I don't sell in Walmart, so why should I care?
At first glance, it might seem like this news has nothing to do with you. You're not Walmart or one of their major competitors. You're not one of Walmart's suppliers. About the most business you do with them is stocking up on paper towels and Sam's Choice sodas, right? Well, as goes Walmart, so goes the rest of retail, and that's what I want to focus on. You see, one of the most important paragraphs in the whole AdAge article (and it was quite a good article), was this:
To be sure, there's no evidence any major marketers have come close to meeting [Walmart's new pay-to-play] demand. If they did, they would either have to make proportionate concessions to other retailers -- essentially turning their entire marketing budgets over to the retail trade -- or risk violating the Robinson-Patman Act, which requires manufacturers to treat retailers proportionately in trade deals. (emphasis mine)Putting aside the ridiculous implications of the ancient and very Atlas Shrugged-esque Robinson-Patman Act, product marketers and retailers have been trading blows over advertising since time immemorial. So the basic gist of Walmart's plan is nothing new. What's new and different is the sheer scale of the thing, which could put literally billions of advertising dollars in the hands of the retail giant, effectively turning them into one of the biggest advertising agencies in the world. Should that come to pass, the key prediction of the big POPAI/Saatchi & Saatchi X study on private label brands from back in 2007 would come true: the channel, not the brand manager, would control the brand.
Rise of the retailer-as-agency
It doesn't seem too unnatural for the channel -- the means by which a product is sold -- to necessarily have some impact on how that product is sold. However, some shopper marketing firms, retailers and digital signage network pundits prefer to push this concept to the extremes, declaring that the retail "channel" will soon be a medium into and of itself. I've never understood this, since a retailer's primary goal will always be to sell product, and any attempt to sell media "space" separately from the product would likely cause conflicts between these goals. Leon Nicholas, director of retail insights at WPP consulting firm Management Ventures, cleared up a lot of that potential confusion by declaring the retailer might be an agency, not a channel. That makes a lot more sense to me: in addition to preferred slotting and endcap allowances, retail venues have the ability to dole out brand access to a huge number of other "media" like posters, POP displays, shelf talkers, digital signs, in-store audio programs, circulars, and who knows what else. And even small mom-and-pops and modest store chains advertise on external media like TV, print, radio and the Internet. If a new form of trade promotion requires product manufacturers to "pay to play," and that money isn't going directly into the retailer's coffers (which it certainly shouldn't), then suddenly the retailer does start to look very much like an agency, deciding where to spend marketing dollars, which media to invest in, and which venues, locations and air times to secure. And if ad agencies are still having trouble understanding digital out-of-home, retailers could be in a position to attract additional ad dollars simply by virtue of understanding the retail-centric media options better than regular agencies do.
Creating agencies out of thin air
As always, Walmart is a fringe case. They basically commanded Saatchi & Saatchi X to exist, and it did. Then, when it came time to roll out the Smart Network, they once again built an ad sales agency out of thin air (Studio2). If the cost-supplement initiative really takes off (and the Robinson-Patman issue gets resolved), I could easily see the same thing happening, with a new entity formed to allocate and spend the billions of dollars pumped in via product makers. Not too long ago, Walmart said in-store media is their most important channel, so who knows how far they'll take it when someone else is footing the bill.
What's the most likely outcome here? As Walmart and others heap more trade promotion fees on their suppliers, the overall percentage of ad dollars they control could increase dramatically. This raises several questions:
Will retailers (or at least the largest of them) continue to manage the advertising funds themselves, as they have in the past? Will existing agencies step up to the plate with services tailored to these growing programs? Or, will entirely new entities be spawned for the sole purpose of handling retailer-specific spending accounts?
Comments
RSS feed for comments to this post