An advertising agency fighting to keep Wal-Mart's business last year told the world's largest retailer that while it was a "positive force" because low prices helped shoppers lead better lives, the company suffered a lack of respect that could drive away shoppers.
The marketing report by GSD&M was obtained by a union-funded group critical of the retailer, WakeUpWalMart.com, and provided to The Associated Press. It warned Wal-Mart was being portrayed in the media as a "bad corporate citizen who doesn't treat employees well and isn't acting as a good citizen of the planet."
GSD&M had handled Wal-Mart's advertising for 19 years until the retailer hired a new group during the winter. For its 55-page document, "Wal-Mart: Positioning Report," GSD&M conducted in-home interviews with 24 groups of consumers and 20 individuals nationwide and took some of them shopping.
Wal-Mart, based at Bentonville, Ark., acknowledged the report was genuine but played down its significance. Spokesman Nick Agarwal said the company receives many marketing studies from consultants.
"I'm afraid this particular piece of work is not very useful, not least because it's now completely out of date and in some areas just plain wrong," Agarwal said.
Agarwal disputed GSD&M's claims that Wal-Mart's reputation has declined in recent years. He said Wal-Mart does not believe it is losing business because of negative headlines.
Austin, Texas-based GSD&M confirmed the report was part of its unsuccessful pitch. Wal-Mart in January dropped Omnicom Group Inc.'s GSD&M and another longtime agency, Bernstein-Rein of Kansas City, Mo. It hired Interpublic Group of Co.'s Martin Agency and Publicis Groupe SA's MediaVest.
WakeUpWalMart.com spokesman Chris Kofinis said the study backs his group's arguments that Wal-Mart must change, including paying its workers more and improving health benefits.
"From day one we told Wal-Mart that the American people cared about values, not just value, and because they didn't listen, preferring this dumb 'head-in-the sand-publicity-stunt' strategy, they have damaged their public image, and needlessly hurt their company, their shareholders, and their workers," Kofinis said.
Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which manages $9.6 billion in assets and holds about 42,000 Wal-Mart shares, said the report points to a genuine issue for Wal-Mart.
"Reputation really does matter," said Edwards. "It's more and more important, especially as you get to the younger crowd (of consumers). They are less about the money and more about values."
Wal-Mart's shares have been in the doldrums for years, a fact that some analysts blame in part on the potential risk of negative headlines affecting its business. While total sales rose 94 percent from 2000 through last year, the company's shares are trading about 30 percent below their Jan. 3, 2000 closing price.
GSD&M listed Wal-Mart's corporate reputation as the first of 10 challenges the company faces. Other problems included a "hillbilly" stereotype of its shoppers and competition from smaller Target Corp.
The agency argued that Wal-Mart is a positive force because its low prices help shoppers lead better lives.
But it said Wal-Mart's brand had slipped over time from standing for values like patriotism, community and opportunity to offering only economic value as low prices. GSD&M said if that gap is not closed, shoppers will have one more reason not to shop at Wal-Mart.
"While corporate respect may not be a highly rated driver of store choice, this intangible quality cannot be underestimated _ especially as Millennials (people born after 1980) take hold of the marketplace," the report said.
It did not recommend specific steps but said Wal-Mart should rebuild its values and make itself a brand that shoppers, employees, suppliers, shareholders and communities are proud of.
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