Naming In The News

Research: China's Recall Woes Bad for Wal-Mart

Study shows fallout from many recalls is affecting nation's largest retailer.

By Eric Newman,
September 10, 2007

Last week 675,000 Barbie accessories were recalled as the pile of tainted products from China grows into a mountain. While this is obviously bad news for Barbie-maker Mattel, the ill will from the plague of product recalls has also begun to affect Wal-Mart, according to a new study.

The survey, published by Strategic Name Development, a marketing consultancy based in Minneapolis, was based on responses from 503 participants in an online panel from Aug. 22-23. The sample set was balanced by gender, geography, income and age to produce results at a 95% confidence.

It asked respondents to answer questions regarding their perceptions of both Wal-Mart and Target following the recalls.

Only 40% of respondents felt that they could trust Wal-Mart to protect them from products made in China. The study further showed that 39% of respondents said they were more fearful of buying products from Wal-Mart, versus 22% for Target.

As far as public image, 56% said they felt Wal-Mart was "more interested in profits than people," compared to 41% who felt that way about Target.

Because the low-cost retailer is associated with regularly providing products from China, respondees offered that Wal-Mart "sold out the American consumer just to make a buck" and "It's been my policy to avoid all things associated with China, including Wal-Mart... I haven't been [there] in three months and I used to go weekly."

Despite the recalls, Wal-Mart asserted it's business is fine. "We haven't seen evidence of such findings at our registers," said Melissa O'Brien, a Wal-Mart rep. "Wal-Mart has been the only retailer to date to publicly announce a new safety net check and test program for toys-which we know parents have reacted favorably to-as an effort to step above and beyond."

She added that the company's own research has shown that, in cases of product safety, consumers laid responsibility at the feet of manufacturers and government before blaming retailers.

Still, the damage has been done, according to some analysts, despite Wal-Mart's efforts and Beijing's announcement last week that it will implement a new food and toy recall system to crack down on poor quality products and unlicensed manufacturers.

"It's a gigantic problem for both China and Wal-Mart," said Jack Trout, president of Trout & Partners, a marketing strategy firm based in Old Greenwich, Conn. "Wal-Mart is known for everyday low prices and China is known for making products cheaply, so they're both hoisted by their own petard. It's going to take a long time to turn this [negative perception] around."

The survey also shows that in the wake of the recalls, many consumers would now rather buy products manufactured in India than those produced in China. In key affected categories, such as pet food, 78% of respondents preferred that product be produced in India, compared to 74% citing prescription drugs and 73% for toys.

In only four of 25 categories did consumers prefer Chinese products: automobiles, cell phones, computers and flat screen televisions.

"This is a seismic shift in terms of marketing goods made in China," said William Lozito, president of Strategic Name Development.

Despite building a reputation for higher-quality products, the recalls have sent China back to its 1980s reputation for poorly made, cheap goods.

"It's a problem for brands that are inextricably linked with the 'Made in China' label," said Lozito. "The safety of products coming from China is a genuine, deeply embedded concern for consumers."

Trout added: "This isn't going away."