Wal-Mart Launches Rare Newspaper Ad Blitz

Wal-Mart Stores Inc. (WMT), hurt by sluggish sales over the Thanksgiving holiday weekend, on Friday launched a rare advertising blitz in newspapers across the United States touting price cuts.

The No. 1 U.S. retailer took out full-page color ads in newspapers in as many as 50 markets to promote price reductions of up to a third on products ranging from portable DVD players, appliances, tools, to stuffed Elmo toys.

The ad campaign follows poor November sales reported by the retailer on Thursday. Wal-Mart does not typically advertise in newspapers, preferring to promote its products in its monthly circulars and on some television spots.

Media analysts said the ad campaign could be good news for newspaper publishers, who have struggled with an unsteady advertising market, if it marks the beginning of a longer term strategy by the retail giant to advertise more regularly in print.

"If Wal-Mart feels the need to begin to supplement its marketing programs with print advertising, it will mean a big new customer for newspapers and would undoubtedly spark a response from other discounters," said Edward Atorino, a publishing analyst at Fulcrum Global Partners. "It could breathe an unexpected new life into retail advertising."

The ads are running in papers, including The Dallas Morning News (search), published by Belo Corp. (BLC).

Wal-Mart spokesman Gus Whitcomb said the discounter sought to reassert its position as an "Every Day Low Price" shopping destination through the ad blitz. Retail analysts say Wal-Mart had opted to be less promotional over Thanksgiving, a step that has since backfired and alienated some of its die-hard shoppers.

According to a research report from Deutsche Bank publishing analyst Paul Ginocchio, Wal-Mart was launching the newspaper ad blitz in 15 major markets. The New York Times said the ads were appearing in about 35 secondary markets as well.

Wal-Mart will follow up the newspaper ads with TV and radio commercials this weekend, Ginocchio wrote.

Emme Kozloff, a retail analyst at Bernstein & Co. Inc., said the ad blitz was primarily an attempt to boost Wal-Mart's store traffic. It also could be a sign Wal-Mart was possibly sitting on massive stocks of holiday inventory, Kozloff said.

Commenting on the likely outcome of the price cuts, Kozloff said in a research report that "the gross margin is potentially vulnerable to compression if Wal-Mart is forced to cut more item prices in order to drive enough traffic through its doors to sell through inventory."

Bob Gordman, managing executive director of strategic planning at Meridian Inc. — a marketing and merchandising strategy firm — said the effectiveness of the ad blitz could be constrained by a lack of planning.

"Our experience would indicate that the best advertising is pre-planned and is part of the total strategy for the company," he said. "Obviously it's a quick reaction ... but their strength is certainly not in print advertising."

He said one print ad he saw early on Friday, touting "Wal-Mart — why wait for rebates," reinforced a view "they are executing a strategy that they have little experience with."

Unlike traditional department stores, Wal-Mart has long eschewed print ads. Advertising from retailers is a key revenue source for newspapers and analysts have said Wal-Mart's increasing dominance in the retail industry could spell trouble for many publishers.

Ginocchio said Wal-Mart spends much less than other retailers on advertising overall and it allocates only 5 percent of its ad budget to newspapers, compared with 50 percent or more for other retailers. Of the $375 million Wal-Mart spent on ads last year, only about $15 million of that went to newspapers, according to Ginocchio's estimates.