Understanding Merchandising at Wal Mart

Key Wal Mart manager:
John Fleming – Chief Merchandising Officer. Primary person in charge of the merchandising transformation that is now in play at Wal Mart. Prior position was in the marketing department where he identified who Wal Mart’s customer is and how best to serve them.

I will attempt to communicate Wal Mart’s merchandising direction so suppliers I work with will understand how to best operate in concert with the world’s largest retailer. First, let’s define some terms;

Save money – Live better – This is Wal Mart’s primary direction and mission. Wal Mart will have the lowest price on everything in their stores and on line so their customer can live a better life with the savings. Undisputed low price leader period! Clear low price leadership. Profit margins are secondary to lowest prices on all products. All management decisions are made with this concept in mind.

Clarity of offering – Having a limited number of brands/products in low growth categories. Spreading out on top selling brands in growth categories. Result is the elimination of the #2, #3, #4 products and giving more space to the #1 product. This eliminates out of stocks, increases turns, and Wal Mart’s belief is the consumer will adjust to the lack of assortment especially in the slow growth categories. This strategy is common place merchandising in Europe.

Conversion- This is store merchandising designed to motivate the Wal Mart customer to purchase from as many departments as possible on each shopping trip.

Who are Wal Marts target customers?
Value Seekers – Wal Marts primary customer. Three groups; price value shopper – looking for low price points on popular brands. Price sensitive affluent – quality seeker at a great price. Brand aspirational. Contact tom.price@earthlink for a complete discussion about types of consumers.

Wal Mart is focused on growth categories. They believe that success comes to companies that have their merchandising investment in the growth categories. Their goal is to increase market share in these growth categories.

There are 96 defined categories in Wal Mart. Contact tom.price@earthlink.net for a discussion about these categories.

They analyze product categories from three dimensions; growth potential, scale advantage, and credibility with the customer. Wal Mart calls this approach the Win – Play – show.

A win category is a category that will grow twice the rate of the business unit. Scale advantage relates to power with suppliers thru access of a full range of products and use of the logistics network. Customer credibility is to what degree customers perceive Wal Mart as a creditable source of information.

A play category is one with lower growth or stable business with Wal Mart having a scale advantage and some degree of customer credibility.

A show category is declining in sales, Wal Mart has little credibility with consumers and no scale advantage. This category of products is in the store to fulfill the “one-stop shopping proposition”. Example; it is important that Wal Mart have tape measures but they do not need an assortment. Limit assortment will not harm the shopping experience and will drive productivity so they can invest assets in “win” categories.

If the category is defined as a win or play (grow) Wal Mart invests in the range assortment and visual presentation. They study their competition and strive for quality products at competitive prices. Brands within categories can have a win-play-show rating.

If the category is defined as “show” Wal Mart is reducing suppliers and SKU’s. This results in productivity gains that allows them to invest in the growth categories.

In food examples of “show” categories are ketchup, mustard, barbecue sauce, flour, batters, and soft drinks. Examples of “play” categories are marinades and Mexican.

Along with this merchandising change has come a management structure change called “customer experience”. This group does space allocations, adjacencies, and visual presentation in all stores. Goal is consistent shopping experience throughout all stores.
This group is also about planning, replenishment, pricing, and category management.

Future growth will come from “multichannel integration”. This is defined as customers shopping multiple channels before they make a purchase decision. The online channel will be critical to future growth. The “site to store” program will be a growth platform at Wal Mart. Under this program products available on line only at Wal Mart dot com are delivered to the store free for customer pick up.

In my judgement Win, Play, Show is a huge mistake by  Wal Mart management.

Contact Tom Price at  tom.price@earthlink.net  for ideas on how to gain and keep Wal Mart distribution. I can also help you with your web site and social media marketing development.

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