Notes from the recent Year Beginning Meetings held by Wal-Mart Stores Inc. reveal bold aspirations from the top down. CEO Doug McMillon is not letting any grass grow under his feet, issuing edicts like being “maniacal about growth.”
He said growing comp sales “is a must” and expects to accomplish that with excellence in merchandising, creative displays and “retailtainment.” In other words, he wants to see more excitement and energy displayed inside the retailer’s physical stores.
Reading between the lines, there could be more celebrity visits surrounding new product launches or more “try and buy” opportunities for suppliers.
McMillon’s expectations also raise the bar on in-stocks. Last year Gisel Ruiz, chief operating officer for Walmart U.S., said the retailer made a conscious effort to improve in-stock averages to 96%.
At the YBM event, Duncan Mac Naughton, chief merchandising officer, reiterated the need of improvement in what he calls a $3 billion opportunity — the sales Wal-Mart losses annually when products are out-of-stock.
Mac Naughton said the retailer’s goal is to grow inventory at half the rate of sales, a disciplined approach, while also embracing more localization. His main objective is to grow top line sales, leveraging every tool at his disposal — individualized pricing perks with “Savings Catcher,” more price rollbacks billed as “Amazing Finds” which are three to four items featured in weekly tabs.
He said the retailer expects to see production innovation from its suppliers and Wal-Mart is eager to partner where it can to assist in the process.
“Wal-Mart’s recent communication clearly signals a ‘take no prisoners’ approach to growing their topline and comp sales. You can hear it in their voices. They’re back on offense and ready to take it to the competition,” said Jason Long, CEO of Shift Marketing Group.
Wal-Mart has proven to be a nimble giant willing to test multiple initiatives and then roll out the learnings much more quickly than the brick and mortar retail industry as a whole. Carol Spieckerman, CEO of NewMarketBuilders, said this agility is linked to the @WalmartLabs “brain trusts” and all the digital talent the retailer has acquired over the past 18 months.
“Wal-Mart gets that it doesn’t have to be perfect. They are testing A and B simultaneously, like never before.” Spieckerman said.
Mac Naughton said this year Walmart U.S. will expand “pick up today.” now being tested in Denver. Consumers can order groceries online and pick up free at the nearest store. Bill Simon, CEO of Walmart U.S., recently said the retailer is planning to build pick-up depots that will allow shoppers to drive through and get their grocery order that was placed online earlier in the day.
The “Walmart to Go” grocery delivery test market will also be expanded this year. It is already available in Denver, San Jose, Northern Virginia, Philadelphia and Minneapolis. Wal-Mart also plans to ship product from 50 more of its supercenter locations this year. This effort to tether supercenters to smaller formats and e-commerce fulfillment is key to Wal-Mart being able to better compete for Amazon Prime customers.
“The new Wal-Mart programs and tests will likely take some time to bear fruit, but they have so many irons in the fire that dividends should start to accrue sooner rather than later,” Long said.
In the near-term, Long said, Wal-Mart’s biggest opportunity continues to be picking off unhappy Target customers.
“A recent report had upper-income customer satisfaction dropping to 70% at Target, down 9 percentage points. Wal-Mart is better positioned than most to pick-up this cross-over business and it’s likely incremental as this shopper probably isn’t shopping their stores today,” Long said.