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Walmart Returns to ABCs

BENTONVILLE, ARK. - Three words sum up Walmart's approach to going forward: back to basics.
     Walmart U.S.'s chief merchandising officer Duncan Mac Naughton said the retailer is working to boost basics across the board - merchandise assortment, price and in-store message - as a key tenet to improve business and streamline expenses.
     Home will follow the same path as apparel, which was recently revamped to center on core necessities like socks, underwear, jeans and tops, he said during the company's 18th Annual Meeting for the Investor Community event this month.
     "What you will notice is a focus on improved quality and a focus on basics," he continued. "Our value here is unmatched and resonates well with customers. They come to us for basics in home because that is what we are good at."
     Home is also being given a "simplified in-store presentation." The assortment's key items include bedding, bath, candles, floor care, outdoor living and, especially, small appliances, he added.
     Mac Naughton offered a more complete outline on Walmart U.S.'s 5-P merchandising improvement plan - a $2 billion, self-funded effort, noted Walmart U.S. president and ceo Bill Simon - that has already begun.
     At the top is "price," which represents "a big initiative," Simon said. Walmart U.S. is focused on reducing price points throughout the store in response to shoppers' ongoing, and in some cases, increasingly cautious approach to spending. At the onset of this effort, the retailer is focused on cutting tickets "in areas with a reasonable amount of price elasticity, so that when we make the change our gross margin dollars will go up," Simon said.
     The price reduction strategy is long-term and more encompassing. Walmart is already two years into the effort and plans to continue working on it in all areas of the store.
     With the price reduction comes "looking to traffic-driving categories and areas of the store that will show price and allow customers to come in more frequently," he added.
     Product marks the second "p" in the merchandising improvement strategy. "Already, more than 10,000 items have been brought back into store since we started this initiative," Mac Naughton said.
     The retailer's approach here is by phase, he explained. "The first phase was with food, consumables, dry grocery - it is where we had our biggest gap," he said.
     Phase 2 turned to dairy, health & beauty items, pet products and others like hair care - the latter he cited as a small area "where we added back brands and selection and since then we've seen it go up 480 basis points."
    Phase 3 is currently underway, Mac Naughton said, and centers on entertainment and soft lines, including home and apparel. About 75% of the work here is done, and remaining changes to these areas are expected to be wrapped up by end of year, he said.
     The third "p" is Place - or on-shelf availability.
     "In-store availability ensures that when our customer comes in to look for a product, it is there," Mac Naughton explained. "And our sales performance is directly tied to how we are able to keep on-shelf availability. So we've made it a priority. We're working with our suppliers, logistics, and our in-store execution team. And we're making sure that when customer comes in to buy products they are on the shelf."
     Promotion represents the fourth "p" in the strategy and calls for "showcasing items and prices big and bold." Improvements here so far include bolder signage for smarter price points, expansion of national brand products "at fabulous prices," higher gondolas, increases in capacity and others - all of which to date add up to 140 basis point increases.
     Finally, people - customers and Walmart's team - make up the last "p" in the strategy.
     Turning to the upcoming holiday, Walmart U.S. is "very excited and very well prepared," Mac Naughton said.
     A highlight is the return of the layaway program for toys, electronics and jewelry, starting October 17th.
     Special in-store events are planned, including new Black Friday cooking presentations and promotions and visits from Santa to take pictures and listen to Christmas lists.
     Walmart U.S.'s marketing effort for this holiday is "doubling from last year's volume," Mac Naughton said. With the debut of a new toy catalog, a "significant TV and print campaign," a new holiday entertaining catalog, a new in-store apparel guide, daily Facebook postings, and more.

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