Fashion Infusion Remains a Work in Progress
Wal-Mart isn’t giving away any secrets regarding its merchandising strategy for the second half of the year when executives talk about a commitment to opening price point merchandise, rollbacks and a more basic assortment of apparel.
Those themes, and the company’s new branding statement of, “We save people money so they can live better,” were repeated often during a series of meetings earlier this month with media, analysts, investors and associates before, during and after the company’s annual shareholders extravaganza. However, beyond such broad statements and familiar strategies, Wal-Mart’s merchants and senior executives did offer a glimpse of the strategic objectives influencing merchandising decisions and in-store initiatives.
For example, despite the company’s well-documented misses in the apparel area and a return to a narrower assortment of more basic merchandise, higher ticket fashionable offerings can earn a place in the assortment if Wal-Mart is capable of upgrading the shopping experience.
“We had some $39 sweaters on our racks that were the right color, fabric and silhouette, but we hadn’t earned the right to put a $39 sweater there,” said Wal-Mart president and ceo Lee Scott. “We just got up one morning and decided we could move the customer (to the higher price point) because they trusted us at $13.88 they were going to trust us at $39.
Then, speaking on behalf of chief merchandising office John Fleming, Scott added, “John understands clearly, and his team does, that it is a slower transition, and during that transition you’ve got to strengthen that core which we didn’t do. We are going to move on a very thoughtful basis on an investment in quality and experience so we earn the right for customers to shop across the store in a way that we so gloriously talked about last year.”
Throughout much of last year as the company detailed how it planed to grow business beyond the basic consumables categories where it is so strong, there was much talk of getting customers who were deemed “selective shoppers,” to cross the aisle for their apparel and home goods needs. However, as same-store sales in those categories turned negative during the second half of the year, it became apparent Wal-Mart had pushed the fashion envelope too hard and damaged its valued proposition with pricy clothes.
While the apparel department is shifting to a basics strategy better suited to Wal-Mart’s supply chain mentality and espoused by Scott a decade ago when he served as head merchant, in the home area the emphasis is on presenting consumer solutions and improved adjacencies.
In the company’s older stores, the home categories were spread throughout the store, which meant the first step was to pull them together and then refine adjacencies, according to Beth Schommer, senior vp/gmm of the home division.
“We tried to pull together the categories that she would logically think of together to make it easier for her to shop,” Schommer said. That means kitchen products such as towels and related softlines are merchandised on shelves adjacent to dinnerware to “make it easier for her to shop the category.”
Ease of shopping is a philosophy driving merchandising decisions in other departments as well. Pam Kohn, senior vp/gmm of fresh grocery, asserted, “we will always stand for price leadership in our grocery department,” but trends such as health and wellness and convenience are influencing product assortment decisions. For example, thanks to new packaging technology, stores now offer an assortment of self-steaming, microwavable frozen vegetables. Thirty-eight items from three different vendors are currently available and 12 more items from a new vendor will be added soon.
She added that no two Wal-Mart stores are going to look alike because of the importance the food category plays in Wal-Mart’s effort to establish itself as store of the community. For example, during a tour of Wal-Mart’s supercenter in Rogers, Ark., she pointed out how the location’s demographics support a sushi bar, an expanded organic offering and a fixture of specialty cheeses.
While merchandising efforts in categories such as apparel, home and food are about becoming more relevant to a broader range of customer needs, Wal-Mart is also pursuing new services as a means to achieve that goal. For example, customers are being serviced in new ways through initiatives such as in-store clinics, money centers and increased integration with Wal-Mart.com. Wal-Mart has moved quickly to add medical clinics to its stores both as a profit center and because it positions the company as part of the solution to a national health care crisis as opposed to a source of the problem as critics contend. The company currently has 77 clinics and recently announced plans for a total of 400 while hinting at the possibility of several thousand.
“We believe if the demand continues we could see 2,000 clinics in our stores,” said Linda Dillman, evp for risk, benefits and sustainability. “By way of comparison, we have 2,200 eye clinics in our stores today, so 2,000 medical clinics does not seem unreasonable to us.”
As for establishing a bank in the United States, “it does not appear that we will have a bank anytime in the near future,” ceo Scott said. However, the company offers the next best thing with a range of financial services that enables it to provide customers with bank-type services at a reduced rate the company estimates saved customers $250 million last year. Wal-Mart offers services such as wire transfers, check cashing, bill paying, money orders, and credit cards and now operates a network of 170 Wal-Mart Money Centers. The popularity of the service offering has sales and profits growing at 30% this year, according to John Menzer, Wal-Mart’s chief administrative officer, who has oversight of financial services.
“The Money Centers are doing very, very well and we are going to continue to grow in that arena,” Menzer said. We’ll also have more products to come and we are getting great acceptance from our customers in that arena.
Wal-Mart is also living up to the initiative to provide customers with easy access to more Wal-Mart launched by chief merchandising offer John Fleming when he was head of the online business. That means the company has expanded its site-to-store initiative which enables customers to order online and pick up or return merchandise in stores. The site-to-store service is available in 2,400 stores currently and the chainwide rollout will be completed later this year. According to Mike Smith, senior director of online operations, there is a lot of pent-up demand for the service, an observation he attributes to the fact that when the company went live with the service at 693 stores in the Southeast in late May, 96% of the stores received an order within 48 hours of launch. The beauty of having customers pick up merchandise in the store versus having goods delivered directly to their home is that while in the store they spend an additional $60, according to Smith.
The addition of services to Wal-Mart’s retail environment tends to be more transparent to customers than the more visual changes impacting merchandising. From that perspective, Wal-Mart wants to get where Target already is, although its on-trend rival is seldom offered as a role model. Wal-Mart’s objective is to have the entire store look like a single merchant made all the buying decisions. In addition to the more consistent look, the other broad objective is to improve the customer experience. Wal-Mart’s research indicated one of its key shortcomings was long checkout lines, so the company is in the process of rolling out a new front-end labor scheduling system that better aligns the cashier schedules with when customers want to pay for merchandise.
“We have 900 stores that have implemented the new scheduling system, a