Shopper Penetration

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Transcript Shopper Penetration

ANNUAL SHOPPER REVIEW: WALMART

Prepared by:

Robin Sherk

Senior Analyst

Rachel McGuire

Senior Analyst

October 2012

Executive Summary: Walmart Annual Update

Walmart’s biggest formats are not driving shopper penetration growth.

Though nearly two-thirds (65%) of primary household shoppers shop its core Supercenter and Discount formats, there has been a continuous erosion in Walmart shopper penetration since 2008. Moreover, one in five (22%) of Walmart’s current shoppers report shopping at Walmart less often than last year. Many of these shoppers are shopping less in general, reminding the retailer that a sizable portion of its audience (approximately one in five) still feel that their financial situation is deteriorating. Others shopping less at Walmart are shopping more at competitors, including other grocers, Target, Dollar General, and Amazon.

Basket sizes are increasing, though emphasis of wide assortment is double edged.

Walmart shoppers have noticed the broadened assortment this year. Average basket sizes and trip frequency have risen since 2010, with grocery serving as the primary trip driver. Conversion for general merchandise still lags. Given the wider assortment, shoppers also feel that the in-store experience has weakened recently as they report out-of-stocks and more difficulty shopping the box. Viewed broadly, the retailer’s one-stop affirmations are in line with what its shoppers find important relative to other factors, but this proposition is becoming less of a motive to shop at Walmart over time. © Copyright 2012 Kantar Retail 2

Source: Kantar Retail analysis

Executive Summary: Continued

Price leadership still needs support.

Despite Walmart’s intense marketing efforts since early 2011, its shoppers tend to disagree about whether the value offered by Walmart is improving. At the same time, its shoppers increasingly value receiving a good deal in addition to seeking Walmart’s everyday low price (EDLP) proposition.

Shopper reach is steadily growing at Neighborhood Market.

The Neighborhood Market shopper base is slightly different than other Walmart shoppers, skewing younger, more urban, and Hispanic. The grocer also draws shoppers on a different type of trip than does the supercenter, as it better serves quick, fill-in trips. Meeting the needs of this distinct audience will gather increased attention as management rapidly expands its store footprint.

Walmart.com has opportunity to reach Walmart shoppers.

Even though 45% of Walmart shoppers also shop monthly at Amazon, only 22% of Walmart shoppers shop monthly at Walmart.com. Moreover, Walmart’s website disproportionately captures young families, a crucial audience for the retailer to maintain over time. © Copyright 2012 Kantar Retail 3

Source: Kantar Retail analysis

• • • • • • Table of Contents

Shopper Penetration – Penetration by channel, banner – Penetration by demographics Shopper Motivations – Financial concerns – Spending intentions – Reasons to shop less – Motives to visit Shopping Behaviors – Trips, trip type, and baskets – Where else Walmart store shoppers shop Brand Position – Perceived price leadership – Assortment and store of the community Growth Platforms – Neighborhood Market – Online Appendix – Category preference, change over time © Copyright 2012 Kantar Retail 4

Shopper Penetration Walmart US has 3,925 stores, the majority of which are supercenters or discount stores. The total includes an increase of 224 Supercenter and Discount store locations between early 2007 and the end of 2011. Given the expanding footprint, Walmart’s shopper reach has evolved in recent years:

However, Supercenter and Discount store weekly shopper penetration has trended downward since 2007.

At the same time, Neighborhood Market and online penetration is trending upward —underscoring the growth in these emerging formats.

Walmart’s shopper base tends to be lower income, rural, and suburban families, though it has made gains with upper income shoppers and urban dwellers in recent years.

© Copyright 2012 Kantar Retail 5

Source: Kantar Retail analysis

Mass Channel Weekly Shoppers Have Declined

Most core retail channels have witnessed a reduction in weekly shoppers since 2007, though value discounters and drug stores are starting to rebound. Meanwhile, mass merchandisers continue to wane.

Supermarkets Convenience stores Mass channel Drug stores Value discounters/dollar stores Warehouse clubs 9% 8% 9% 8% 7% 16% 14% 15% 14% 16% 24% 21% 21% 19% 21%

Weekly Shoppers

52% 49% 50% 50% 48% 50% 47% 44% 42% 40% 40% 39% 38% 38% 37% 2007 2008 2009 2010 2011 Fewer weekly shoppers across channels indicates a broader trend of shoppers spreading their purchase needs across stores, indicating decreased allegiance to particular formats.

Weekly Shoppers, by Channel Warehouse clubs Value discounters/dollar stores Drug stores Mass channel Convenience stores Supermarkets 2007–11 ppd change

-1.8

-0.3

-2.7

-3.4

-10.0

-3.9

© Copyright 2012 Kantar Retail 6

Source: Kantar Retail ShopperScape ®, October 2007, 2008, 2009, 2010 and 2011

Though Walmart’s Newer Formats Show Growth

While the shopper base at Walmart’s big boxes shrinks, its penetration is growing at Neighborhood Market and Walmart.com. Given this trend, the retailer is both shoring up its core and investing in these rising opportunities.

Percent Shopped Walmart (by format) during Past Four Weeks

30% 20% 10% 0% 80% 70% 60% 50% 40% 69% 9% 69% 9% 68% 10% 67% 9% 64% 11% 7% 65% 11% 8% Walmart/Walmart Supercenter Walmart.com

Walmart Neighborhood Market*

*Analysis for Neighborhood Market is limited to states in which Neighborhood Market had a presence as of January 2011

© Copyright 2012 Kantar Retail 7

Source: Kantar Retail ShopperScape ® , January 2007- July 2012

While the Families that It Attracts Evolves

Traditionally, Walmart’s base has been lower income, rural families with children. While the retailer still over-indexes with these groups, it also is attracting more urban, younger, and higher income shoppers over time.

All Shoppers Monthly Walmart/WMSC Shoppers PPT Change Q2 2012 Q2 2012 Q2 2011 Q2 2007 Q2 '12 vs. Q2 '11 Q2 '12 vs. Q2 '07

<$25K 26% 28% 29% 30% -0.2

-2.1

Annual HH Income

$25K - $49.9K

$50K - $74.9K

$75K - $99.9K

$100K+ 25% 18% 11% 20% 28% 18% 11% 15% 28% 18% 11% 15% 28% 18% 10% 13% -0.4

0.0

0.3

0.3

-0.8

-0.6

0.8

2.6

Spanish Origin

Yes 12% 58% 12% 59% 12% 54% 10% 58% -0.3

5.0

1.2

Now married Never married 1.2

0.1

Marital Status

21% 21% 18% 22% 21% 25% 18% 23%

-2.6

-2.4

Divorced, widowed, separated Generation Y (1982 to 2002) -1.3

6.3

14% 31% 14% 31% 15% 31% 7% 32%

-1.3

0.1

Generation

Generation X (1965 to 1981) Baby Boomers (1946 to 1964) Seniors (before 1946) 38% 17% 38% 17% 37% 16% 38% 22% 0.6

0.6

-0.8

-0.2

-5.3

Children in HH

Children under 19 at home No children under 19 at home 26% 74% 29% 71% 27% 73% 31% 69% 1.1

-1.1

-2.5

2.5

Pet ownership Market Size

Dog Owners Cat Owners Under 100,000 100,000 - 499,999 500,000 - 1,999,999 2,000,000 or more 41% 33% 13% 15% 21% 51% 45% 35% 17% 19% 23% 41% 45% 35% 18% 19% 24% 38% 44% 36% 18% 20% 25% 37% -0.4

0.0

-1.0

0.3

-1.7

2.4

0.5

-1.7

-0.9

-0.7

-1.9

3.5

Note: Grey highlighting on indicates statistically significant diff (95% CL).

© Copyright 2012 Kantar Retail 8

Source: Kantar Retail ShopperScape ® April, May and June of 2012, 2011 and 2007

• • • • • • Table of Contents

Shopper Penetration – Penetration by channel, banner – Penetration by demographics Shopper Motivations – Financial concerns – Spending intentions – Reasons to shop less – Motives to visit Shopping Behaviors – Trips, trip type, and baskets – Where else Walmart store shoppers shop Brand Position – Perceived price leadership – Assortment and store of the community Growth Platforms – Neighborhood Market – Online Appendix – Category preference, change over time © Copyright 2012 Kantar Retail 9

Shopper Motives Given the eroding penetration at its core Supercenter and Discount formats, understanding shoppers’ financial security and motives around shopping Walmart is necessary to gain perspective on the issue:

Many Walmart shoppers feel that their financial situation is improving and their spending intentions are on par with others.

However, Walmart shoppers also are more sensitive to price pressures, such as food inflation. Of the Walmart shoppers shopping at the retailer less often, they’re generally shopping less often overall.

Motives for Walmart shoppers to shop at the retailer involve low prices and the one-stop shop. Over time, the one-stop shop is decreasing in importance as shoppers increasingly want a deal.

© Copyright 2012 Kantar Retail 10

Source: Kantar Retail analysis

Financial Concerns Are Easing versus Last Year

Assessments of income and home value have improved since 2011, while views of credit card debt, mortgage & car payments, and investments are stable. However, a sizable group still says their situation is worsening.

Household Financial Health of Walmart Shoppers Q2 2011 Q2 2012 Job security

Much better/somewhat better off No change from last year Somewhat worse/much worse off

Household Income level

Much better/somewhat better off No change from last year Somewhat worse/much worse off

Credit card debt

Much better/somewhat better off No change from last year Somewhat worse/much worse off

Monthly mortgage/car payments

Much better/somewhat better off No change from last year Somewhat worse/much worse off

Worth of investments

Much better/somewhat better off No change from last year Somewhat worse/much worse off

Value of home

Much better/somewhat better off No change from last year Somewhat worse/much worse off 18% 62% 20% 24%

48% 28%

26% 56% 18% 20% 67% 13%

24%

53% 22% 15% 56%

30%

19% 61% 21%

28%

46% 26% 25% 56% 18% 21% 66% 13% 21%

56%

23%

18% 58%

24%

Note: Shading indicates significant year-to-year difference (90% CL)

© Copyright 2012 Kantar Retail 11

Source: Kantar Retail ShopperScape ® , April –June 2011 and 2012

Though Shoppers Still Very Sensitive to Prices

Last year, Walmart shoppers were more likely than others to notice rising food costs and take action. Looking to 2013, the base will likely respond similarly to the food inflation expected as drought conditions affect prices.

Strategies Using to Offset Rising Food Prices All Shoppers Walmart Shoppers Awareness of Rising Food Prices, by Where Most Spend on Groceries

(% say food prices have increased a lot/somewhat)

90% 88% 88% 86% 85% 84% 84% 82% 80% 78% 76% 74% 72% Total 78% Walmart Publix Safeway

Using more coupons Buying whatever brand is on sale Planning meals around what’s on sale Buying whatever brand I have a coupon for Shopping around to “cherry pick” best deals Not buying items that seem too expensive Buying fewer items on impulse Sticking to list Buying more products to cook from scratch Buying fewer prepared foods 49% 33% 28% 22% 18% 46% 45% 42% 23% 19% Buying fewer gourmet and specialty items Buying more private brand Buying less expensive versions of products 17% 32% 27%

19% 36% 31%

Buying less expensive cuts of meat Buying canned/frozen instead of fresh produce 24% 12%

27% 13%

None of these

12%

Note: Shading indicates significant difference between all shoppers and Walmart shoppers (90% CL)

9%

52% 35% 30% 23% 21% 48% 49% 45% 24% 21%

© Copyright 2012 Kantar Retail 12

Source: Kantar Retail ShopperScape ® , November 2011

Overall, Spending Plans Steadily Are Improving

On par with all U.S. primary household shoppers, Walmart shoppers are generally holding or increasing their near-term spending intentions versus the same time last year.

Source: Kantar Retail ShopperScape ® , January 2009 –June 2012 Note: No significant differences between all shoppers and Walmart shoppers (90% confidence level)

© Copyright 2012 Kantar Retail 13

But One in Five Are Going to Walmart Less Often

About half of the shoppers going to Walmart less often are shopping less overall. Many are going to supermarkets more often. Walmart also is losing its higher income shoppers to Target, middle income shoppers to clubs, and lower income shoppers to dollar stores.

Among the 22% of Walmart shoppers who are shopping Walmart less often Shopping Frequency at Walmart/Walmart Supercenter Compared With Same Time Last Year Reasons for Shopping Walmart / Walmart Supercenter Less Compared With Last Year

Shoppi ng l es s i n genera l

Total

48%

Annual HH Income <$25k $25k - $84.9K

>$85K

50% 47% 45% Shoppi ng more a t s uperma rkets 24% 25% 23% 23% Other retai l ers offer a more pl ea s a nt s hoppi ng experi ence Shoppi ng retai l ers tha t a re conveni ent to home/work Ca n fi nd better overa l l va l ue a t other retai l ers 22% 21% 20%

15%

21% 21%

25%

23%

25%

22% 18%

13% 15% More often 64% About the same 22% Less often

Shoppi ng more a t retai l ers tha t a l l ow me to get i n/out qui ckl y Shoppi ng more a t Ta rget Di vi di ng s hoppi ng a mong more s tores , i ns tea d of one-s top s hoppi ng Shoppi ng more a t dol l a r s tores Other retai l ers ca rry more of the i tems I need Shoppi ng more a t onl i ne-onl y retai l ers 18% 18% 14% 14% 11% 9% 17%

9%

15%

21%

9% 9% 20% 20%

18%

15% 13% 9% 17%

26% 9% 5%

11% 7% Shoppi ng more a t wa rehous e cl ubs 9%

4% 12%

9% Other 17% 17%

21% 11%

NOTE: Grey shading indicates significantly greater percentage, compared with all shoppers shopping the retailer less; border indicates significantly lower percentage (95% confidence level).

Read as: 45% of up-market shoppers who are shopping Walmart less often than last year are doing so because they are shopping less in general.

© Copyright 2012 Kantar Retail 14

Source: Kantar Retail ShopperScape ® May 2012

Walmart’s Shoppers Value Savings, One-Stop

Relative to others, Walmart’s base is more focused on spending as little money as possible and a one-stop shop. They are slightly less focused on high quality, though they equally appreciate “stress-free” shopping.

Arrows indicate significant difference between all shoppers vs. Walmart shoppers (90% confidence level) Source: Kantar Retail ShopperScape ® , January 2012

© Copyright 2012 Kantar Retail 15

Higher-Income Shoppers Appreciate the Deal

Walmart’s higher-income shoppers focus more on the experience: having fun, finding new & high-quality items, and getting a deal. The lower income focus more on employee interaction, a one-stop shop, and spending less. Functional Experiential

Notes: Boxes indicate significant difference between Haves and Have Nots (90% confidence level) Definition of ‘Have Nots’: Annual household income of less than $65,000; ‘Haves’ is income $65,000 + Source: Kantar Retail ShopperScape ® , January 2012, Kantar Retail analysis

© Copyright 2012 Kantar Retail 16

Fewer Choosing Because of One-Stop Appeal

Compared with 2007, Walmart’s grocery/consumables shoppers are less likely to chose Walmart because of its one stop shop propositions. It’s now less important than sales/promotions. Shoppers continue to value EDLP.

Reasons for Store Choice for Groceries (Among Walmart Shoppers) 64% 56%

2007 2012

50% 49% 27% 18% Better value Conveniently located

Note: arrows indicate significant difference between 2007 and 2012 (95% confidence level)

Able to one-stop shop 19% 20% Conveniently located EDLP

Note: arrows indicate significant difference between 2007 and 2012 (95% confidence level)

Able to one-stop shop Betters sales and promotions 62% Reasons for Store Choice for HBC (Among Walmart Shoppers) 58% 53%

2007 2012

50% 34% 29% 22% 20% Better sales or promotions

© Copyright 2012 Kantar Retail 17

Source: Kantar Retail ShopperScape ®, Feb/May/Aug 2007 and Feb/May/Aug 2012

• • • • • • Table of Contents

Shopper Penetration – Penetration by channel, banner – Penetration by demographics Shopper Motivations – Financial concerns – Spending intentions – Reasons to shop less – Motives to visit Shopping Behaviors – Trips, trip type, and baskets – Where else Walmart store shoppers shop Brand Position – Perceived price leadership – Assortment and store of the community Growth Platforms – Neighborhood Market – Online Appendix – Category preference, change over time © Copyright 2012 Kantar Retail 18

Trips, Basket, & Cross-Shopping After experiencing decreased customer traffic in 2010, Walmart reinforced its one-stop, low-price brand proposition in an effort to reverse this trend. At the same time, its shoppers are generally starting to feel better about their income and home values, helping to shore up near-term spending confidence. In this environment, the trip to Walmart is evolving:

After trips bumped up in 2011, the frequency settled to channel norms in 2012. At the same time, average basket sizes have steadily increased.

The retailer continues to garner approximately as many trips for fill-in and immediate use as it does stock-up occasions. Grocery continues to be the primary trip driver.

Amazon has risen as a significant contender in recent years, becoming the retailer most commonly cross-shopped by Walmart shoppers.

© Copyright 2012 Kantar Retail 19

Source: Kantar Retail analysis

Though Leveling Off, Trips Are Up since 2010

On par with the mass merchandiser & grocery channel averages, Walmart’s shoppers visit the retailer approximately once a week. This indicates that Walmart serves as a destination for shoppers fulfilling routine needs.

Note: arrows indicate significant year-to-year difference (90% confidence level) Source: Kantar Retail ShopperScape ® , Feb/May/Aug/Nov 2010 and 2011, Feb/May/Aug 2012

© Copyright 2012 Kantar Retail 20

Trips Are Generally for Stock-Up Occasions

Nearly 40% of the grocery and consumables trips to Walmart are for stocking up. However, trips for fill-ins and immediate use also are very common: combined they account for 42% of the occasions.

Stock-up Fill-in Immediate use Buy coupon items Browsing Special occasion Buy sale items

Source: Kantar Retail ShopperScape ® , May/Aug/Nov 2010, Feb/May/Aug/Nov 2011, Feb/May 2012

© Copyright 2012 Kantar Retail 21

The Basket Leans to Grocery, Consumables Walmart’s basket size continues to expand across grocery and general merchandise. Though most shoppers purchased food on their most recent trip to Walmart, only 26% bought general merchandise —indicating opportunity to increase shopper conversion across the box.

$88.30

$95.60

$101.99

Source: Kantar Retail ShopperScape ® , Feb/May/Aug/Nov 2010 and 2011, Feb/May/Aug 2012

© Copyright 2012 Kantar Retail 22

Fresh Is the Dominate Department Shopped

Fresh food has risen to be the #1 department shopped at Walmart. Meanwhile the other top 10 categories have seen eroding shopper penetration since 2009. Many shoppers shop relatively few categories at Walmart, underscoring its need to encourage shoppers to “cross the box” to general merchandise

Source: Kantar Retail ShopperScape ® , May 2009, May 2010, May 2011, and May 2012

© Copyright 2012 Kantar Retail 23

Cross Shopping Rises Starkly for Amazon Underscoring the heightened competition from online, Amazon is now the #1 retailer where Walmart shoppers also shop.

Top 25 Retailers Cross-Shopped by Walmart Shoppers

Amazon.com

Target Walgreens CVS/pharmacy

Jan-Jul 2007

24%

42%

38%

Jan-Jul 2012 45%

41%

39% PPD 2012 vs. 2007

21.1

-1.2

1.4

Dollar Tree Lowe's The Home Depot Kohl's Dollar General JCPenney Kroger Best Buy eBay.com

Sam's Club Family Dollar Macy's Kmart 29% n/a 32%

37%

25% 29%

33%

23%

27% 24% 24%

21% 19%

23% 32%

32% 32% 31%

30%

30% 29% 24% 23% 22% 22% 21% 19% 19% 3.2

n/a -0.4

-5.6

4.6

0.8

-3.5

0.5

-4.7

-1.7

-2.6

0.4

0.5

-4.0

Barnes & Noble Bed Bath & Beyond Staples Sears

21% 19% 19% 20%

19% 17% 17% 17% -1.7

-1.6

-1.7

-3.4

PetSmart Michaels Big Lots Costco 16%

17% 22%

14% 16% 16% 15%

15%

0.5

-1.0

-6.9

1.2

Note: Bolding/grey highlight indicates a statistically significant PPD (95% C.L.) –

More Walmart shoppers are now cross shopping Amazon.com and drug stores

Kohl’s also is gaining traction

Dollar channel holding steady

14% of Gen Y Walmart Moms are also members of Amazon Mom, Amazon’s auto-replenishment program targeted to mothers of infants and toddlers. This underscores how today’s young families shop differently than their parents did.

Less cross-shopping of category specialists (particularly The Home Depot and Best Buy)

Less cross shopping of Sam’s Club, Kmart/Sears, Big Lots, and JCPenney

© Copyright 2012 Kantar Retail 24

Source: Kantar Retail ShopperScape ® , January-July, 2007 and 2012

• • • • • • Table of Contents

Shopper Penetration – Penetration by channel, banner – Penetration by demographics Shopper Motivations – Financial concerns – Spending intentions – Reasons to shop less – Motives to visit Shopping Behaviors – Trips, trip type, and baskets – Where else Walmart store shoppers shop Brand Position – Perceived price leadership – Assortment and store of the community Growth Platforms – Neighborhood Market – Online Appendix – Category preference, change over time © Copyright 2012 Kantar Retail 25

Brand Position: Merchandise & Marketing Walmart is known for carrying a broad, one-stop shopping offer at an everyday low price to help shoppers “save money” and therefore “live better.” In recent years, though, the retailer has faced challenges on both of these fronts:

Assortment:

In 2009 and 2010, Walmart “rationalized” SKUs, cutting about 10% of the items in its box. By 2011, the retailer recognized shoppers’ frustration and added back the assortment by the end of the year. This year, Walmart has further focused on the shopper by emphasizing local, “Store of the Community” products. While shoppers have generally noticed the broadened assortment, they also see the corresponding drawbacks (i.e., out of stocks).

Walmart’s core principles examined in this section:

Lowest prices:

Walmart has faced price leadership challenges recently. In Kantar Retail’s semi-annual pricing study, Target’s basket has been equal to or less than Walmart’s basket in half of the assessments since 2009. Starting in 2011, and augmented in 2012, Walmart has aggressively asserted its price position by promoting Ad Match and “see for yourself” savings messages and investing in gross margin to lower prices. Today, its shoppers still disagree whether the value that Walmart offers is improving.

© Copyright 2012 Kantar Retail 26

Source: Kantar Retail research and analysis

Walmart’s Price Leadership Faces Challenges

More Walmart shoppers disagree that Walmart’s value has improved over the past year than agree. Seniors are particularly skeptical, while more Gen Y shoppers feel that the value is better.

The value offered by Walmart is better than it was a year ago (% that agree/disagree)...

35% 30% 25% 20% 15% 10% 5% 21% 25% 31% 21% 22% 26% 20% 26% 15% 24% 0% Total Gen Y

Strongly agree/agree

Gen X Boomers

Disagree/strongly disagree

Seniors

*Among Walmart shoppers only

Note: Yellow arrows indicate significantly greater/lesser vs. total (95% confidence level)

Anticipate that Walmart will continue to ramp up its Ad Match and “See for yourself” local price leadership messages

© Copyright 2012 Kantar Retail 27

Source: Kantar Retail ShopperScape ®, May 2012

But Shoppers Notice the Widened Assortment

Nearly one in three shoppers noticed the broadened assortment, with Gen Y and Gen X shoppers particularly attentive. However, only one in five noticed more local items, suggesting opportunity to further assert Store of the Community.

35% 30% 25% 20% 15% 10% 5%

There is a broader assortment of items available at Walmart now compared with a year ago

36% 32% 30% 28% 25% 21% 19% 15% 20% 19% 35% 30% 25% 20% 15% 10% 5%

I have noticed more local products available at my Walmart store

20% 28% 25% 28% 23% 29% 19% 28% 13% 26% 0% 0% Total Gen Y Strongly agree/agree Gen X Boomers Disagree/strongly disagree Seniors Total Gen Y Strongly agree/agree

*Among Walmart shoppers only *Among Walmart shoppers only

Note: Yellow arrows indicate significantly greater/lesser vs. total (95% confidence level) Gen X Boomers Disagree/strongly disagree Seniors © Copyright 2012 Kantar Retail 28

Source: Kantar Retail ShopperScape ®, May 2012

Greater Attention to the Experience Needed Too

With the broadened assortment, about one-third of shoppers also are noticing more out-of-stocks. More than one in four shoppers also feel that the ease of shopping at Walmart has declined.

40% 35% 30% 25% 20% 15% 10% 5% 0%

I've noticed more items out of stock at Walmart compared with a year ago

37% 33% 33% 32% 24% 16% 26% 24% 24% 26% Total Gen Y Strongly agree/agree Gen X Boomers Disagree/strongly disagree Seniors

It is easier to shop Walmart now than it was a year ago

40% 35% 30% 25% 20% 15% 10% 5% 0% 20% 26% 25% 27% 21% 28% 21% 25% 15% 23% Total Gen Y Strongly agree/agree Gen X Boomers Disagree/strongly disagree Seniors Note: Yellow arrows indicate significantly greater/lesser vs. total (95% confidence level)

Source: Kantar Retail ShopperScape ®, May 2012

© Copyright 2012 Kantar Retail 29

• • • • • • Table of Contents

Shopper Penetration – Penetration by channel, banner – Penetration by demographics Shopper Motivations – Financial concerns – Spending intentions – Reasons to shop less – Motives to visit Shopping Behaviors – Trips, trip type, and baskets – Where else Walmart store shoppers shop Brand Position – Perceived price leadership – Assortment and store of the community Growth Platforms – Neighborhood Market – Online Appendix – Category preference, change over time © Copyright 2012 Kantar Retail 30

Growth Platforms Neighborhood Market and Walmart.com shoppers

Recognizing the growth of smaller formats and online shopping, Walmart is advancing its grocery banner and eCommerce platforms: •

Neighborhood Market:

In October 2011, Walmart announced that it was ready to roll out this format, increasing its store base by about 50% in 2012. This announcement came as the banner posted ~5% comparable store sales growth and customer traffic gains, and reached the returns that Walmart demands. From a shopper insights perspective, the format has rising penetration and a distinct shopper profile: more urban, younger, and Hispanic.

Walmart.com:

In April 2012, Walmart asserted that one of its corporate strategies is “winning in global eCommerce.” Its recently created @WalmarLabs division has focused on improving Walmart.com’s platform in 2012 by introducing a new product search engine, called Polaris, and advancing the website’s pricing position and search engine optimization. Though Walmart shoppers shop online and Walmart.com’s penetration is steadily growing, the website has opportunity to develop its reach among Walmart shoppers.

© Copyright 2012 Kantar Retail 31

Source: Kantar Retail research, store visits, and analysis

Neighborhood Market Penetration Is Growing

With a footprint in about one-third of states, this format is steadily increasing its shopper reach with a 1 percentage point gain in July, year over year. This coincides with the retailer’s reported ~5% comparable store sales gains in mid 2012, well above Walmart US’s average.

12%

Percent Shopped Walmart Neighborhood Market during Past Four Weeks

10% 8% 6% 4% 2% 0% 7% 8%

Walmart Neighborhood Market* Overall trend

*Analysis for Neighborhood Market is limited to states in which Neighborhood Market had a presence as of January 2011

© Copyright 2012 Kantar Retail 32

Source: Kantar Retail ShopperScape ® , January 2011 – July 2012, Kantar Retail analysis

And the Shopper Base Is Slightly Different

Compared to the Supercenter, Neighborhood Market shoppers are younger, more urban, and more likely to be of Hispanic origin.

Shopped Retailer in Past 4 Weeks Walm art Supercenter Neighborhood Market Annual HH Incom e Market Size Kids in HH Generation

Sample Size <$25K $25K - $49.9K

$50K - $74.9K

$75K - $99.9K

$100K+ Non- MSA/ MSA <500K MSA 500K - 1,999K MSA 2M Children under 19 at home No children under 19 at home Generation Y (1982 to 2002) Generation X (1965 to 1981) Baby Boomers (1946 to 1964) Seniors (before 1946) Mean age 6863 29% 28% 17% 10% 15%

34%

32% 33% 28% 72% 15% 32%

36%

17%

48.3

785 30% 25% 17% 11% 18% 17%

38% 45%

29% 71%

21%

32% 30% 16% 45.5

Spanish Origin

Yes 15%

21%

Highlighting indicates significant difference b/t column percentages (95% C.L.)

*in states where Neighborhood Market was present as of January 2011

Given that Walmart traditionally does not over-index with these shoppers, Neighborhood Market should help the retailer widen its audience base

© Copyright 2012 Kantar Retail 33

Source: Kantar Retail ShopperScape ®, Jan-July 2012

The Basket also Is Quite Lucrative

The average Neighborhood Market basket is only about 10% less than the Supercenter basket, and the trip frequency reaches 1 –2 times a week. The spend on general merchandise is fairly similar across formats.

$100.02

Avg Trips per Month: 5.2

$90.52

Note that the presence of general merchandise varies widely in this format, with some stores offering entertainment and home areas 6.9

© Copyright 2012 Kantar Retail 34

Source: Kantar Retail ShopperScape ® , Aug/Nov 2011 and Feb/May/Aug 2012

Neighborhood Market Shares Its Shoppers with a Wide Range of Retailers …

… suggesting that it serves as more of a complement vs. destination format

All Shoppers Neighborhood Market Shoppers Index vs. All Shoppers

WALMART (no N. Market) 75% 78% 104 Walgreens Target Amazon.com

CVS/pharmacy The Home Depot JCPenney Lowe's Dollar General Dollar Tree Kohl's Sam's Club Best Buy Family Dollar Kroger Macy's Bed Bath & Beyond Barnes & Noble Office Depot eBay.com

PetSmart Old Navy Publix Kmart/Big Kmart Michaels 42% 37% 43% 32% 29% 26% 33% 32% 26% 24% 23% 20% 22% 32% 17% 16% 18% 14% 20% 16% 12% 19% 14% 14% 59% 54% 51% 45% 44% 43% 42% 41% 39% 37% 34% 34% 34% 33% 32% 32% 31% 29% 28% 26% 25% 24% 24% 23%

*in states where Neighborhood Market was present as of January 2011

140 148 117 140 152 162 128 127 150 153 152 167 157 104 191 202 172 201 136 164 214 123 169 170

Competitors that Neighborhood Market particularly overlaps and over-indexes with

: © Copyright 2012 Kantar Retail 35

Source: Kantar Retail ShopperScape ®, Jan-July 2012, Kantar Retail analysis

Two-Thirds of Walmart Shoppers Shop Online

Walmart shoppers are equally as likely to report shopping and purchasing online as others. However, most are not frequenting Walmart.com to do so, indicating opportunity to connect the in-store and online experience.

Shopping Frequency on Amazon.com and Walmart.com

Never Less than once a month Monthly Weekly % Shopped/Purchased Online During the Past Six Months

(at any retailer)

18% 19% 7% 9% 9% 13%

80% 70% 63% 62%

20% 20%

60%

35%

53% 52% 50%

40%

40%

33% 34%

30%

49%

20%

38% 29% 28%

10% 0%

All Shoppers Walmart Shoppers Amazon.com

All Shoppers Walmart Shoppers Walmart.com

All Shoppers

Shopped online in past 6 months

Walmart Shoppers

Purchased online in past 6 months

22% of Walmart shoppers are monthly shoppers of Walmart.com, much lower than the proportion that regularly shop Amazon.com!

Note: no statistically significant difference between all shoppers and Walmart shoppers.

© Copyright 2012 Kantar Retail 36

Source: Kantar Retail ShopperScape ®, July 2012, June 2011- August 2012

Penetration on Walmart.com Is Steadily Rising

Though Walmart.com is the #1 most frequently shopped website among those operated by brick & mortar retailers, Amazon captures more than double the unique visits and nearly two-thirds more shoppers than Walmart.com.

Unique trips to Walmart.com continue to gain traction, rising 12.3% year-over-year.

Comparatively, Target has witnessed year-over-year declines.

Channel Comparison: Unique Daily Trips in Millions

300.0 253 250.0 228 231 208 205 200.0 150.0 148 100.0 50.0 87 59 86 61 87 88 53 98 52 2011_Q2 2011_Q3 2011_Q4 2012_Q1 2012_Q2

Source: Compete, Inc. 2012, a Kantar Media Company in exclusive partnership with Kantar Retail

walmart.com target.com amazon.com –

Furthermore, Walmart.com’s unique shopper counts increased at a faster pace, growing 19.6% year over year.

Walmart’s lead over Target is becoming more pronounced, while Amazon is holding its lead over Walmart.

Channel Comparison: Unique Daily Shoppers in Millions

100 90 80 70 60 50 40 30 20 10 47 37 78 49 39 81 72 53 93 50 35 85 56 35 92 2011_Q2 2011_Q3 2011_Q4 2012_Q1 2012_Q2

Source: Compete, Inc. 2012, a Kantar Media Company in exclusive partnership with Kantar Retail

walmart.com target.com amazon.com © Copyright 2012 Kantar Retail 37

Source: Compete, Kantar Retail analysis

And Most Often Buy Apparel, Entertainment

Though, Walmart’s shoppers also shop for less expected categories online, including beauty, OTC, toys, and pet food. Over time, Kantar Retail expects more of these categories to be purchased online.

Top 20 Products Shopped for and Purchased Online During Past Six Months

(among Walmart shoppers, at any online retailer)

Purchased Product Online Shopped for product online Women's apparel Women's shoes Hardcover or paperback books E-books Beauty or skin care products DVD or Blu-ray movies Consumer electronics Computer Men's apparel OTC or vitamins Video games Toys/dolls/games Furniture Tablet computer (e.g., iPad) Infants/toddlers/kids apparel Pet food and supplies School/home office supplies Prescription drugs Men's shoes Small housewares (e.g., glasses)

0% 9% 13% 12% 9% 9% 4% 5% 5% 5% 6% 2% 2% 4% 4% 3% 5% 4% 3% 7% 8% 9% 9% 9% 9% 8% 8% 8% 8% 10% 13% 14% 13% 12% 11% 10% 15% 15% 16% 16% 16% 19% 20% 20% 25% 26% 30%

Whether or not your categories are widely purchased online, it evolves the store’s trip-drivers:

Consider which of your category's co-purchased items are moving online faster, anticipating how this will affect in-store navigation and your promotions.

© Copyright 2012 Kantar Retail 38

Source: Kantar Retail ShopperScape ® July 2012, Kantar Retail analysis

Walmart.com’s Core Shopper Is Young Families

Walmart.com shoppers tend to be younger and are more likely to have children at home than other Walmart shoppers, making them a desirable demographic .

Relative to all Walmart shoppers, Walmart.com shoppers are:

• • •

Younger (25-34 yrs old) Have children in the household Less likely to be Hispanic

Age Kids in HH Race Annual HH Income All Walmart Shoppers Walmart.com Shoppers Sample Size 18-24 25-34 35-44 45-54 55-64 65+ Children under 19 at home No children under 19 at home White 18257 6% 18% 19% 21% 18%

20%

28%

72%

79% Black/African American <$25K $25K - $49.9K

$50K - $74.9K

13%

27%

27% 18% 14% 25% 28% 18% $75K - $99.9K

$100K+ 11% 17% 11% 17% Non- MSA/ MSA <500K MSA 500K - 1,999K 34% 23% 34% 23% 2984 6%

21%

20%

23%

17% 13%

32%

68% 78% © Copyright 2012 Kantar Retail 39

Source: Kantar Retail ShopperScape ®, Jan-July 2012

Its Biggest Online Competitor Is Amazon

More than two-thirds of Walmart.com shoppers also shop Amazon. As this is more than twice the proportion that also shop Target.com, Amazon has become the primary online contender for Walmart shoppers.

Top 25 Retailers Cross-Shopped Online by Walmart.com Shoppers

Amazon.com

eBay.com

Target Best Buy JCPenney Kohl's The Home Depot Lowe's Barnes & Noble Sears Macy's Kmart Staples Old Navy Bed Bath & Beyond Walgreens Apple Office Depot

Jan-Jul 2007

45%

43% 36% 30% 25%

15%

21%

16% 19% 17% 10% 15%

15%

12% 13% 9% 6%

14% Jan-Jul 2012 68%

40% 29% 24% 22%

20%

18% 18% 18% 16%

15%

14% 12% 12% 12%

11% 10%

9%

PPD 2012 vs. 2007

23.1

-3.5

-6.9

-5.8

n/a 5.2

-3.2

1.3

-1.2

-0.5

4.3

-1.4

-2.8

-0.2

-0.8

2.8

3.8

-4.8

Victoria's Secret Newegg.com

CVS/pharmacy 9% n/a 6% n/a 9% 8%

8%

8% -0.3

n/a 1.6

n/a Zappos.com

QVC TV/QVC.com

Sam's Club

10% 10%

8% 7% -1.6

-2.6

GameStop n/a 7% n/a Note: Bolding/grey highlight indicates a statistically significant PPD (95% C.L.) –

Walmart.com cross-shopping down from 2007:

Target.com

Category specialists (Best Buy & office supply)

Walmart.com cross-shopping up from 2007:

Amazon.com

Department stores (Macy’s, Kohl’s)

Drug stores

Apple

© Copyright 2012 Kantar Retail 40

Source: Kantar Retail ShopperScape ® , January – July, 2012 and 2007, Kantar Retail analysis

• • • • • • Table of Contents

Shopper Penetration

– Penetration by channel, banner – Penetration by demographics

Shopper Motivations

– Financial concerns – Spending intentions – Reasons to shop less – Motives to visit

Shopping Behaviors

– Trips, trip type, and baskets – Where else Walmart store shoppers shop

Brand Position

– Perceived price leadership – Assortment and store of the community

Growth Platforms

– Neighborhood Market – Online

Appendix

– Category preference, change over time © Copyright 2012 Kantar Retail 41

Appendix

The following charts are appended in the associated Excel file on KRIQ. Click here to download the Excel file .

Demographic Profiles by Department Shopped:

• Shopper Profiles: Shoppers Who Indicate Walmart U.S. Is Store of Preference for

Grocery/HBC

• Shopper Profiles: Shoppers Who Indicate Walmart U.S. Is Store of Preference for

General Merchandise Penetration by Department/Category:

• Did Most Past Month Spending on

Grocery

at Walmart • Did Most Past Month Spending on

Health and Beauty Care

at Walmart • Did Most Past Month Spending on

Electronics and Entertainment

at Walmart • Did Most Past Month Spending on

Apparel, Shoes and Accessories

at Walmart • Did Most Past Month Spending on

Home Improvement Products

at Walmart © Copyright 2012 Kantar Retail 42

Source: ShopperScape ®, Kantar Retail analysis

Robin Sherk Senior Analyst [email protected]

245 First Street Floor 10 Cambridge, MA 02142 T +1 212 896 8191 F +1 617 499 2723 www.KantarRetailiq.com

© Copyright 2012 Kantar Retail