A Kinder, Gentler Retailer?

“Know and understand the local customers…Take the community's culture and ambience to heart…Enhance the consumer's shopping experience.” Subtitles from the specialty retail handbook? Not this time.

Rather, these familiar-sounding concepts are at the center of the evolution of the world's largest retailer, Wal-Mart. Yes, even the most successful merchant in the world is heeding Darwinian theory, adapting to a retail environment that's been fatigued by predatory pricing wars, worn out by relentless retail battles and littered with failed storefronts.

The company that wrote the book on mass marketing is now taking a few pages from the specialty retailer handbook. During an invitation-only media event at Wal-Mart's Bentonville, AR, headquarters this spring, executives drew a blueprint for the company's future — a future that includes implementing many familiar specialty strategies, which, if successful, could leave independent retailers scrambling for another way to compete against the retail behemoth.

At the heart of the Wal-Mart blueprint — and probably the most ambitious of the company's initiatives — is the “store-of-the-community” concept. This refers to stores that reflect their locales (including the wants and needs of local consumers) both inside and out — an approach that has always been at the heart of successful specialty retailing. The stores will also break the mold of the Wal-Mart “super store” by being smaller and more accessible: future stores-of-the-community will be built on 7.8 acres of land or less

Wal-Mart believes that the concept will help the company break out of the cookie-cutter mold that has defined large-scale chain retailing from the get-go. But in instituting the “store-of-the-community” concept, the company is also challenging the retail adage that you can't be everything to everyone; apparently, the Wal-Mart believes it can be almost everything to almost everyone.

Yet achieving a grassroots “feel” will require significant internal changes, especially at the middle management level. A central issue, explains John Fleming, executive vice president of marketing, is to take the community store idea to its most local level, since the composition of each market is very different. This will involve decentralizing the Wal-Mart management scheme.

“If we understand the segments locally, we can then tailor the programs to be very specific for that segment, and then it's not like everything's different,” says Fleming. “In some instances, the product changes only by 2 to 3 percent, but the [store] experience — how we feature the product — is very different.”

To ensure success for the community store concept, Wal-Mart is conducting a decentralization process geared to bringing divisional and regional managers closer to the company's sales associates, and thus closer to the consumer. The result “makes a store more local,” according to Pat Curran, executive vice president of store operations.

Wal-Mart stores-of-the-community are boldly individualistic, not only in their designs and footprints, which reflect the communities where they are located, but also in the merchandise assortments they offer.

“In order to deliver the best customer experience, we need to tailor the store to what [the customer] needs and wants, based on where and how she lives,” says Curran. “Our old structure didn't allow us to reflect those preferences in our stores.”

While Wal-Mart executives portray the community stores as part of a continuing effort to be more responsive to their communities, they also reflect the company's increasing confidence in its ability to successfully micro-manage divergent retail venues.

“With the technology today, it's all very doable,” notes Fleming.

It's an effort that allows Wal-Mart to convert a former factory on Chicago's west side into a multi-story venue with a roof garden, or to build an Art Deco-inspired unit in Hollywood or a western-flavored store in Fort Collins, CO. Likewise, the Wal-Mart in Evergreen Park, IL, reflects an expanded assortment of specialty hair and beauty products for the community's African American base, while the store in El Centro, CA, is has an assortment more to the liking of that area's largely Hispanic customer base.

Yet one of the best examples of a community store is the Wal-Mart in Middlefield, OH, a community that boasts the fourth largest Amish population in the U.S. There, Wal-Mart offers hitching posts to accommodate up to 84 horse-and-buggy rigs outside the store. Inside, there are such Amish necessities as block ice for traditional household “ice-boxes” and plenty of denim material suitable for making clothing

Wal-Mart is also focused on making shopping a positive “experience” for customers — a technique long since perfected by specialty retailers. The goal, says Eduardo Castro-Wright, president and CEO of Wal-Mart Stores USA, is “to enhance the in-store experience.” To achieve this, the retailer is offering more product choices, a wider range of price points — many higher than usual for Wal-Mart — and a number of “solutions” for time-starved customers.

One such solution is to become a true one-stop shopping experience, offering everything from cleansers and detergents to furniture, home decor, gifts, toys and “mass luxury” items (to coin an oxymoron). In order to accomplish this, Wal-Mart is bringing high-end products to its shelves, and merchandising them in ways most often found in traditional department stores and specialty stores.

Yet while loyal Wal-Mart customers will be seeing higher price points on the shelves, those items will continue be balanced by familiar low prices — likely within reach of the higher priced items.

Another of Wal-Mart's goals is to appeal to a broader range of customers — but without going “upscale,” according to company representatives. From the retailer whose mantra has always been the lowest price, a sales strategy that focuses on a wider range of customers, while still encompassing the low price ideal is a real change of heart.

“We want to champion a broader range of customers with more relevant product services,” says Fleming.

But, of course, the retail behemoth does not want to lose touch with its loyal customer base in the process. “We want to keep our most loyal customers coming in for their everyday needs,” says Wal-Mart CEO Lee Scott.

The “loyalist,” or core customer, shops in a Wal-Mart store an average of 63 times a year, and spends 77 percent of her grocery dollars there.

“We also want them to buy merchandise they may not typically pick up at Wal-Mart,” Scott says, adding that the retailer wants “to attract new customers who may not typically shop at Wal-Mart.” In particular, the company is making a concerted effort to understand and appeal to the tastes of women and more affluent consumers.

The customer Wal-Mart is now courting — tagged as the “selective” shopper — shops at Wal-Mart only 46 times a year on average, and spends just 28 percent of her grocery dollar there. “The loyalists shop items and price points, and they love the broad assortments that Wal-Mart offers,” Fleming explains. “It becomes one-stop shopping for them.

“The selective shopper, on the other hand, is looking for solutions. This is a customer who is looking for value for their money. This is a customer who is very focused on convenience; in fact, time becomes their currency ... They shop for value, not just price.”

“Value” is becoming the new Wal-Mart mantra. While the company has always used the term in explaining its consumer proposition, it's now taken on new meaning as Wal-Mart moves from a low opening price point position to a place that offers value in any price point range it enters.

“So our objective is to champion a broader range of customers with products, services and a compelling experience,” Fleming explains. “It's not about going upscale. It's about understanding the customers who are already in our stores, and focusing on the selective shopper. Not at the expense of the loyalist, because that is still a very important segment and we will continue to develop our relationship with that customer — but to focus on the selective shopper and ... drive a deeper level of loyalty with the selective shopper [segment].”

Wal-Mart has already begun the process of broadening its merchandise offerings with the addition of fashion-forward products in categories including gifts, home accents, tabletop, furniture, infant and youth decor, and, of course, clothing.

At the new Plano, TX store, which Scott dubbed the company's “merchandise lab,” Wal-Mart has introduced 3,000-plus unique items. And in its first full month of operation, the store was 42 percent ahead of company projections. Still, only 3 percent of the products in the store were new; the enhanced appearance was achieved by rearranging products to improve the shopping experience.

Of similar importance, general merchandise is outselling consumables in Plano, which according to Scott, “is the exact trend we want to drive throughout our stores nationwide. Plano is teaching us a lot, and it will teach us much more about the future,” he notes.

“What's going on at Wal-Mart these days cannot be denied,” Scott promises, adding: “Wal-Mart is a company in transformation.”