Pierce Mattie Public Relations New York & Los Angeles

The world's largest retailer informed Omnicom Group Inc.'s GSD&M in Austin, Texas, this week that it would no longer need its services as of Jan. 31. The agency had worked with Wal-Mart for almost 20 years and had developed the motto "always low prices, " according to Eric Webber, a spokesman at GSD&M.

In August, Wal-Mart notified another longtime agency, Bernstein-Rein Advertising Inc., based in Kansas City, Mo., that it would be dismissed as of the end of January, according to Neil Neumeyer, a spokesman at the ad agency. Bernstein-Rein, which worked with the discounter for 32 years and helped brand the smiley face for the retailer, created the discounter's holiday campaign, to be unveiled next month.

According to reports that first surfaced on adage.com and adweek.com on Wednesday, Wal-Mart plans to replace the agencies with Draft FCG, a division of Interpublic Group and Aegis Group's Carat USA.
Officials at Draft FCB referred all media calls to Wal-Mart, while Carat's officials could not be reached immediately.

Wal-Mart spokeswoman Jolanda Stewart declined to comment on the latest developments, only saying in a statement that, "The agency review process is ongoing. We have not made any decisions or announcements at this time."

The dismissal of both agencies wasn't surprising as Wal-Mart said in May that it was reviewing its ad business -accounts reportedly worth more than a half a billion dollars - as part of its overhaul of its advertising strategy.

"It was a pretty uphill battle fighting for business. We were quite the underdog," said Webber, noting the agency was notified late Tuesday night. "We had a successful venture."

Webber noted it is more of an "emotional loss"; he described the financial loss as only "modest."

"We will have to tighten our belts," Webber said, though he added it won't be at the staff's expense.

Wal-Mart's marketing change has been spearheaded by John Fleming who became chief marketing officer in 2005. Fleming, who had previously headed up walmart.com, has been shaking up the discounter's marketing strategy in an effort to get its well-heeled shoppers to buy more merchandise beyond food.

Over the past year and a half, Wal-Mart has been expanding into higher-quality apparel and other merchandise such as iPods and pricey flat-screen TVs. It's also been upgrading the interior of its stores.
But the move to sell more upscale products, particularly in apparel, is failing.

Wal-Mart posted a disappointing 1.3 percent increase in same-store sales,or sales at stores opened at least a year, in September, despite falling gasoline prices. And company officials told investors during this week's investor meeting that the retailer is tracking a meager 1 percent same-store sales gain in October.

Amid a disappointing performance, Wal-Mart's CEO Lee Scott told analysts this week that Wal-Mart overloaded the stores with trendy items. In fact, the company will be reducing its distribution of its new fashion line called Metro 7, which features slim jeans and camisol tops, to no more than 900 stores.

Meanwhile, Wal-Mart, which had de-emphasized its rollback or price- cutting strategy, appears to be playing it up again - for now. On Oct. 18, it announced price cuts on 100 holiday toys, the first of what it promised to be only the beginning of price wars on toys.