EDLP Price Leadership Assertions How Walmart Is Driving

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EDLP+ Price Leadership Assertions: How Walmart Is Driving Value Impressions Presented by: Robin Sherk, Director June 2014

Copyright © 2014 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, MA 02116 (617) 912 - 2828 howard. zimmerman@kantarretail. com No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides. © Copyright 2014 Kantar Retail

Walmart Price Leadership Assertions: EDLP+ Degree of targeting, sophistication me Individualized appeals Private Labels mass Source: Kantar Retail analysis Value Deals Local Market Campaigns Savings Events KVIs EDLP © Copyright 2014 Kantar Retail 3

EDLP: Goal of USD 6 Billion in Price Investment Furthering investment thru the end of 2016, “self-funded” Productivity Gains: • Lower remodel/new stores costs • Productivity in stores • Efficiency in transport, marketing, DCs… • Global sourcing • JBP Price Reductions: – “Lead with traffic-driving categories” – Broad application (not only KVIs), elastic items – Long-term investments Source: Company presentations, Kantar Retail research Walmart reaffirms its pledge to reduce SG&A % thru the end of 2016 © Copyright 2014 Kantar Retail 4

Local Market Campaigns Reinforce Leadership Becoming more aggressive: matching BOGO offers Testing matching of BOGO coupon offers in Florida • Pilot started Sept. 2013 • Across Supercenters, Discount, and Neighborhood Market • Limit of two BOGO offers per item • Receive Walmart’s EDLP price on the BOGO “See For Yourself” campaign reaches ~75 markets across US, 70% of sales; TV ads are refreshed frequently Source: Walmart. com, company presentations, Kantar Retail analysis © Copyright 2014 Kantar Retail 7 7

Key Value Items Investing to Drive Impressions “If we invest in price and there is no sales response, we are not going to invest in those categories. ” - Bill Simon, September 2013 Source: Company presentations; Kantar Retail analysis, store visits © Copyright 2014 Kantar Retail 9

Individualized Appeals: Savings Catcher • Compares ~80, 000 grocery and consumables purchases, giving shoppers a gift card compensating them for lower advertised prices elsewhere – Produce and general merchandise to be added • Nearly 1 million receipts processed by Savings Catcher during the pilot – Ranks #1 on the retailer’s list of concepts tested to date • Plans to link to e. Receipts to automatically check for the lowest price in the area – Also to develop e. Coupons and automated shopping lists Source: Kantar Retail research, company reports “We are going to win by integrating digital and physical. Savings Catcher and its expanding capabilities are just one example of that. We are well-positioned to innovate and lead in the tech space, and you’ll see more of this. ” – Duncan Mac Naughton, June 2014 © Copyright 2014 Kantar Retail 10

Scan & Go App Enables Budgeting Tools As well as deepened customer knowledge • Check out via i. Phone and Android phones, while helping shoppers budget as they go: – Log in via Walmart. com account – Part of Walmart app, activated in “Store Mode” • Pilot started in 2012, now at Supercenters and N’Markets across the country • Also enabling e. Coupons on the app, allowing for further targeting of appeals “What we did with this tool is we allowed [shoppers] to budget in privacy. ” –Gibu Thomas, March 2014, quoted by The Atlantic Source: Kantar Retail research, analysis © Copyright 2014 Kantar Retail 11

Prices to Become Personal via Emailers? NOW: NEXT? “Just for You” emails, launched Aug. 2012 Already targeting price drop emails… “We built a sophisticated, brand-new recommendation engine that's been built internally by the Walmart Labs. ” – Joel Anderson, Oct. 2013 Source: Kantar Retail research, analysis © Copyright 2014 Kantar Retail 12

Acquired the Ability to Target Ads Social analytics & mobile marketing firm: One. Riot was Acquired by @Walmart. Labs in Sept 2011: • Uses a Social Targeting Engine for mobile ad campaigns • “Social-Geo Census Database”: send mobile content to audiences in specific geo-locations, targeting by their interests, location, and demographics • Social targeting service for mobile ads Aligned with mobile rich media providers, its mobile ads can feature video, social sharing, and image galleries Source: Kantar Retail research, analysis © Copyright 2014 Kantar Retail 13

Inkiru Also Accelerated Walmart’s Position Real-time analytics aid 1: 1 interaction Predictive Intelligence platform: • Examines transaction data in conjunction with external data sources to predict current and future shopping behavior • Updates to account for real-time behavior • Builds a profile for each site user Customer Targeting Solution, which runs on the platform: • Helps retailers better understand how each shopper is using their site • Individual suggestions (e. g. , production recommendations, advises the most effective incentive to offer each user on the site) “Inkiru recommends how to interact with each individual customer based on their live click stream as well as current and past behavior. ” – Company marketing material, 2013 • Campaign optimization (e. g. , email refinement) Source: Kantar Retail research, analysis © Copyright 2014 Kantar Retail 14

Yumprint Targets Online Meal Planners Mobile and social food app will link with online grocery Yumprint acquired by @Walmart. Labs in February 2014 • Displays more than 15 million recipes from food blogs • Walmart. com, about Yumprint Users can access it via website, mobile app, and browser extension (allowing shoppers to easily save recipes to their “cookbooks”) • “A vision for how technology can improve the way all of us discover and prepare our meals. ” – Ben Galbraith, VP, Global Products, For a fee, “Yumprint Premium” tracked sale items for local supermarkets in recipes saved in users’ cookbooks— though this feature now appears to be disabled Source: Kantar Retail research, analysis; company materials © Copyright 2014 Kantar Retail 15

Individualized Appeals: Implications Walmart Initiative Savings Catcher Scan & Go e. Receipts, e. Coupons Source: Kantar Retail analysis Supplier Implication KVI items will face greater scrutiny, with the sale price in various channels becoming the effective price at Walmart Communicate that other customer teams will face pressure to diversify promotional tactics at competing channels to eschew direct comparisons Anticipate potential for insight around shoppers’ budgeting and in-store behaviors Consider that this “second screen” will become a more central marketing medium for in-store shoppers as this program advances Expect Walmart to have knowledge of its shoppers’ baskets over time through digital receipts and its app, allowing greater targeting to appeals and savings suggestions Connect with loyalty card marketers within your organization to anticipate when and how to best target promotional messages, as such tools become available © Copyright 2014 Kantar Retail 16