Walmart Merchandising in Return to Roots
October 15, 2010,
Promoted from chief operating officer to his new leadership position in June, and having just on Sept. 3 named his four-man merchandising executive team - each with a direct report to his office - Simon predicted improved sales trends for the fourth quarter, but a "very, very competitive" holiday retail season "driven by needs and practicality."
"Our customers seem more cautious than distressed. They will spend money on their kids," he said, but adults can "plan on socks and underwear" as gifts this year.
As evidence of a needs-based, "extreme paycheck cycle" among U.S. consumers, Simon described a scene found in many Walmart stores on the last day of each month in 2010. Shoppers start arriving around 11 p.m., picking out basic items such as infant formula, milk and bread, and then at midnight -- "when government electronic benefit cards get activated" -- they enter the cashier lanes.
The company's re-dedication to delivering to consumers on its Every Day Low Price proposition goes straight back to Sam Walton, he stated, and another of Walton's philosophies that's just as important is commitment to a "very broad merchandise assortment."
Simon said Walmart, with its Project Impact re-merchandising focus of recent years had gone too far into a "category distortion" policy with trimmed-down, win-place-show offerings and aggressive "Great Value" private label presentations that somewhat baffled shoppers - - and turned off too many suppliers, who found their product lines pared below tolerance. Too often, he acknowledged, consumers were going into a Walmart store to buy 15 items, but coming out with just 12. Even the massive price rollback campaign of early summer 2010, while driving the macro pricing environment, did not generate traffic upswings as substantial as hoped for by the chain.
In part due to these "learning" pains, Walmart posted fl at revenues and negative comp store volume in the second quarter.
The big merchandiser is now in a line-by-line, store-by-store review of every sku; the effort started in dry grocery and consumable categories. To suppliers, Simon said, the new message is clear: "We want to sell your product. Assortment is important to us. New products are our engine as well as yours." And Walmart, he asserted, "can launch a product as well as anybody in retail."
This too, Simon said, is based on a Walton core concept: that Walmart should be in win-win relationships with its vendors.
At the same time that Simon's team in Bentonville will inject speed into the merchandising function through greater centralization, a reinvigorated field buying organization will join store managers in filling out 10% or even in some cases as much as 20% of a store's merchandise mix. This, too, is a return to a previous mode when Walmart store managers, attuned to their local market tastes and trends, participated more directly in buying.
The ongoing turnaround, Simon said, will be dramatic enough to require a re-setting of some freshly newly remodeled stores that had been planned on the category distortion model.
Simon emphasized that the company will champion national brands. "We are a house of brands. We prefer to sell national brands; they show our value better" in head-to-head comparison with competing retailers, he said. Private label products, however, will remain vital in a number of categories. "In home and apparel they will lead, where we don't have the national brand penetration where we wish we did."