I first noticed my amazing powers of prediction whilst at university when, in a fit of poverty-induced desperation, I put my last £50 on a horse called Katabatic in the 1991 Queen Mother Champion chase. When it romped home at 9-1, I was therefore able to maintain my high flying lifestyle of Findus Crispy Pancakes, Kronenbourg and Rothmans for the rest of term.
So it’s gratifying to see the Walmart predictions I made at the start of the year slowly falling into place. The roll-out of Marketside private label means that one of the predictions has already been smashed into the back of the net and even if the others don’t happen, I can always go back to that post and edit the list to include things that do actually happen this year to mean that I still look faintly intelligent rather than coming across as the clueless halfwit I actually am.
Bill Simon, EVP and COO of Walmart US gave a fascinating insight this week into the various strategies and programs underway within the business, and he was refreshingly frank about some of the hits and misses that he has been seeing within the company. He was speaking at the Bank of America-Merrill Lynch Consumer Conference, covering areas such as SKU rationalisation, Rollbacks, Great Value, Marketside and Hispanic store concepts.
SKU rationalisation, or assortment editing, is one of the top of mind issues keeping suppliers and retailers awake at nights and has certainly been one of the key issues on the agenda for our customers here at Planet Retail. The issue has been particularly pertinent for Walmart vendors affected by Project Impact, so any of you out there with an interest in the topic is heartily recommended to visit http://www.8thandwalton.com/planet-retail/ for details of the webinars that our friends at 8th & Walton will be running on SKU Rationalisation at Walmart, as well as other topics such as Shopper-centricity and Walmart’s general strategic outlook.
On the subject of pricing, Simon was keen to point out the renewed importance of the Rollback, perhaps Walmart’s most powerful pricing mechanism. He told the conference: “Rollbacks are our permanent price reductions, semi-permanent I guess you could say, longer term price reductions that are driven not by promotional activity, but an enhancement to our EDLP program. The leverage now that we’re completing the conversion to high capacity end caps which actually carry more product than the Action Alley features. They deliver a much better, much clearer price impression and a much more hard-hitting product presentation. In addition to the price action and activity that will be on that, you’ll see us really focusing on this in the coming months and throughout the year.”
The installation of the high capacity end caps are part and parcel of the Clean Action Alley program that Walmart has been implementing. Despite ongoing speculation that removing promotional pallets from Action Alley has cause availability issues at weekends and holidays, Walmart still regards the move as a huge success and the program will be rolled out across the chain this year.
On SKU rationalisation, Simon was refreshingly honest: “What we found is that, and again, not surprisingly - and in this environment you have to be perfect, and we weren’t last year - that you can discontinue items that don’t sell anything, but gets you a trip. And one pound brown rice, if you eat brown rice because your doctor told you and we don’t have it and you can’t afford the two pound, you lose an $80 basket or a $60 basket, not just the $1 for the one pound brown rice. So we’ve been through the business and put the top 300 or so of those items back into the stores that were removed.”
“We had done some things that lost a trip. And I promise you and I tell customers this all the time, we’ve never discontinued anything that sells well, but what we did discontinue were things that didn’t sell well, but were only bought infrequently, but cost us a trip. And we did discontinue some things that people didn’t buy very often, but were aggravating to a customer to lose. And, you know, Lee Scott told us recently, rule number one in retail, don’t aggravate your customer.”
“So we need to put those back because we’ve got to service the customer. We added back, I said about 300 SKUs, but we didn’t add back 3,000. We added back a small percentage of what was removed. The vast majority of what was removed was done for the right reasons in the right way, and have actually improved the category sales in those categories. Mostly in food and consumables, there were flavours, items, sizes that customers are very accustomed to and that liked very much. And we disappointed them by taking those out and we put them back here.”
Simon also made some telling remarks on the Great Value brand overhaul, an initiative that Walmart claims has seen the brand outperform grocery in general: “For Great Value, many people misinterpreted the package redesign of Great Value as a shift in focus towards a private brand strategy that some of our competitors follow. We are a house of brands. We prefer to sell national brands because that’s how we can differentiate ourselves in price better. When we sell Oreos and our competitor sells Oreos, and our Oreos are cheaper than their Oreos, the customer knows that we have a better price. When we sell cream-filled chocolate sandwich cookies and they sell cream-filled chocolate sandwich cookies, and you’re not sure whether the quality is the same, the size is the same, it’s very hard to differentiate yourself. We like to sell national brands. The Great Value program for us has been a program designed to bring a more uniform look to the product and to provide alternatives to the customers who were buying those in other places.”
Marketside – both in terms of the stores and the brand – was also up for discussion, with Simon noting that: “We did open Marketsides several years ago, and you know we’ve been pleased with them. It was designed to help us access customers for ready-to-eat meals. And it worked. The product worked for us so well that we’re rolling Marketside branded products into the Supercenters, and the impact for us will be greater than if we could have opened thousands of Marketsides because of the size of the Supercenter business.” While this can be read as an endorsement of the Marketside store concept, I’m kind of taking it as a way of saying that the stores might well have served their purpose.
Finally, some very interesting comments from Bill on my real favourite in the Walmart store portfolio – Supermercado: “So some of the formats that we’re learning from in the US actually have led to improvements to the bigger box. We opened a Hispanic format and the produce presentation in those stores are phenomenal. If you haven’t been in one, you should go into them. They’re terrific. And we’re learning from that and bringing some of those changes to the way we’re going to lay out our Supercenters all across the US because we shockingly discovered that Anglos like good produce too. So, we’re going to add that to the Supercenter box. So, we learn from them, and we are committed to accessing markets through formats where we can and you’ll see hopefully some of that coming up.”
on Mar 12th, 2010 at 3:37 pm
I wonder if WalMart (and Asda) had the data that Tesco gains from its Clubcard - and analysis from dunnhumby - would it have stripped the shelves of products that consumers clearly want. I doubt it very much.
To put 300 SKUs back on the shelf is pretty damning and highlights a failure at the group to know what its customers are buying today and what they might want to buy tomorrow.
on Mar 12th, 2010 at 3:47 pm
Funnily enough, I’ve just made exactly the same comment for an article that we’ll be publishing on Monday (see below). That said, 300 out of thousands and thousands isn’t too discouraging. Also, it might be less about not knowing what your customers buy, but not knowing which items are decisive trip-drivers for consumers.
“One accusation that has been levelled at Walmart by a couple of analysts – and this is something that has a degree of resonance – is that some of Walmart’s missteps in range rationalisation have been caused by a lack of shopper insight and/or customer data. Walmart asserts that it surveys 500,000 customers a month, which allows it to get robust actionable, statistically significant data all the way down to the store level. One is forced to wonder, however, how many fewer mistakes would have been made if Walmart had a loyalty scheme and dunnhumby at its disposal.”