story by Kim Souza
ksouza@thecitywire.com
Execs at the world’s largest retailer are all about new store formats and innovation, but they aren’t letting go of the big box. Wal-Mart Stores CEO Doug McMillon recently told Wall Street analysts that supercenters have plenty of potential and will be renovated as needed in the months and years ahead to ensure the lifecycle is extended.
McMillon said over time the supercenter has always evolved. While stores are now trending smaller, he assured analysts that the stock-up trip format is still relevant as efforts to intertwine technology and actively engage shoppers ramp up.
Some natural evolution that has already taken place involved reducing the size of the supercenter. Older stores, some up to 220,000 square feet are being rethought as the new format nearer 150,000 square feet. McMillon said future space configuration would be rethought as the retailer looks for ways to energize the experience. He can see emerging categories such as smart home connectivity gaining space from categories such as hardware.
“Supercenters today have room to improve that give them a longer life and better experience,” McMillon said.
Walmart U.S. CEO Greg Foran and his team are engaged in subtle makeovers across the retailer’s more than 4,500 stores, of which 76% are supercenters. Foran said during shareholder week that when you operate that many stores over a lifespan of 50 years the fleet is bound to be diverse. He told analysts June 6 that his merchandising team is always discussing space configuration and he would like to increase maternity apparel offerings and plus size fashions.
But equally important is the customer overlap between online and brick and mortar. In some categories, like seasonal lawn and garden, the retailer has set up kiosks in stores with virtual catalog displays of patio tables and other lawn furniture items. The shopper can browse the virtual catalog and purchase same day in the store and in most cases take it home immediately. This eliminates the need for valuable floor space as the boxed inventory can be stocked in the backed room or out of reach in the lawn and garden center.
Other more subtle changes are underway according to Judith McKenna, chief operating officer for Walmart U.S. She recently pledged to the media and shareholders that Wal-Mart’s 4,500 U.S. stores would be “fast, friendly, clean and in-stock by the holidays.” While McKenna and Foran gave no actual timeline for the complete supercenter turnaround, they did impose a preholiday 2015 timeframe for the “fast, friendly, clean and in-stock” metrics they measure daily.
“Right now half of our customers like what we are doing and the other half doesn’t. That doesn’t mean you can go out and put a coat of paint of half your stores and fix it the problems ... but we are leaning into store remodels where they are needed and the entire operational workings within are being evaluated from the way we order paper towels to how technology is being used to increase store efficiencies,” Foran told the media June 4.
He said Wal-Mart measures consumer sentiment each week and store scores are gradually improving. At 50% approval, Foran said the scores are a lot better than they were in August when the new management team took over. McKenna said she under-estimated how much it takes it move the needle forward in a fleet of 4,500 stores.
“It’s hard to wrap your hands around 4,500 stores. We are reinforcing the management count into stores and cities where it is needed and the simplification of processes underway is helping to give us a clear focus going forward,” McKenna said.
The supercenter format has been the predominant cash cow for the retail giant for three decades. But sagging comp sales in recent quarters indicate that cannibalization is underway from competing Neighborhood Markets, and that e-commerce growth and constant competition from dollar stores and discounters are eating away at supercenter sales.
McMillon said the disciplined management in place and changes underway to improve foundations in conjunction with the technology and people investments will make a difference in the next few years. Right now, he said Wal-Mart is focused on store experience.
“We have to get this right in order to grow. I think we can add $10 billion to $20 billion a year in sales,” McMillon added.