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Tech-Savvy Walmart Gets Beaten Up on Sustainability

Posted by Barry Silverstein on March 14, 2012 10:16 AM

Walmart continues to be the low-price leader in the minds of consumers, and it aims to stay that way. As it promotes such tech innovations as UltraViolet, its new digital entertainment offering with VUDU, the retail giant is reportedly pushing suppliers to its grocery operations to cut prices so that Walmart stores can feature lower prices on a permanent basis instead of the previous promotional strategy of price "rollbacks."

Walmart is the largest seller of groceries in the U.S., so when it talks, suppliers listen. As Walmart CFO Charles Holley told reporters in February, "We want to work with vendors on that to see if we can take a price lower and leave it there permanently. The price image for a customer is very important."

At the same time, some consumer packaged goods companies have been caught with their hands in the cookie jar, raising prices while their earnings soar. Jack Russo, an analyst with Edward Jones, told Reuters, "I think we reached the wall in terms of raising price. Consumers can't take any more. A lot of these companies are going to have to get back to basics and not raise prices much, and if they want to grow sales they're going to have to do it through innovation, or being razor-sharp on pricing."

Walmart will undoubtedly keep the pressure on its suppliers, because the company's low price strategy has always been Walmart's strength, in spite of worries in the past about cheap prices cheapening its image. An economy not yet in full recovery has only reinforced the company's perennial price pitch. Walmart had great success during last year's holiday season with its reintroduced layaway program, which allowed consumers to pay off items in small increments before claiming their merchandise. In addition, Walmart has adopted an aggressive approach to matching competitors' prices. The chain has invested $2 billion to maintain low prices and undercut competitors, according to Reuters.

Despite its ability to attract price-conscious shoppers, though, Walmart has faced criticism in a number of areas, including some employment practices and, most recently, its commitment to sustainability. "Walmart's Greenwash," a new report from the Institute for Local Self-Reliance, suggests "Walmart's sustainability campaign has done more to improve the company's image than to help the environment."

According to the report, Walmart's greenhouse gas emissions are increasing rapidly and its energy efficiency and renewable projects are "too modest" for the size and scale of the company's operations. By pressuring manufacturers to keep prices low, says the report, Walmart has actually reduced the quality and durability of consumer goods, contributing to "a sharp increase in the amount of stuff Americans buy and a doubling of the trash households generate." Walmart has "made little progress toward its goal of developing a Sustainability Index to rate consumer products" and the company "will need roughly 300 years to reach its goal of 100 percent renewable energy."

Even so, unfavorable views of Walmart have declined since the company introduced a sustainability campaign in 2005. The company has also gained positive publicity around its proactive stance on nutrition, which was famously acknowledged early last year by first lady Michelle Obama. And this Spring, Walmart will begin rolling out its "Great for You" nutritional labels to identify healthy foods among its store brands. Meanwhile, Walmart encouraged consumers to vote in a recent "Get on the Shelf" contest, the first of its kind by a major retailer, to decide which new products should be offered on Walmart.com. So far, it has received more than a quarter of a million votes on over 4,00 products.

Interestingly, Walmart has also been on the leading edge of technology. In 2010, Walmart began using RFID "smart tags" to track inventory, and the company recently acquired Social Calendar, a Facebook application. The retailer just debuted a new cloud-based Walmart Entertainment platform that's touting "UltraViolet," which gives consumers the ability to pay anywhere from $2 to $4 to gain access to a digital version of a DVD (The Hangover, for example). It is these kinds of innovations that Walmart hopes will keep it several steps ahead of its competitors.

Whatever perception one might have of the Walmart brand, it is nothing if not ubiquitous. The stores are just about everywhere and often packed with people — so much so that the Pentagon is suggesting Walmart stores could be therapeutic for soldiers returning from combat who might suffer from PTSD (Post Traumatic Stress Disorder). That's because a Walmart store is "often busy and noisy, and some people may be hidden behind things — and all those are perceived as dangerous" by combat soldiers, according to Alan Peterson, who directs a Pentagon-funded project at the University of Texas Health Science Center. Apparently, walking through a Walmart store not only saves consumers money — it could also help soldiers confront their fears.

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