Friday, April 03, 2009

Learn from the Leader: Walmart

Saw this story yesterday at this website:

SPRINGDALE — Walmart has 21 minutes to get a customer's attention, from the time a shopper walks into a Supercenter to shopping aisles and checking out.

Customers find fewer types of products on Walmart shelves, as the company reduces inventory and changes store layouts to implement its "fast, friendly, clean" message.

Bill Simon, executive vice president and chief executive officer of Walmart U.S., delivered those points to analysts and investors Wednesday.

Simon spoke at the Morgan Stanley Arizona Field Trip in Paradise, Ariz. Simon's presentation is available at

Simon oversees more than 3,600 U.S. stores, including Walmart Supercenters, Neighborhood Markets and Marksetsides; and logistics and transportation, including 121 distribution centers.

Walmart reduced inventory, as the chain had $23.3 billion in inventory in fiscal year 2007, $23.5 billion in fiscal year 2008 and $23.2 billion in fiscal year 2009.

Less inventory in stores makes it easier to order products from distribution centers and easier for employees to restock shelves.

"It allows our associates more time to spend on a customer," Simon said.

Less inventory also makes it easier for customers to find items, Simon said.

Customers see uncluttered aisles and see signs more clearly. Walmart no longer puts pallets of pencils and paper and displays of diapers in "action alleys," the wide center aisles.

Removing the "action alley" displays means customers may cross aisles more often to shop other areas.

"You provide access and visibility for departments in the store that were previously difficult to shop, like apparel," Simon said.

Cutting inventory likely is a smart move in a down economy in which consumers lose jobs, see declining home values and lose value in their retirement accounts.

TNS Retail Forward, a Columbus, Ohio, research firm, surveyed 4,000 consumers in its August ShopperScape survey. About 75 percent of respondents reported changing shopping behaviors, including buying only essentials, shopping less often and even doing without some items.

That behavior means retail sales will remain flat throughout this year after sales grew 1.8 percent in 2008, according to Retail Forward.

Most Walmart stores have between 15 and 30 days of inventory, Simon said. Cutting inventory means logistics efficiencies, Simon said, as Walmart has not built a new distribution center in two years, despite opening more stores.

However, Walmart experienced inventory shortages some days in some areas, Simon said, and store management re-evaluated product assortment.

Still, having fewer products in a store reduces shrink, or theft; accident costs; and markdowns needed to get slow-moving or overstocked items out of a store, Simon said.

Walmart's new merchandise mix and store layouts gained praise from Richard Hastings, a Charlotte, N.C.-based consumer strategist with Global Hunter Securities LLC. Hastings does not make stock recommendations or set target stock prices, but Global Hunter Securities does.

Walmart is getting more foot traffic that was going to other stores, partly because of better merchandising and execution, Hastings said in early March.

Walmart is collecting data on how customers perceive the chain is living up to its "fast, friendly, clean" motto, Simon said, and is tying performance in that area to bonuses.

Walmart surveys about 500,000 customers each month, Simon said, and can break down data "nearly to the cashier level" to gauge what customers think.

The better the employee and store scores on the fast, friendly, clean rubric, the higher the bonus both hourly and management employees receive, Simon said.

Shares of Wal-Mart Stores Inc. (NYSE: WMT) closed Wednesday at $52.82, up 72 cents. The share price ranged from a $63.85 high to a $46.25 low in the past 52 weeks.

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