Can Walmart stop its downward spiral in grocery?

Discussion
Nov 18, 2014

Walmart’s well-established problems with inventory management took on a new dimension last week thanks to a leaked memo, which indicated that the grocer is struggling to implement processes to boost grocery sales and stop its perishable grocery items from wilting, molding and rotting on the shelves. According to a New York Times article, the "urgent agenda memo" sent to Walmart store managers nationwide was leaked by a store manager unhappy with understaffing.

The memo instructs Walmart managers to discount meat and baked goods that are approaching their expiration dates to increase the possibility they will sell, as well as to remove expired items and place new stock in the backs and bottoms of coolers.

The memo, according to the Times, also discusses the need for employees to assess the quality of fruits and vegetables along a "Would I Buy It" scale to determine if the products have grown rotten or moldy and should be taken off the shelves. The introduction of Walmart’s internal "Would I Buy It" scale is referenced in an earlier Times article from 2013 about the store’s difficulties keeping fresh produce on the shelves.

Some have argued that Walmart has not been staffing its stores adequately and simply does not have the number of employees required to implement the strongly worded memo, which reminds managers that sales are their number one concern.

Walmart reported an uptick in comp sales for the first time in seven quarters on the company’s Q3 earnings call last week. On that call, CEO Doug McMillon recounted having recently visited store locations in Asia, as well as a more local trip to Chicago, and detailed his experiences.

"Our fresh food in Japan looks great," said Mr. McMillon.

"A customer stopped me to thank us for the value we’ve brought to his community and it was interesting for me to see some of the similarities and differences of our fresh food offer compared to what I’d seen in Japan," Mr. McMillon went on to say. "We are learning across markets and can do even more of that to improve our fresh offering in all of our markets. It’s a key point in our enterprise strategy going forward."

Mr. McMillon also mentioned a Chicago Walmart customer requesting that the grocer add more organic produce.

"She was right; we needed more," said Mr. McMillon. "Interactions like this often remind me how similar our customers are around the world. Everyone is interested in getting quality products at a value."

How does Walmart’s execution in fresh foods compare to its competitors’ in the grocery space? What steps will Walmart have to take to get its grocery department functioning correctly?

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29 Comments on "Can Walmart stop its downward spiral in grocery?"

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Bob Phibbs
BrainTrust

I doubt this is a training issue as much as not allocating necessary bodies to do the grunt labor of actually inspecting everything multiple times a day. You can get away with that with packaged goods but not fresh food.

Everything has a cost.

Nikki Baird
BrainTrust

I have to say, every day away from Central Market (HEB’s answer to Whole Foods) makes me miss it more and more. I have long dismissed Walmart’s produce section as unshoppable, so I have no doubt that they’re struggling. I’m not Walmart’s target customer: I’m much more interested in quality when it comes to fresh than price. But I think their challenges show that even price-driven consumers have a bottom when it comes to what they’re getting for that low-low price.

What surprises me is that the competition doesn’t seem to be much better. Target is my grocery store, but the produce situation there has really declined. My family has taken our business to Sprouts market, which surprisingly isn’t any more expensive, and is much higher quality food. Organic isn’t a priority for me. All I want are bananas that aren’t either flaming green or bug-ridden and mush after three days.

That doesn’t seem like much to ask for, but clearly this is not as easy as it looks. And Walmart, at least in my section of the world, is not the only retailer that is struggling.

Tom Redd
Guest

First, the New York Times readers will have a field day beating up on Walmart. Most readers of that rag love to spend or overspend on food. Many shoppers at Walmart do not have that luxury.

I am not a retail food wizard, but Doug and the gang at Walmart will reshape the processes required to keep food fresh longer. Kroger and Walmart are food giants. Walmart has the Supercenter and Kroger has the super grocery operation (that is changing shape fast).

We shop at both in Scottsdale AZ and both meet our needs. Our Walmart here has a great deli and an always-stocked food center.

Max Goldberg
BrainTrust

What’s foremost in consumers’ minds is that the food they buy won’t make them sick. If Walmart’s produce and fresh items don’t measure up to competitors’ in terms of looking fresh, their grocery sales will continue to decline. Walmart knows what it must do to improve grocery functionality. The question is, will they spend the money necessary to make this happen?

Brian Numainville
BrainTrust

In the hundreds of consumer studies I have conducted over the years in markets across the U.S., one constant has been been the weak, and occasionally average, ratings by consumers of the Walmart produce and meat departments. Whether this current situation is worse or equal to the longtime disappointing ratings in these departments may indeed have more to do with allocating the right labor to rotate/pull products but won’t likely fix the broader quality perceptions.

W. Frank Dell II
BrainTrust

My how times have changed. It was not so many years ago that Walmart was telling the rest of retail world they were the end-all for inventory control. They claimed the retail industry’s lowest out-of-stocks and then they entered the world of food. Every supermarket knows Walmart and Target are weak in perishables. We have talked about this point for years. To solve this problem, Walmart need to understand its customers. American consumers shop Walmart on the weekend like a European Hypermarket. That means they should have basic coverage, fill the front not the back of the shelf, Monday through Thursday. Thursday night fill in the inventory with fresh product. The whole supply chain needs to shift to support the consumers’ buying pattern.

Paula Rosenblum
BrainTrust

I am utterly baffled that the company has not automated this process with Fresh Item Management. It’s not rocket science, for goodness sake. Of course the department is understaffed, but getting already grumpy employees to ask themselves “would I buy it?” feels a bit like rubbing salt on a wound (hence the leaked memo).

Walmart’s lack of sophistication in these areas boggles my mind.

Ed Dunn
Guest
2 years 11 months ago

This appears to be a perishable food problem currently affecting all supermarket grocers, not just Walmart.

I trained myself to wait for the lamb chops behind the butcher glass at a supermarket grocer to reach near expiration knowing that supermarket grocer will place the meat on discount. I also know browning steaks are desirable to experts but undesirable for presentation and will also wait for these steaks to brown to reach discount status. So I trained myself on when perishables will be placed on display, count the days of freshness and predict when it will be discounted to save on my grocery bill.

There is not a solution in place to track perishables and like the apparel retail industry, where discounters are waiting for the out-of-season discount sale, there is also a movement to wait for perishables to reach the threshold where it has to be marked down if not sold.

John Hyman
Guest
2 years 11 months ago

Discounting meat and baked goods that are approaching their expiration dates to drive the rates of sale just makes sense. Removing expired items and placing new stock in the backs and bottoms of coolers may also prove effective (this had to have been thought up by an accountant, the LIFO principal).

Any such initiative, however, will fail unless there is adequate staffing to do the inspections and restocking available.

Rick Myers
Guest
Rick Myers
2 years 11 months ago

Interesting. I never really thought about it, but at “regular” grocery stores you snake your way through the produce before going into the rest of the store. At Walmart, I walk in, go down the main aisle to frozen goods and snake my way back to the back of the store. Then typically I need one or two items from the other side of the store and never make it back to the front where the produce is.

Chris Petersen, PhD.
BrainTrust

Fresh produce and groceries are the life blood of Walmart’s business. In many stores food and consumables account for 50 percent-plus of sales.

More importantly, fresh produce and groceries are the key to driving weekly traffic to Walmart’s giant hypermarket stores. “Would I buy it” is more than a slogan—it is the foundation of keeping Walmart’s core customers coming back as destination shoppers who will then explore other aisles.

Like the other sage commenters, I am shocked to see that Walmart, with all its systems and data, has not been able to solve something this basic.

gordon arnold
Guest

Walmart does not recognize that grocery retail and department store retail are similar in industry type only. The use of coupons, rewards programs and competitive pricing in a large-scale discount grocery store is very different and far more important. These divergences coupled with store layout, staffing and customer service departments are pushing shoppers out the door and away from both sides.

Walmart’s client base see two stores under one roof at the door while the company struggles with “what’s happening here?” Step one should be to have two store managers, staffs and customer service departments reporting to independent district managers. Likewise the marketing methods and timings should also be independent in structure, appearance and release. Without radical replacement of current management process the executives will only see more reports that support incrimination of characteristics instead of isolating problems.

The problem is on the way from being entrenched to becoming accepted. This is not what the company needs when the original purpose included utilizing overages in floor space and not creating even larger overages. This might not be bad if the current company plan is to move out of grocery and into cars and boats or maybe even motels.

James Coolbaugh
Guest
James Coolbaugh
2 years 11 months ago

Fresh food is always a battle between in-stock and spoilage. Any formula for maximizing profit needs to address both the labor needed to manage the fresh food effectively and the proper inventory control systems to monitor and track all aspects of the products.

To state the obvious, what I have found to work the best is to make sure you have as near to real-time sales/inventory tracking as possible, to be able to anticipate both outages as well as items that are not selling. This can alert employees ahead of time to check items and act accordingly. In addition, knowing your positions at any moment can help to prevent over ordering slow moving items or large spoilage items. Any system/process needs to look at overall trends by the day/hour to better manage the inventory.

Walmart’s problems are not unique, but as several have mentioned already I’m not sure they are in tune with the customer shopping patterns. I also agree that asking the question “would you buy it” isn’t the best method for tackling this problem. I’m not sure I would want to buy what Walmart’s employees deem as salable.

Ed Rosenbaum
BrainTrust

That’s great if the fresh food looks good in Japan. But we are not going to go to Japan to buy it. Walmart has been having a staffing problem for years now. This is nothing new to anyone who has ever shopped there.

Christina Ellwood
Guest
Christina Ellwood
2 years 11 months ago

Walmart’s fresh foods are substandard. Labor and store-level accountability are both lacking.

James Tenser
BrainTrust

Walmart’s black produce bins look ugly when they are mostly empty. Yet it may be uneconomic to keep all of them looking full. Here is where operational priorities seem to be in conflict with shopper perceptions in the produce departments.

I say Walmart should assess this problem from the perspective of basket composition. If it learns that its shoppers are leaving the store to buy produce elsewhere, that may well justify establishing a different labor formula specific to the department.

J. Kent Smith
BrainTrust

With Walmart’s very high sales per square foot, there’s an even greater requirement to apportion space properly—specifically, thinking beyond the basic sales per square foot to understand what space is needed to replenish effectively. Effective and store specific seems to be the only way to go, but only in a sustainable, concentrated fashion that enables supply chain to have a seat at the table.

vic gallese
Guest
2 years 11 months ago

Mr. McMillon’s comparison is interesting. Culture is at the base of the problem, especially in perishables.

Merchandise rotation and close date markdowns are part of the food business. WMT certainly must have that in their procedures manuals. That leads us to the “will vs skill”question. Is WMT too understaffed to follow the procedure or are they just less rigorous than their Japanese counterparts?

My experience says it has a lot more to do with culture than the labor hours allowed.
Good results Mr. Millon, much work lies ahead!

Martin Amadio
Guest
Martin Amadio
2 years 11 months ago

Walmart’s strength is built upon items which can be warehoused and shipped regionally. Unfortunately (for Walmart) fresh produce is not one of these items. Fresh produce depends on quick local distribution. This is not to say they can/will not solve the problem, but the issues associated with produce are somewhat outside of the Walmart’s corporate culture/structure.

If any grocers are reading this…this is Walmart’s Achilles Heal when it comes to grocery.

Craig Sundstrom
Guest

What’s behind the problem—indeed; is there really a “problem” at all? Probably not. Sales are not constant, nor are they entirely predictable, so there will always be either out-of-stock situations or unsold items. It seems Walmart wants to have more of the latter, and less of the former. OK, the job (then) is then to have personnel to haul away the dead bodies (as it were). I agree with Paula that it “boggles the mind” that a company should feel a need to issue a memo that is the management equivalent of getting up in the morning.

Carol Spieckerman
BrainTrust

Being based in Northwest Arkansas, I shop at Walmart quite often because it is usually the most convenient option. I’ve found out-of-stocks on basic produce items to be fairly common, quality is generally meh and just this past week, I took home a package of moldy okra. On the last point, Walmart’s produce guarantee sounds like a fine idea but how many customers are going to return to Walmart and stand in a customer service line to return a $3 produce item? I did, once (moldy tomatoes). The item was taken back, no questions asked, then shoved behind the customer service desk without any documentation. Why would Walmart make such a guarantee then not track against it? Finally, Sam’s Club produce is generally pristine, in-stock and often even irresistible. How can that be?

Naomi K. Shapiro
Guest
Naomi K. Shapiro
2 years 11 months ago

The problem, I think, is that Walmart first was a “department” store, and later became a food store, tacked onto the department store—two very disparate things. Second, I am shocked that anyone working with groceries, especially fresh produce wouldn’t know when something is fresh or spoiled (or even unattractive), and once this happens, it leaves a bad taste (pun?) in the shopper’s mouth.

The other shock is that any basic grocer wouldn’t know to put the old produce or meat in the front of the case, and the new stuff in the back. I’ve come across product and meat in several stores that were past their expiration date. That is a big no-no, and I won’t shop anywhere where this exists.

The steps seem so incredibly obvious and easy to execute. That should be a basic part of the training of anyone who works in these places. Don’t just go out there and throw the new stuff into a bin on top of the old stuff. Is that really so difficult to master? And is it really a question of short staffing? At my (imaginary) grocery store, these things just would never ever happen.

Tony Orlando
BrainTrust

Walmart is mostly strong in dry goods grocery, and HBA. I hope they stay that way from my perspective, as we thrive on their lack of running good perishable departments. It comes down to higher skilled labor to do it right, which they do not want, and committing the right people to actually do it right, which they won’t.

Traditional supermarkets are definitely losing the center aisle war, but they have not lost the perishable battle, so again, if you can not commit resources, and actually have real butchers, and homemade food in the deli, than nothing will change. Keep it up, I certainly can use the business.

Richard Hernandez
Guest

As others have said here, this has been an issue for years. Grocers like HEB, Wegmans, Marks & Spencer and the like devote time and personnel to perishable rotation, monitoring of spoils several times a day every day. You can’t only win with price—it only gets you some of the way. Maintaining fresh departments needs to be a consistent company-wide initiative.

Demos Ioannou
Guest
Demos Ioannou
2 years 11 months ago

Nothing they can do can improve their image or grocery department. They can’t be everything to everyone. At some point they will give up on meat and produce and stick with warehouse based products.

SS Kresge…
Montgomery Ward…
Sears…
Kmart…
Walmart…

Just the latest behemoth who is now too big and too slow to do anything about it. Factor in a workforce that is underpaid and stores that are understaffed; they will continue to decline once their expansion is complete.

At least the produce in Japan is nice. I can’t imagine who the sycophantic shopper was who thanked Mr. McMillon…the Assistant Store Manager in disguise, probably.

HY Louis
Guest
2 years 11 months ago

Walmart would have to improve its skill levels among its labor force in perishables along with adding additional man hours. The cost/benefit analysis for Walmart has been to keep the status quo. It’s unlikely Walmart will be recruiting higher skilled labor because of the costs and the stigma of working for Walmart.

Thomas Fox
Guest
Thomas Fox
2 years 11 months ago
I do not expect any changes soon. I have been writing letters to my local Walmart for three years about out-of-stock conditions (especially fast moving non-perishable, items), rotation and especially, significant understaffing. Even the “self-checkouts” are understaffed and often out of order. As the old saying goes, the first step in a solution is to admit you have a problem. That has not happened. The solution to understaffing in the deli department is for the staff to start closing the deli earlier and earlier and using the closed time to do the cleaning that they cannot do during normal operating hours. How smart is it to close a deli at 6:00 PM on Friday, Saturday and Sunday in a 24 hour store? The solution to undertaffing at checkouts was to install self checkouts. And, now the lines are even longer at regular and self checkouts (when the self checkouts are working). Produce – I wouldn’t touch it. Old, mold, and unsold? And, it’s the first section in this store representing what you would expect to find in the rest of the store. I don’t believe I have ever seen an employee in this department while I shopped. Admitting there is… Read more »
Kai Clarke
BrainTrust

Walmart’s fresh food execution is very similar to that of other grocers. Implementation of the memo’s suggestions is the difference between sending out a memo and having it become successful. Only time will tell….

Clyde Mercer
Guest
Clyde Mercer
2 years 4 months ago

It should come as no surprise that Walmart struggles with fresh produce. As the first person to sell Walmart fresh mushrooms when they started in grocery back in the early ’90s, it has always been clear that their primary reason for getting into grocery was to drive more consumers to the non-foods side of the store, which is much more profitable (early studies showed a 35% increase in non-foods sales for converted/replacement SuperCenters vs previous history). As the decades have moved on, they are under increasing pressure to make grocery “pay off” and not be just a consumer draw.

As in all organizations, change must come from the top down, so their leadership must provide the focus, training, and standards for the store level teams. Simply telling them to only put out what they would buy is not specific enough to get the results they need.

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