Wal-Mart Looks to Home

Brent Felgner, June 19, 2006

Rogers, Ark. —Home is moving front and center at Wal-Mart. The retailer's ambitious store remodeling program will unite multiple home lines, including domestics, in a 20,000-plus square- foot “total home” section moved inside the stores' power aisles adjacent to apparel, currently undergoing its own dramatic reset.

At the same time Wal-Mart is preparing to introduce more “mass luxury” in soft home, while further enhancing opening price point goods. Later this summer it will introduce a luxury hotel bedding collection, even as its 180-count entry inches up to a 200-count product.

It is a bid to “create a better customer experience” while garnering a larger basket and deeper penetration of home categories in a higher trafficked area, said Paul Beahm, senior vp home, hardlines. The reset is intended to capitalize not only on bringing allied home merchandise together but also create more symbiotic adjacencies with other departments.

In addition to domestics, the expanded home department will include furniture, housewares, small appliances, crafts & fabrics, along with recent additions stemming from last month's restructuring of home category buying: home & office, outdoor living and seasonal. An updated supercenter floor plan showed paint, now also under the home buying umbrella, still across and outside the power aisle alongside hardware.

The bulk of the department, though, will be on the infield, running from the front end to the rear power aisles. Domestics formerly sat against the back wall of the store, frequently adjacent to groceries or other consumables, or often wedged between shoes and fabrics & crafts.

Home as destination

“We think the synergies that that offers with total home around product trends and customer trends are going to be significant for our basket as well,” Beahm told analysts following the annual shareholders' meeting. “We're really excited in the home lines areas with these initiatives — and what we're going to be doing is creating a destination for home.”

The total home section occupies about one-eighth of the supercenter floor space — perhaps as much as 24,000 square feet, give or take, in a typical 190,000-square-foot store, according to the floor plan Beahm displayed. It is part of a massive reset of 1,800 stores currently underway, planned for completion over 18 months. About 1,300 of those are to be finished by year end, with the priority on stores in the Northeast.

JPMorgan analyst Charles Grom, who last week visited several New York metro stores undergoing the transformation, noted two different types of remodels taking place, dictated largely by store age and original layout: one taking four to five weeks to complete, the other at least three months. He raised concerns that they were “disruptive to the normal shopping experience” and could provide a significant short-term drag on comparable-store sales in the second and third quarters, even though the long-term potential could be beneficial.

“All in all, taking steps to improve the 'look and feel' of its existing store base could benefit comps. However, how quickly this will transpire is unclear and something we will be monitoring closely over the next few months,” he wrote.


Last week, Wal-Mart vice chairman John Menzer warned that the home area would likely be the “the messy part of our special remodel” requiring a large section of the store to be torn apart then re-formed. The entire mini-remodel, he said, would likely take 8 to 10 weeks, although would not necessarily be continuous.

All of it is about attracting a broader customer base, and since Wal-Mart readily wins opening price-point shoppers — its loyalists — it means pulling in higher-income, bigger-pending customers, likened by many to the Target-type shopper. It will be a considerable challenge.

“There is not a timetable; it will take a couple of years,” he told HTT at last week's Kearny, N.J., store opening. “We don't like to talk about the competition. Worldwide, 180 million people come into our stores every week. Those customers are already shopping our grocery aisles; what we're trying to do is get them to shop the entire store.”

The 142,000 square-foot Kearny discount store, while not in the supercenter format, clearly showed a compressed version of the store planners' thinking, bringing domestics, furniture, accents and decor, along with housewares and dinnerware to adjacent infield departments at the rear and side power aisles. An expanded furniture display on lower risers crossed adjacent to soft home and decor.

'More focused'

More broadly, the remodels are focusing on five areas of the store, based on customer insights and financial performance of the departments, which also influence the reallocation of space.

“We are leveraging our information systems and additional customer research to take a more scientific approach to managing our space both within the store and then more broadly, the optimal size of the total store,” Pam Kohn, senior vp of operations for the Southeast, told analysts

“In the past we kind of took an ad hoc approach to our remodel program. Now, we're much more focused,” Kohn said. “We are listening to the customer and focusing the remodels on the areas of the store that matter most to her, namely electronics, apparel, food, home and, of course, the restrooms.”

The overarching remodel program is aimed at creating more “logical space adjacencies and enhanced visual high impact displays,” offered DeDe Priest, senior vp, merchandising, food. “We are creating a shopping experience that is solution based and we are more empowered than ever to meet consumer relevancy at very high levels, with a focus on a very high ROI.”

“We then tailor execution to every store,” she explained. “Buyers are truly more than buyers. They are becoming editors of assortment store-by-store.”

Visits to more than a dozen stores in northwest Arkansas and southwestern Missouri seemed to support that view, as well as Wal-Mart's bold ongoing experimentation with store layouts and departmental adjacencies.

In home, Beahm said the focus has been on making further progress in improved merchandise quality, sku rationalization, utilizing global procurement and in product development — all of which serve both the Wal-Mart loyalist and the selective shopper it's trying to pull deeper.

Higher luxe, 'perfect essentials'

Wal-Mart will introduce a luxury Springmaid Hotel Bedding Collection, rolling out to 700 “stores of the community” in the higher income demographic beginning in August, Beahm said.

“This luxury collection has the very best fabrics, including long-staple cotton and the packaging presentation, as well, is fantastic. The products include 600-thread count sheets, white goose down comforters — a total solution, including window panels, as well as accent pillows.” he said.

Wal-Mart briefly experimented with a 600-count offering in selected stores earlier this year.

Aimed at a young adult demographic, the Get it Together collection is launching now and will run through the summer and back-to-college season. It takes the total solution approach, including everything from floor covering to top of the bed, decor, furniture, and accent pieces.

“Innovation and functionality are the keys to this,” Beahm said.

Wal-Mart's Project Decor, the home accent program perhaps most symbolized by the islander gondola with vases, picture frames and the like, seen in the Plano test store, has now been tested in 50 stores and the company likes what it sees. It's being aggressively rolled out in all the remodel stores that fall into the high and medium high income demographic, Beahm said. The collections, which extend well beyond that islander display, are merchandised by color and trends.

“Where does the space come from? It comes from our fabric area. Coincidentally, in these markets where the high income, medium high income index is high, the fabric index is very low. So what we do will be more relevant for her and, obviously, [we will] have a better return on the invested inventory.”

True to form

Attempting to remain true to its loyalist customer, Wal-Mart is continuing its push for “perfect essentials” in home. The Mainstays sheet has moved up to 200 thread count from 180, with improvements in fit and construction, he said. And, at a $2.96 opening price point for a sheet — opening at $8.67 for a set — the “quality at this value is unmatched anywhere in the U.S. market,” Beahm offered. “Working through our global procurement organization, not only did we deliver extra value and quality for our customer, but we improved margins as well.”

Likewise, the $2.88 Mainstays towel program, also with improved specs by Wal-Mart's product development organization and sourced through global procurement, is currently on a run rate to exceed 51 million units this year, at the same time delivering higher margins.

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