In one N.J. town, Wal-Mart puts its heart into Home

SADDLE BROOK, N.J. —Wal-Mart is trying to address an ongoing concern— both for management and the Wall Street community—at a discount store in Saddle Brook, N.J. The retailer is experimenting with a home merchandising set that will test whether insights gleaned from fresh prototypes and new concepts can be assembled in a package that can economically retrofit older units and drive up sales.

Wal-Mart evp and cfo Thomas Schoewe discussed the test’s existence at a Bank of America analysts meeting last month. He conceded at the gathering that, although home had pretty much met expectations for the back-to-school season, it continued to disappoint from the longer term prospective.

“We told you during the second quarter that we had a very difficult time in home and apparel at Wal-Mart U.S. in the first half of this year,” he said. “We told you that we had the need to reduce inventory there that led to moderating your earnings expectations. As I mentioned earlier, we’re in very, very good shape now when it comes to inventory for apparel and home. And back-to-school is everything we would hope that it would be. When it comes to home…as kids are going back to either school or to college, areas like bedding or towels or plastic organization [are] performing pretty well right now. And in apparel, girls’, boys’, juniors’…are now performing better. Having said that, we are still struggling with negative traffic in these categories and have lots of room for improvement.”

Wal-Mart has launched a series of what it calls ‘special projects’ to test, among other elements, new merchandising ideas in a range of departments. Home has been a special case, and the latest test in Saddle Brook is designed to examine the economics of refreshing department merchandising.

“In home, we have found that those remodels…were very expensive, not yielding the kind of results that we had looked for. So, in typical Wal-Mart fashion, what we’re in the process of doing now is trying something different…to see if we can’t yield some better results.”

The high-profile, center store home set in Saddle Brook combines elements familiar from Wal-Mart’s recent store prototypes, including tiered end aisles in small appliances, with those that are somewhat less familiar, such as a concave vacuum cleaner fixture. Wood finished shelves warm the presentation and lifestyle signage sprinkled throughout provides an up-to-date feel.

Soft home gets a particularly visible treatment in Saddle Brook. Wal-Mart has upgraded its product assortment considerably in domestics, adding higher thread counts in bedding as well as luxury fibers such as Pima cotton in bedding and towels. However, in older stores, the better product is buried in towering fixtures arranged in maze-like aisles that are forbidding to some customers. As much of the selection is in interior aisles and away from the traffic traversing the stores, non-promotional domestics rarely gets the attention it deserves from shoppers. Wal-Mart has been dependent on price to generate interest in domestics because it hasn’t been calling attention to the broad improvement in its products, which doesn’t exactly provide room for margin improvement opportunities. And, even with the low-price structure, it hasn’t been able to halt the slide in traffic.

Heightening the profile of domestics may help Wal-Mart call greater customer attention to products on an everyday basis. While that should be helpful, conspicuousness has another benefit, as it also means that domestics will be under the eye of store managers more often. Aisle maintenance has been an issue with Wal-Mart in home. Underattended domestics displays can become unattractive pretty quickly as customers pull towels or sheets out of the fold for a better peek.

Wal-Mart will be grappling with itself, trying to determine where and if it can make a merchandising investment across the store system that will boost home sales in a profitable way. During its analyst meeting at the end of this month, Wal-Mart executives, including recently appointed senior vp and gmm of home, Linda Hefner, will almost certainly have to answer what have become persistent observer questions about what they will do to turn around the company’s home departments. Perhaps the Saddle Brook experiment will provide some answers.