second TV commercial. WPP believes an understanding of distribution and retail is essential and it is one of our core practice development areas. The Store, our global retail practice, links more than 900 professionals working on retail business and issues around the world, updating them on the latest developments and trends – subject to client confidentiality. Management Ventures – with more than 50 global retail analysts – along with Cannondale and Glendinning Associates, both experts in channel management, supplement and consolidate our knowledge of global retailing.

In addition, OgilvyAction gives WPP an even broader distribution offer with its focus on product categories that have been denied access to traditional media. Our new investment, Smollan, has over 15,000 people focused on retail brand management in South Africa, China, India and, next, Brazil. Recent comments by Walmart, for example, seem to indicate an even greater focus on global purchasing discounts and co-ordination with manufacturers, spelling more price pressure and referred pain for suppliers. At the same time, Procter & Gamble has taken a minority stake in Ocado, the UK’s leading online home shopping, direct delivery food network to move closer to the customer.

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