1. Prepared by: ANNUAL SHOPPER REVIEW: WALMART Robin Sherk Senior Analyst October2012 Rachel McGuire Senior Analyst

2. © Copyright 2012 Kantar Retail Executive Summary: Walmart Annual Update Walmart’s biggest formats are not driving shopper penetration growth. Though nearly two-thirds (65%) of primary household shoppers shop its core Supercenter and Discount formats, there has been a continuous erosion in Walmart shopper penetration since 2008. Moreover, one in five (22%) of Walmart’s current shoppers report shopping at Walmart less often than last year. Many of these shoppers are shopping less in general, reminding the retailer that a sizable portion of its audience (approximately one in five) still feel that their financial situation is deteriorating. Others shopping less at Walmart are shopping more at competitors, including other grocers, Target, Dollar General, and Amazon. Basket sizes are increasing, though emphasis of wide assortment is double- edged. Walmart shoppers have noticed the broadened assortment this year. Average basket sizes and trip frequency have risen since 2010, with grocery serving as the primary trip driver. Conversion for general merchandise still lags. Given the wider assortment, shoppers also feel that the in-store experience has weakened recently as they report out-of-stocks and more difficulty shopping the box. Viewed broadly, the retailer’s one-stop affirmations are in line with what its shoppers find important relative to other factors, but this proposition is becoming less of a motive to shop at Walmart over time. 2 Source: Kantar Retail analysis

3. © Copyright 2012 Kantar Retail Executive Summary: Continued Price leadership still needs support. Despite Walmart’s intense marketing efforts since early 2011, its shoppers tend to disagree about whether the value offered by Walmart is improving. At the same time, its shoppers increasingly value receiving a good deal in addition to seeking Walmart’s everyday low price (EDLP) proposition. Shopper reach is steadily growing at Neighborhood Market. The Neighborhood Market shopper base is slightly different than other Walmart shoppers, skewing younger, more urban, and Hispanic. The grocer also draws shoppers on a different type of trip than does the supercenter, as it better serves quick, fill-in trips. Meeting the needs of this distinct audience will gather increased attention as management rapidly expands its store footprint. Walmart.com has opportunity to reach Walmart shoppers. Even though 45% of Walmart shoppers also shop monthly at Amazon, only 22% of Walmart shoppers shop monthly at Walmart.com. Moreover, Walmart’s website disproportionately captures young families, a crucial audience for the retailer to maintain over time. 3 Source: Kantar Retail analysis

4. © Copyright 2012 Kantar Retail Table of Contents Shopper Penetration –Penetration by channel, banner –Penetration by demographics Shopper Motivations –Financial concerns –Spending intentions –Reasons to shop less –Motives to visit Shopping Behaviors –Trips, trip type, and baskets –Where else Walmart store shoppers shop Brand Position –Perceived price leadership –Assortment and store of the community Growth Platforms –Neighborhood Market –Online Appendix –Category preference, change over time 4

5. © Copyright 2012 Kantar Retail Shopper Penetration Walmart US has 3,925 stores, the majority of which are supercenters or discount stores. The total includes an increase of 224 Supercenter and Discount store locations between early 2007 and the end of 2011. Given the expanding footprint, Walmart’s shopper reach has evolved in recent years: 5 Source: Kantar Retail analysis However, Supercenter and Discount store weekly shopper penetration has trended downward since 2007. At the same time, Neighborhood Market and online penetration is trending upward—underscoring the growth in these emerging formats. Walmart’s shopper base tends to be lower income, rural, and suburban families, though it has made gains with upper income shoppers and urban dwellers in recent years.

6. © Copyright 2012 Kantar Retail Mass Channel Weekly Shoppers Have Declined 6 Most core retail channels have witnessed a reduction in weekly shoppers since 2007, though value discounters and drug stores are starting to rebound. Meanwhile, mass merchandisers continue to wane. Source: Kantar Retail ShopperScape®, October 2007, 2008, 2009, 2010 and 2011 Fewer weekly shoppers across channels indicates a broader trend of shoppers spreading their purchase needs across stores, indicating decreased allegiance to particular formats.

7. © Copyright 2012 Kantar Retail Though Walmart’s Newer Formats Show Growth 7 While the shopper base at Walmart’s big boxes shrinks, its penetration is growing at Neighborhood Market and Walmart.com. Given this trend, the retailer is both shoring up its core and investing in these rising opportunities. Source: Kantar Retail ShopperScape ®, January 2007- July 2012

8. © Copyright 2012 Kantar Retail While the Families that It Attracts Evolves 8 Traditionally, Walmart’s base has been lower income, rural families with children. While the retailer still over-indexes with these groups, it also is attracting more urban, younger, and higher income shoppers over time. Source: Kantar Retail ShopperScape ® April, May and June of 2012, 2011 and 2007 Note: Grey highlighting on indicates statistically significant diff (95% CL).

9. © Copyright 2012 Kantar Retail Shopper Penetration –Penetration by channel, banner –Penetration by demographics Shopper Motivations –Financial concerns –Spending intentions –Reasons to shop less –Motives to visit Shopping Behaviors –Trips, trip type, and baskets –Where else Walmart store shoppers shop Brand Position –Perceived price leadership –Assortment and store of the community Growth Platforms –Neighborhood Market –Online Appendix –Category preference, change over time 9 Table of Contents

10. © Copyright 2012 Kantar Retail Shopper Motives Given the eroding penetration at its core Supercenter and Discount formats, understanding shoppers’ financial security and motives around shopping Walmart is necessary to gain perspective on the issue: 10 Source: Kantar Retail analysis Many Walmart shoppers feel that their financial situation is improving and their spending intentions are on par with others. However, Walmart shoppers also are more sensitive to price pressures, such as food inflation. Of the Walmart shoppers shopping at the retailer less often, they’re generally shopping less often overall. Motives for Walmart shoppers to shop at the retailer involve low prices and the one-stop shop. Over time, the one-stop shop is decreasing in importance as shoppers increasingly want a deal.

11. © Copyright 2012 Kantar Retail Financial Concerns Are Easing versus Last Year Q2 2011Q2 2012 Job security Much better/somewhat better off 18%19% No change from last year 62%61% Somewhat worse/much worse off 20%21% Household Income level Much better/somewhat better off 24%28% No change from last year 48%46% Somewhat worse/much worse off 28%26% Credit card debt Much better/somewhat better off 26%25% No change from last year 56% Somewhat worse/much worse off 18% Monthly mortgage/car payments Much better/somewhat better off 20%21% No change from last year 67%66% Somewhat worse/much worse off 13% Worth of investments Much better/somewhat better off 24%21% No change from last year 53%56% Somewhat worse/much worse off 22%23% Value of home Much better/somewhat better off 15%18% No change from last year 56%58% Somewhat worse/much worse off 30%24% 11 Assessments of income and home value have improved since 2011, while views of credit card debt, mortgage & car payments, and investments are stable. However, a sizable group still says their situation is worsening. Source: Kantar Retail ShopperScape ®, April–June 2011 and 2012 Household Financial Health of Walmart Shoppers Note: Shading indicates significant year-to-year difference (90% CL)

12. © Copyright 2012 Kantar Retail Though Shoppers Still Very Sensitive to Prices All Shoppers Walmart Shoppers Deal-Seeking Using more coupons 49%52% Buying whatever brand is on sale 33%35% Planning meals around what’s on sale 28%30% Buying whatever brand I have a coupon for 22%23% Shopping around to “cherry pick” best deals 18%21% Limiting Not buying items that seem too expensive 46%48% Buying fewer items on impulse 45%49% Sticking to list 42%45% Buying more products to cook from scratch 23%24% Buying fewer prepared foods 19%21% Buying fewer gourmet and specialty items 17%19% Trading Down Buying more private brand 32%36% Buying less expensive versions of products 27%31% Buying less expensive cuts of meat 24%27% Buying canned/frozen instead of fresh produce 12%13% None of these 12%9% 12 Last year, Walmart shoppers were more likely than others to notice rising food costs and take action. Looking to 2013, the base will likely respond similarly to the food inflation expected as drought conditions affect prices. Strategies Using to Offset Rising Food Prices Source: Kantar Retail ShopperScape ®, November 2011 Note: Shading indicates significant difference between all shoppers and Walmart shoppers (90% CL)

13. © Copyright 2012 Kantar Retail Overall, Spending Plans Steadily Are Improving 13 On par with all U.S. primary household shoppers, Walmart shoppers are generally holding or increasing their near-term spending intentions versus the same time last year. Source: Kantar Retail ShopperScape ®, January 2009–June 2012 Note: No significant differences between all shoppers and Walmart shoppers (90% confidence level)

14. © Copyright 2012 Kantar Retail But One in Five Are Going to Walmart Less Often 14 About half of the shoppers going to Walmart less often are shopping less overall. Many are going to supermarkets more often. Walmart also is losing its higher income shoppers to Target, middle income shoppers to clubs, and lower income shoppers to dollar stores. Source: Kantar Retail ShopperScape® May 2012 Among the 22% of Walmart shoppers who are shopping Walmart less often

15. © Copyright 2012 Kantar Retail Walmart’s Shoppers Value Savings, One-Stop 15 Relative to others, Walmart’s base is more focused on spending as little money as possible and a one-stop shop. They are slightly less focused on high-quality, though they equally appreciate “stress-free” shopping. Source: Kantar Retail ShopperScape ®, January 2012 Arrows indicate significant difference between all shoppers vs. Walmart shoppers (90% confidence level)

16. © Copyright 2012 Kantar Retail Higher-Income Shoppers Appreciate the Deal 16 Walmart’s higher-income shoppers focus more on the experience: having fun, finding new & high-quality items, and getting a deal. The lower income focus more on employee interaction, a one-stop shop, and spending less. Functional Experiential Source: Kantar Retail ShopperScape ®, January 2012, Kantar Retail analysis Notes: Boxes indicate significant difference between Haves and Have Nots (90% confidence level) Definition of ‘Have Nots’: Annual household income of less than $65,000; ‘Haves’ is income $65,000 +

17. © Copyright 2012 Kantar Retail Fewer Choosing Because of One-Stop Appeal 17 Source: Kantar Retail ShopperScape®, Feb/May/Aug 2007 and Feb/May/Aug 2012 Compared with 2007, Walmart’s grocery/consumables shoppers are less likely to chose Walmart because of its one-stop shop propositions. It’s now less important than sales/promotions. Shoppers continue to value EDLP.

18. © Copyright 2012 Kantar Retail Table of Contents Shopper Penetration –Penetration by channel, banner –Penetration by demographics Shopper Motivations –Financial concerns –Spending intentions –Reasons to shop less –Motives to visit Shopping Behaviors –Trips, trip type, and baskets –Where else Walmart store shoppers shop Brand Position –Perceived price leadership –Assortment and store of the community Growth Platforms –Neighborhood Market –Online Appendix –Category preference, change over time 18

19. © Copyright 2012 Kantar Retail Trips, Basket, & Cross-Shopping After experiencing decreased customer traffic in 2010, Walmart reinforced its one-stop, low-price brand proposition in an effort to reverse this trend. At the same time, its shoppers are generally starting to feel better about their income and home values, helping to shore up near-term spending confidence. In this environment, the trip to Walmart is evolving: After trips bumped up in 2011, the frequency settled to channel norms in 2012. At the same time, average basket sizes have steadily increased. The retailer continues to garner approximately as many trips for fill-in and immediate use as it does stock-up occasions. Grocery continues to be the primary trip driver. Amazon has risen as a significant contender in recent years, becoming the retailer most commonly cross-shopped by Walmart shoppers. 19 Source: Kantar Retail analysis

20. © Copyright 2012 Kantar Retail Though Leveling Off, Trips Are Up since 2010 20 Source: Kantar Retail ShopperScape ®, Feb/May/Aug/Nov 2010 and 2011, Feb/May/Aug 2012 Note: arrows indicate significant year-to-year difference (90% confidence level) On par with the mass merchandiser & grocery channel averages, Walmart’s shoppers visit the retailer approximately once a week. This indicates that Walmart serves as a destination for shoppers fulfilling routine needs.

21. © Copyright 2012 Kantar Retail Trips Are Generally for Stock-Up Occasions 21 Nearly 40% of the grocery and consumables trips to Walmart are for stocking up. However, trips for fill-ins and immediate use also are very common: combined they account for 42% of the occasions. Source: Kantar Retail ShopperScape ®, May/Aug/Nov 2010, Feb/May/Aug/Nov 2011, Feb/May 2012 Stock-up Special occasion Immediate use Fill-in Browsing Buy coupon items Buy sale items

22. © Copyright 2012 Kantar Retail The Basket Leans to Grocery, Consumables 22 $88.30 $95.60 Source: Kantar Retail ShopperScape ®, Feb/May/Aug/Nov 2010 and 2011, Feb/May/Aug 2012 $101.99 Walmart’s basket size continues to expand across grocery and general merchandise. Though most shoppers purchased food on their most recent trip to Walmart, only 26% bought general merchandise—indicating opportunity to increase shopper conversion across the box.

23. © Copyright 2012 Kantar Retail Fresh Is the Dominate Department Shopped 23 Fresh food has risen to be the #1 department shopped at Walmart. Meanwhile the other top 10 categories have seen eroding shopper penetration since 2009. Source: Kantar Retail ShopperScape ®, May 2009, May 2010, May 2011, and May 2012 Many shoppers shop relatively few categories at Walmart, underscoring its need to encourage shoppers to “cross the box” to general merchandise

24. © Copyright 2012 Kantar Retail –More Walmart shoppers are now cross- shopping Amazon.com and drug stores Kohl’s also is gaining traction Dollar channel holding steady –Less cross-shopping of category specialists (particularly The Home Depot and Best Buy) –Less cross-shopping of Sam’s Club, Kmart/Sears, Big Lots, and JCPenney Cross Shopping Rises Starkly for Amazon 24 Source: Kantar Retail ShopperScape ®, January-July, 2007 and 2012 Underscoring the heightened competition from online, Amazon is now the #1 retailer where Walmart shoppers also shop. 14% of Gen Y Walmart Moms are also members of Amazon Mom, Amazon’s auto-replenishment program targeted to mothers of infants and toddlers. This underscores how today’s young families shop differently than their parents did.

25. © Copyright 2012 Kantar Retail Table of Contents Shopper Penetration –Penetration by channel, banner –Penetration by demographics Shopper Motivations –Financial concerns –Spending intentions –Reasons to shop less –Motives to visit Shopping Behaviors –Trips, trip type, and baskets –Where else Walmart store shoppers shop Brand Position –Perceived price leadership –Assortment and store of the community Growth Platforms –Neighborhood Market –Online Appendix –Category preference, change over time 25

26. © Copyright 2012 Kantar Retail Brand Position: Merchandise & Marketing Walmart is known for carrying a broad, one-stop shopping offer at an everyday low price to help shoppers “save money” and therefore “live better.” In recent years, though, the retailer has faced challenges on both of these fronts: 26 Source: Kantar Retail research and analysis Assortment: In 2009 and 2010, Walmart “rationalized” SKUs, cutting about 10% of the items in its box. By 2011, the retailer recognized shoppers’ frustration and added back the assortment by the end of the year. This year, Walmart has further focused on the shopper by emphasizing local, “Store of the Community” products. While shoppers have generally noticed the broadened assortment, they also see the corresponding drawbacks (i.e., out of stocks). Lowest prices: Walmart has faced price leadership challenges recently. In Kantar Retail’s semi-annual pricing study, Target’s basket has been equal to or less than Walmart’s basket in half of the assessments since 2009. Starting in 2011, and augmented in 2012, Walmart has aggressively asserted its price position by promoting Ad Match and “see for yourself” savings messages and investing in gross margin to lower prices. Today, its shoppers still disagree whether the value that Walmart offers is improving. Walmart’s core principles examined in this section:

27. © Copyright 2012 Kantar Retail Walmart’s Price Leadership Faces Challenges 27 More Walmart shoppers disagree that Walmart’s value has improved over the past year than agree. Seniors are particularly skeptical, while more Gen Y shoppers feel that the value is better. Source: Kantar Retail ShopperScape®, May 2012 *Among Walmart shoppers only Anticipate that Walmart will continue to ramp up its Ad Match and “See for yourself” local price leadership messages Note: Yellow arrows indicate significantly greater/lesser vs. total (95% confidence level)

28. © Copyright 2012 Kantar Retail But Shoppers Notice the Widened Assortment 28 Source: Kantar Retail ShopperScape®, May 2012 Nearly one in three shoppers noticed the broadened assortment, with Gen Y and Gen X shoppers particularly attentive. However, only one in five noticed more local items, suggesting opportunity to further assert Store of the Community. *Among Walmart shoppers only Note: Yellow arrows indicate significantly greater/lesser vs. total (95% confidence level)

29. © Copyright 2012 Kantar Retail Greater Attention to the Experience Needed Too 29 With the broadened assortment, about one-third of shoppers also are noticing more out-of-stocks. More than one in four shoppers also feel that the ease of shopping at Walmart has declined. Source: Kantar Retail ShopperScape®, May 2012 Note: Yellow arrows indicate significantly greater/lesser vs. total (95% confidence level)

30. © Copyright 2012 Kantar Retail Table of Contents Shopper Penetration –Penetration by channel, banner –Penetration by demographics Shopper Motivations –Financial concerns –Spending intentions –Reasons to shop less –Motives to visit Shopping Behaviors –Trips, trip type, and baskets –Where else Walmart store shoppers shop Brand Position –Perceived price leadership –Assortment and store of the community Growth Platforms –Neighborhood Market –Online Appendix –Category preference, change over time 30

31. © Copyright 2012 Kantar Retail Growth Platforms Neighborhood Market: In October 2011, Walmart announced that it was ready to roll out this format, increasing its store base by about 50% in 2012. This announcement came as the banner posted ~5% comparable store sales growth and customer traffic gains, and reached the returns that Walmart demands. From a shopper insights perspective, the format has rising penetration and a distinct shopper profile: more urban, younger, and Hispanic. Walmart.com: In April 2012, Walmart asserted that one of its corporate strategies is “winning in global eCommerce.” Its recently created @WalmarLabs division has focused on improving Walmart.com’s platform in 2012 by introducing a new product search engine, called Polaris, and advancing the website’s pricing position and search engine optimization. Though Walmart shoppers shop online and Walmart.com’s penetration is steadily growing, the website has opportunity to develop its reach among Walmart shoppers. 31 Neighborhood Market and Walmart.com shoppers Source: Kantar Retail research, store visits, and analysis Recognizing the growth of smaller formats and online shopping, Walmart is advancing its grocery banner and eCommerce platforms:

32. © Copyright 2012 Kantar Retail Neighborhood Market Penetration Is Growing 32 Source: Kantar Retail ShopperScape ®, January 2011 – July 2012, Kantar Retail analysis With a footprint in about one-third of states, this format is steadily increasing its shopper reach with a 1 percentage point gain in July, year over year. This coincides with the retailer’s reported ~5% comparable store sales gains in mid 2012, well above Walmart US’s average.

33. © Copyright 2012 Kantar Retail And the Shopper Base Is Slightly Different 33 *in states where Neighborhood Market was present as of January 2011 Source: Kantar Retail ShopperScape®, Jan-July 2012 Compared to the Supercenter, Neighborhood Market shoppers are younger, more urban, and more likely to be of Hispanic origin. Given that Walmart traditionally does not over-index with these shoppers, Neighborhood Market should help the retailer widen its audience base

34. © Copyright 2012 Kantar Retail The Basket also Is Quite Lucrative 34 $100.02 $90.52 9.5% diff Avg Trips per Month: 5.2 6.9 Source: Kantar Retail ShopperScape ®, Aug/Nov 2011 and Feb/May/Aug 2012 The average Neighborhood Market basket is only about 10% less than the Supercenter basket, and the trip frequency reaches 1–2 times a week. The spend on general merchandise is fairly similar across formats. Note that the presence of general merchandise varies widely in this format, with some stores offering entertainment and home areas

35. © Copyright 2012 Kantar Retail Neighborhood Market Shares Its Shoppers with a Wide Range of Retailers … 35 *in states where Neighborhood Market was present as of January 2011 Source: Kantar Retail ShopperScape®, Jan-July 2012, Kantar Retail analysis Competitors that Neighborhood Market particularly overlaps and over-indexes with: … suggesting that it serves as more of a complement vs. destination format

36. © Copyright 2012 Kantar Retail Two-Thirds of Walmart Shoppers Shop Online 36 Walmart shoppers are equally as likely to report shopping and purchasing online as others. However, most are not frequenting Walmart.com to do so, indicating opportunity to connect the in-store and online experience. Source: Kantar Retail ShopperScape®, July 2012, June 2011- August 2012 Note: no statistically significant difference between all shoppers and Walmart shoppers. 22% of Walmart shoppers are monthly shoppers of Walmart.com, much lower than the proportion that regularly shop Amazon.com!

37. © Copyright 2012 Kantar Retail Penetration on Walmart.com Is Steadily Rising –Unique trips to Walmart.com continue to gain traction, rising 12.3% year-over-year. Comparatively, Target has witnessed year-over-year declines. –Furthermore, Walmart.com’s unique shopper counts increased at a faster pace, growing 19.6% year over year. Walmart’s lead over Target is becoming more pronounced, while Amazon is holding its lead over Walmart. 37 Though Walmart.com is the #1 most frequently shopped website among those operated by brick & mortar retailers, Amazon captures more than double the unique visits and nearly two-thirds more shoppers than Walmart.com. Source: Compete, Kantar Retail analysis

38. © Copyright 2012 Kantar Retail And Most Often Buy Apparel, Entertainment 38 Source: Kantar Retail ShopperScape ® July 2012, Kantar Retail analysis Though, Walmart’s shoppers also shop for less expected categories online, including beauty, OTC, toys, and pet food. Over time, Kantar Retail expects more of these categories to be purchased online. Whether or not your categories are widely purchased online, it evolves the store’s trip-drivers: Consider which of your category's co-purchased items are moving online faster, anticipating how this will affect in-store navigation and your promotions.

39. © Copyright 2012 Kantar Retail Walmart.com’s Core Shopper Is Young Families 39 Source: Kantar Retail ShopperScape®, Jan-July 2012 Relative to all Walmart shoppers, Walmart.com shoppers are: Younger (25-34 yrs old) Have children in the household Less likely to be Hispanic Walmart.com shoppers tend to be younger and are more likely to have children at home than other Walmart shoppers, making them a desirable demographic.

40. © Copyright 2012 Kantar Retail –Walmart.com cross-shopping down from 2007: Target.com Category specialists (Best Buy & office supply) –Walmart.com cross-shopping up from 2007: Amazon.com Department stores (Macy’s, Kohl’s) Drug stores Apple Its Biggest Online Competitor Is Amazon 40 Source: Kantar Retail ShopperScape ®, January – July, 2012 and 2007, Kantar Retail analysis More than two-thirds of Walmart.com shoppers also shop Amazon. As this is more than twice the proportion that also shop Target.com, Amazon has become the primary online contender for Walmart shoppers.

41. © Copyright 2012 Kantar Retail Table of Contents Shopper Penetration –Penetration by channel, banner –Penetration by demographics Shopper Motivations –Financial concerns –Spending intentions –Reasons to shop less –Motives to visit Shopping Behaviors –Trips, trip type, and baskets –Where else Walmart store shoppers shop Brand Position –Perceived price leadership –Assortment and store of the community Growth Platforms –Neighborhood Market –Online Appendix –Category preference, change over time 41

42. © Copyright 2012 Kantar Retail Appendix Demographic Profiles by Department Shopped: Shopper Profiles: Shoppers Who Indicate Walmart U.S. Is Store of Preference for Grocery/HBC Shopper Profiles: Shoppers Who Indicate Walmart U.S. Is Store of Preference for General Merchandise Penetration by Department/Category: Did Most Past Month Spending on Grocery at Walmart Did Most Past Month Spending on Health and Beauty Care at Walmart Did Most Past Month Spending on Electronics and Entertainment at Walmart Did Most Past Month Spending on Apparel, Shoes and Accessories at Walmart Did Most Past Month Spending on Home Improvement Products at Walmart 42 The following charts are appended in the associated Excel file on KRIQ. Click here to download the Excel file.Click here to download the Excel file Source: ShopperScape®, Kantar Retail analysis

43. © Copyright 2012 Kantar Retail 245 First Street Floor 10 Cambridge, MA 02142 F +1 617 499 2723 www.KantarRetailiq.com Robin Sherk T +1 212 896 8191 Senior Analyst Robin.Sherk@kantarretail.com