Wal-Mart's share of shoppers overwhelms Atlanta market - Babson College Retailing Research Report

Discount Store News, August 2, 1993

When Babson College did its first Atlanta retail study in 1984, Wal-Mart had just entered the market and its share of primary shoppers was 2%. A year later, Wal-Mart had an 8% share. By 1993, Wal-Mart dominated the market with a 53% share of shoppers.

Of the three markets, the historical perspective available in the Atlanta study clearly shows the growth and dominance of Wal-Mart and is indicative of Wal-Mart's expansion and market position in other cities throughout the country.

In Atlanta, Wal-Mart's share of primary shoppers is now almost three times that of Kmart's, although it has about half as many stores.

During the 1984 to 1993 time frame, Kmart's share of primary shoppers had dropped from 36% to only 19%.

When Dayton Hudson (Target's parent) took over the Richway stores in Atlanta they had 33% of primary shoppers in the area, but were already losing market share. These 14 Target stores are down to a 12% share.

According to the report, not only do shoppers prefer Wal-Mart, but its primary shoppers actually spend more. Wal-Mart's primary shoppers spend about $250 to $275. Primary shoppers of Kmart and Target in Atlanta spend just under $200. As is true throughout the country, Wal-Mart now has the dominant low-price image in Atlanta and is approximately 15 times stronger than Kmart on the price ratio. Although Kmart runs four times the number of promotions as Wal-Mart, Wal-Mart's image for low prices during special promotions and sales in more than twice as strong as Kmart's.

According to Tigert, some of the research suggests "that neither Kmart nor Target can return to upward momentum unless they improve their market image on price, value and assortment."

Perhaps in response to Wal-Mart's growth in the market, Target did test an EDLP strategy in Atlanta in 1989, but did not roll it out.

There are also things Wal-Mart can do in this market to improve its stance. "Wal-Mart needs to improve on locations (build a few more stores), quality and helpful, friendly service. Wal-Mart should also consider putting a task force on the apparel departments with a view toward strengthening quality and assortment in clothing," said Tigert.

Atlanta consumers did rate Wal-Mart high in a number of product areas. Wal-Mart's points are much higher than Kmart's on average, but Kmart does manage a higher number of mentions in men's dress shirts, men's furnishings, men's casual knit shirts, jeans for men and lawn and garden supplies. Target's ratings are surprisingly low, according to the Babson College study, suggesting that the chain does not have high customer loyalty among product lines.

The Atlanta study found that Wal-Mart shoppers are much less driven by convenience than they were in 1985, and three times more likely to be driven by low price. They are also more likely to say that assortment is critical. Target shoppers are more price-conscious than Kmart shoppers but less so than Wal-Mart's, according to the report. The role of sales/promotions has declined dramatically, evidence that consumers understand that Wal-Mart and Kmart are different, said Tigert. Consumers are aware that Wal-Mart is an EDLP retailer and that Kmart is a promotional retailer, he said.

When asked which chain provides the best value for the money, Wal-Mart garnered the most mentions. Kmart captured the larfest share of mentions on worst value for the money.

Judging store attributes by share of mentions, Kmart does well in Atlanta on easiest to get to, most helpful advertising, easy to return items and catchy advertising.

Wal-Mart's highest attributes included lowest everyday prices, most involved in the community, best value for the money, assortment of H&BC cosmetics, overall assortment, and assortment of housewares.

Target's image rating in the total sample is stronger than its market share on 14 store dimensions. Target's strengths are in store layout and design and fast checkout. The chain has very high marks on signage, lighting, layout/design, and clean/well maintained stores.

"What consumers are saying is that these are great looking stores, but they don't have the best value ... We begin to build a feeling about Target that it is caught between the full-line low-price discounters and the more narrowly focused apparel retailers such as JCPenney, Uptons and Mervyn's," said Tigert.

Wal-Mart is the market leader, both in share of primary shoppers and in market image on the critical dimensions that drive store choice. Wal-Mart's product focus is more on the hard goods side with weakness in apparel, quality and service, said Tigert.

"Wal-Mart is nibbling away at the fringes with a strong focus in children's wear," he said. "It is a big winner in hard goods." For a few key product lines Wal-Mart loses the number one position to category killers such as Circuit City and Sears for TV, stereos and VCRs.