Walmart EVP discusses plan to grow grocery sales
Through a special arrangement, presented here for discussion is a summary of a current article from the newmarketbuilders blog.
With majors such as Target and Kroger on one side and oodles of digital upstarts on the other, Walmart faces a daunting challenge in grocery, a make-or-break business for the retailer even as it must also manage a multitude of other categories.
At a presentation at Bentonville Bella Vista Chamber’s WalStreet supplier group in mid-March, Walmart Food EVP Steve Bratspies said Walmart has enjoyed a 20 percent compound annual growth rate in food over the past 20 years. Mr. Bratspies identified several calls to action for continuing and improving upon the trend.
1. Win in fresh
Consumers are eating more fresh foods, but even if that weren’t the case, getting fresh right is the cornerstone of any fully functioning grocery business. Fresh drives trip frequency, which, in turn should amp up sales in higher-margin categories. Mr. Bratspies cited new bakery technology and the introduction of new deli brands as steps in the right direction for Walmart, yet he stated that a "share gap opportunity" exists in fresh nonetheless. He outlined four elements that will frame Walmart’s win-in-fresh framework: assortment and presentation, customer experience, systems, and processes.
In terms of processes, Mr. Bratspies paid particular attention to sourcing, reiterating the need for supply chain transparency and simplification along with the opportunity to leverage local sourcing and respond to market-specific competitive dynamics.
Photo: Walmart
2. Re-energize the center of the store
Mr. Bratspies cited a couple of the consumer preference dynamics that fall into what he identified as "underdeveloped categories" in the center store: dietary needs and organics. (Premium frozen products and adult beverages were also in the mix.) Organics, in particular, have sparked a heated competitive battle, with Walmart once again redefining the retail value proposition and transforming a niche for the well-to-do into an accessible staple with mass appeal.
Mr. Bratspies spoke of the need to manage the space in Walmart’s stores as "the precious asset that it is" and candidly stated that, even though most people would assume that Walmart understands the impact that various category adjacencies have on its business, for the most part, it doesn’t.
3. Expand physical-to-digital integration
To Walmart’s great credit, it was one of the first retailers to snap out of the "bricks are dead" doldrums and leverage its physical scale as a key differentiator. The next challenge, according to Mr. Bratspies, will be to solve the "dysfunction" between online and in-store once and for all, with the ultimate goal of unifying the Walmart experience, regardless of whether customers are shopping in-store, online, or via their mobile devices.
Discussion Questions
How would you assess Walmart’s strengths and weaknesses currently in the grocery category? How should the retailer position itself in grocery against other majors such as Target and Kroger as well as the emerging digital start-ups?
Poll
BrainTrust
Max Goldberg
President, Max Goldberg & Associates
Tony Orlando
Owner, Tony O's Supermarket and Catering
Walmart’s strength is its size. Walmart’s weakness is its size. The key question is whether or not a retail behemoth can be as nimble and transparent as a local grocer. If the company can fulfill Mr. Bratspies desire to win in fresh, they can trump Kroger and Target, although I think Target is already a distant third among the three companies.
Walmart’s success will hinge on offering good quality fresh goods, making organics affordable, allowing transparency in sourcing, aggressive pricing and improving customer service.
Walmart’s strengths are both pricing and variety in its center aisle grocery business. Its weakness is in the fresh departments. Produce is the worst and not getting any better. I asked one associate in the produce department if they had any shallots. She did not even know what they were let alone if they had any left. They do not carry them at our location.
If Walmart wants to compete with the likes of Kroger it needs to get its fresh departments on track. Or Walmart can modify fresh departments such as has been successfully done at Target.
Walmart has the right plan — just need a backup on organics for when people fall off that trend. It will take a few years but it will happen. The core of their grocery operation is rolling strong. Improve the deli and improve the fresh. The game is Kroger and Walmart. Target can only hope the kids it targets age fast enough to help them gain some marketshare.
Right now their food space still doesn’t fit many of the stores. Looks like a quickly added area vs. an integrated part of the shopping experience.
GO Kroger and Walmart. My family’s favorite places to shop.
Walmart’s strength is in the center store and HBA assortment. Their fresh initiative is admirable, but I don’t see them adding a real meat cutting service with butchers, and for me I’m good with that as you know. I think they can upgrade their produce, but the deli is weak and, again, without a commitment to fresh-made salads and entree’s, Wegmans and the other chains will not lose any sleep.
It takes a large amount of quality labor and equipment to run top notch meat and deli departments, and I don’t see this happening anytime soon. Yes they can aggressively improve variety in organics and increase the healthy foods in center store, and it should help sales with their enormous buying power. Consumers IMO still like to have a butcher they can trust to give them exactly what they want, and Walmart simply does not do this, so how can they grow this important part of any food store? That is my two cents for today and we’ll see what happens. The food business is fun, but insane for sure.
It has got to be all about fresh. Fresh is the first category shoppers see upon entering the store and it sets the stage for their expectations for the rest of the experience. I don’t know how many times and how many different ways Walmart has said it’s going to fix fresh, but I continue to see missteps virtually every time I’m in store.
Admittedly, fresh is a hard category do right, and Walmart hasn’t screwed it up as colossally as Target has, but it must get fresh right in order to be successful in any online/grocery home delivery regime. I can’t recall what Walmart’s picking model is for online grocery, but if I’m not comfortable with the produce I can pick off the shelves, why would I trust a faceless employee to select anything better?
In the center store, the biggest competitors remain Kroger (nationally) and Publix (regionally) and I don’t see the wave of consolidation changing the status quo here. I do, however, expect Target to become a bigger threat to Walmart in center store. In fact, I’m already seeing a lot of progress with Target category resets.
Walmart’s per-store grocery sales are staggering compared to all but Costco, so it’s hard to say there is a weakness. Their strengths are sharp pricing, a simple layout and a sensible assortment geared towards their demographics. The weaknesses are shelf disciplines appear low because there’s so often low stock levels and out-of-stocks (these are well documented), but part of the cause goes back to their huge volumes. There might be an opportunity to re-balance space to help and consider restocking cycles — but it’s hard to say without knowing exactly how they are managing these aspects today.
Both Target and Kroger would die for Walmart’s per-store volumes, so it might be a question of if they should position themselves against Walmart. That being said, there’s likely an opportunity in more upscale markets to tweak the fresh assortment, tweak the overall presentation and add/increase the prominence of the associated brands. Perhaps Neighborhood Market is a vehicle for this.
The calls to action are appropriate to Walmart’s getting back on track. Smaller stores, less cluttered and cleaner Supercenters, a real fresh offering and getting online right will serve them well. Particularly if these initiatives can be achieved while maintaining its value image. To beat the emerging competitors a significant refocus as well as concentration of its resources is needed.
Walmart’s center store has gotten boring. The great stackout promotions at market-leading prices have nearly gone away, new item execution is fair to poor and private-label pricing is not as competitive as it should be. Basically the store just feels vanilla.
The Walmart shopper is looking for value first, then variety/selection, then fresh. These priorities should drive its grocery strategy. Center store offers continued opportunity for innovative private label and differentiated value.
As with all mature retailers, successful omnichannel execution, an unwavering commitment to customer-centricity and a relentless focus on customer experience are key to sustainable relevancy.
Walmart’s weakness has always been perishables. Their daily sale pattern makes it difficult to have fresh product on display. Just look at Costco’s meat cutting operation and resulting sales compared to Walmart’s fresh meat offering. Historically, Walmart has cherry picked categories. This makes it difficult for consumers to purchase all their grocery needs. Last but not least is adjusting the store merchandising mix to local consumers not nationwide consumers. Online sales are simple, charge the same price as in the store with free shipping or pickup for orders above a set minimum.
Walmart’s center store is fine. Perhaps they could do a better job with dealing with out-of-stocks. Where Walmart fails is the perimeter and perishables. I don’t think they really want to improve. In order to improve they would need to upgrade their personnel and hire specialists like meat cutters, bakers, sushi makers, produce managers, etc. Currently, their business model is to just hire warm bodies to do mindless tasks. Therefore, in order for Walmart to grow sales they won’t be making from inside their store, they’ll just keep building more stores.
Win in fresh is the headline, of course, but to me, if they can nail BOPIS (buy on line pick up in store) or ship-to-home, they’ll dominate the industry even more than they are already. To make grocery more convenient, as Amazon is struggling to do but has the right idea about, would be the biggest and ultimate win.
We all know that when Walmart says “go,” they can move mountains. And with physical stores as an advantage tied into their already formidable online component, look for them to dominate for a long time to come.
WMT needs to set its sights on better performers. Kroger is one, but Sprouts and good value oriented regionals would have some lessons to give. Fresh (fruit and produce) is important as is deli and bakery.
Their center store is not bad, but not worth the effort alone.
For me, Walmart’s biggest shortcoming is lack of ease and speed of checkout! Walmart could beat Kroger, Trader Joe’s or Whole Foods on price by an Organic Mile and I’d still avoid shopping there on a regular basis. It’s just no fun…so I “tolerate” Costco for bulk and spend most of my dollars at Trader Joe’s, Von’s and Sprouts—with treks from time to time to my local Whole Foods. I realize this may not be the question asked, but to navigate 5 acres of store, huge parking lots and long lines…? Walmart needs to compete on ease of shopping, too.