Based on Wal-Mart’s most recent audited annual financial statements, the company increased its adspend (for primarily print and television adverts) by $300 million. This includes spend for the company’s other two business segments, Sam’s Club and International. Other major retailers like Target, Sears and Macy’s have been reducing advertising spending. At the end of 2008, Wal-Mart (unlike its largest retail rivals) reported increases in same-store sales.

According to AdAge.com, Wal-Mart is well-positioned to emerge as one of retail’s largest advertising spenders. Compared to its rivals, Wal-Mart’s total net sales (Wal-Mart, Sam’s Club and International) are enormous ($344,992,000,000 for the year ended December 31, 2007). Consequently, its adspend represents a relatively small fraction of its total net sales versus its smaller rivals. Furthermore, the company has been extremely successful in growing its year-over-year total net sales through acquisitions, global store expansion programs and same-store sales increases, so the percentage increase in total net sales has outpaced the percentage increase in adspend. Wal-Mart (including Sam’s Club and International) spent just 0.006% of its total net sales on advertising, far less than competitors Target, Sears and Macy’s. Moreover, Wal-Mart’s purchasing power due to its size and financial strength probably resulted in its ability to negotiate for highly advantageous rate-card rates. Nevertheless, in absolute terms the company has spent more for advertising in 2007 and 2008 than in previous years.

Only time will tell if the retail leviathan will further increase its measured adspend in 2009. The retail industry is extremely competitive, and Wal-Mart incurs strong sales competition from other discount, department, drug, variety and specialty stores and supermarkets, many of which are national, regional or international chains, as well as internet-based retailers and catalog businesses, so further adspend hikes seem logical. However, Wal-Mart has recently appointed Mike Duke, vice-chairman of Wal-Mart International, to succeed retiring CEO Lee Scott effective February 1, 2009. According to CNNMoney.com, Duke might be more inclined to limit U.S. advertising spend increases and focus more on Wal-Mart’s less than stellar international operations, where Duke has substantial expertise.  For example, during 2006, Wal-Mart terminated operations in Germany and South Korea, stating that it "was the right decision, and we have redeployed resources from those countries to other critical areas of our International division." Twenty-nine percent of the company's portfolio is located in Asia and Europe; twenty-two percent of total net sales were derived from stores operating in Asia and Europe.

Still, loyal Wal-Mart customers found good reasons to shop at the over 7,200 supercenters, discount stores, Sam’s Clubs, neighborhood markets and International stores that comprised the Wal-Mart retail system at the end of 2008. The company’s operating strategy of low prices and aggressive marketing appealed to a broad spectrum of consumers during the holiday shopping season, as more people shopped at Wal-Mart than at Target, Sears and Macy’s combined on Black Friday 2008, which was the day after Thanksgiving.

By Darrell Woody

Gazette Staff Writer