A One of a Kind Wal-Mart
By George Anderson
A sushi bar, 500 kinds of organic produce, baggers at checkouts and $3,500 big screen television sets are just some of the things you’ll find at the newest Wal-Mart Supercenter in Plano, Texas.
To be sure, this is a Wal-Mart unlike any other. The chain is experimenting with new products and services to see if it can go beyond selling everyday staples. The objective is to entice more affluent consumers and encouraging them to buy higher tickets items, as well.
Ryan Lincks, the project manager for the Plano store, said the retailer is not looking to move away from its core customer base but judging if it can add more shoppers with the new format.
Britt Beemer, chairman of America’s Research Group, sees an opportunity for Wal-Mart. “When you’ve already got your stores open 24 hours a day, the only way you’re going to get your sales to increase is for someone to buy an $8 bottle of vinegar instead of a $1.12 bottle of vinegar,” he told the Fort Worth Star Telegram. “They can probably get their customers to spend 20 percent more per visit if they’ve got the right goods in the stores.”
Wal-Mart has no announced plans to take the current store concept beyond this one unit, but instead appears to be using the Plano location as a learning lab.
“There’s so much competition here that the customer will tell us very quickly if we’re doing something right or wrong,” said Wal-Mart’s Lincks. “We’re trying lots of different things. If they don’t work, we’ll try something else.”
Moderator’s Comment: Is Wal-Mart’s test of a more upscale approach to doing business at the new Plano store consistent
with how it has evaluated potential store, merchandising and product strategies in the past? What do you expect are likely next steps for Wal-Mart from the opening of this store?
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George Anderson – Moderator
The Plano area is booming. IKEA just opened a store in nearby Frisco in an area that was rangeland less than five years ago. There is a great mix of housing in the area, from McMansions to nice single-family homes to townhouse/low-rise apartment complexes. The traffic was absolutely atrocious when I was there last year, although they were expanding the highways. The other grocery retailers in the area, Kroger and Albertsons in particular, don’t really offer anything tremendously different than each other or Wal-Mart’s existing Supercenters. Seems like a perfect test market for this store. I’m looking forward to seeing it when I next visit Dallas.
“the only way you’re going to get your sales to increase…”
Buried in the article was that remark, which, I think, hints at the broader – for some much darker, and for some much happier – issue: at some point (even) Wal-Mart will reach a saturation point, and its growth rate – at least here in the U.S. – will slow to a trickle.
As for the test itself, this is a test…. it is only a test; if it is a real success, you will know where to turn for more information.
Middle income families on a tight budget have been Wal-Mart’s traditional consumers. Wal-Mart’s mission has been to provide ordinary people with the things that rich people buy. The new concept store being tested is selling more expensive items to consumers who don’t traditionally shop at Wal-Mart. Yes, this is a new venture. Yes, it is a departure from their traditional mission statement. They have spent years creating the image of “low prices always.” How do you change people’s perception of the company? Not easily. And, if you do, what happens to your current loyal consumes? This will be an interesting test to watch.
Is Plano an appropriate lab environment for a test? If so, how many markets and locations is it possible to extrapolate these results from? I’ve been to Plano recently, and the comments were consistent with my experience. The other aspect of Plano is that it has a strange mix of transplanted urbanites and actual rural residents. How comparable is the Plano market?
What’s the purpose? Is it possible that WM is testing its ability to execute a concept operationally? And maybe not testing the metrics of sales and gross margin? I don’t know. I do know that with an operation of the scale of WM, single location testing feels strange to me. It seems almost impossible that the data generated could be relied upon. I don’t recall too much of my statistics courses, but I do remember that confidence in results is based on “N-1”, with N being the number of data points. So that would give me 0 confidence.
This smells like marketing and public relations to me, as opposed to an actual merchandising and assortment testing platform.
When you have as many stores as Wal-Mart, it’s worthwhile to test all sorts of ideas. Wal-Mart certainly has the resources. Sometimes testing leads to unexpected valuable findings. This isn’t their only testing location. I’m curious to discover what they will learn.
It’s very consistent with how they have evaluated other tests of product and merchandising concepts. And, as it has been said, remember it’s only a test – it’s not the end of the world. It’s very easy to do well at what you do, but it’s not so easy to do well at what you don’t. If that was the case, conventional supermarkets wouldn’t be in the position that they are in today. Being adaptable and appealing to those outside your market or even responding to the evolving needs of your target customer is difficult. And yes, it’s difficult even for the best. Remember when Wal-Mart was going to change the face of car buying? It was the end of the day for car dealers as we know them – wasn’t it? What happened?
It would be great to have three eyes – wouldn’t it? One to keep on your competition and two to keep on your own business. We only have two and its very hard to keep them focused. The biggest difficulty facing retailers today is just that. They are keeping their eyes on Wal-Mart and not on their own consumer.
As pointed out previously, Wal-Mart’s upscale tests are happening all over this area (Northwest Arkansas) and I will tell you that they are indeed successful AND drawing a completely new demographic in addition to (not in place of) the core Wal-Mart shopper. Check out Rogers Pleasant Crossing store to see the designer bag-toting customers, their baskets loaded with lots of the “best” and bits of the “good” and “better” and the young-ish store personnel spiriting away stray shopping carts, straightening racks, and doing everything they can to mitigate shop-off-the-floor syndrome.
Being a Dallas girl and watching the explosion of upscale growth down the Tollway, the Plano/McKinney/Frisco area is a much BETTER location for such a test. This particular store takes everything to the next level and I’ll be there this week to check it out.
Scoffing that particular towns don’t have such a Wal-Mart or that testing such concepts in their own “backyard” is safe misses the point…some areas may “never” and that’s by design. Wal-Mart knows that certain stores, and certain aspects of test stores, can be rolled out to similarly upscale areas but you’ll never see 3,000 of them. My second favorite Wal-Mart next to Pleasant Crossing is one of the dingier versions of a regular old Wal-Mart store in Aurora, Colorado. Why? Fantastic service and a family-owned kind of pride that isn’t often found at ANY store. I bet and I hope they never sell sushi.
Of 6500 consumers, those who do not shop at Wal-Mart or shop there infrequently report that they perceive Wal-Mart to be low-quality goods, poor service, crowded, and time-consuming. The average overall shopping experience rating of Wal-Mart in this group of consumers is 2.1 on a scale of 5 (which translates to a 28%). In other words, Wal-Mart has a very poor reputation among those who are not already Wal-Mart’s customers.
As Kmart proved to us, if you are a retailer with many outlets and have operated for a long time, consumer perceptions of you are very definite and are ultra-stable. Changing product mix, logos, store decor, layouts, service levels, pricing strategies, staff uniforms, advertising “branding”, etc., have a weak impact on consumer perception in the 3 to 5 year time frame, and possibly in the 10 to 15 year time frame. Kmart’s first big push to improve its standing in consumers’ minds, in the late 1980’s uncovered a large pocket of consumers (I forget the exact stat but it may have been something like 23%) who had had some kind of poor experience at Kmart and said they would “definitely not” or “likely not” visit a Kmart in the next 6 months; something like 15% of this group had not shopped in a Kmart in over eight years! There really was not any way for Kmart to reach these consumers who refused to expose themselves to Kmart’s improvements, meager as those improvements were.
The data I first quoted shows Wal-Mart too has a very definite image in the consumer mind. As far as we can tell, Wal-Mart has not really accepted this perception, which will make it almost impossible to try to create a different one because the strategies will be based on incorrect assumptions. This newest experiment will likely prove that.
While this new store concept in Plano appears to be outside the Wal-Mart mold, it is consistent with what I perceive to be the Wal-Mart strategy. The Wal-Mart strategy has always appeared to be one of total domination of a category. Wal-Mart has in the past gone into an area, learned it and then executed a strategy to be number one. Now, Wal-Mart, it appears, wants to become the destination store for everyone. They have the systems, they have the clout and now they are in a learning mode. If I were a retailer of higher end products, I’d keep a watchful eye on the goings on in Plano.
Wal-Mart’s venture into upscale customers is a good example of ego getting ahead of reality. The demise of supermarkets is primarily due to their holding onto the idea that everyone is the target market while Wal-Mart selected a segment. This attempt to take on Target is likely to fail. Upscale consumers do not shop Wal-Mart for many reasons. Upscale consumers want and know quality. They want a pleasurable shopping experience. Placing quality goods into the store will turn off Wal-Mart’s primary customer as well. This looks like it came out of the Sears play book.
Warren is right. A test is a test. The caveat here is that when a retailer defines “everybody” as its potential customer they’ve really just said they have no target customer. That said, scale covers a lot of sins, at least in the short run.
With this kind of a store, Wal-Mart will very likely sell a lot of merchandise to Wal-Mart customers. But, it is unlikely they will attract most affluent consumers to the store. The company has spent many years building a reputation and a marketplace position as the low price place to shop.
Consumers who want better quality merchandise and a better shopping experience avoid Wal-Mart for very good reasons. The merchandise doesn’t fit their expectation of quality and the shopping experience in Wal-Mart stores has become unacceptable to anyone but the most price-driven consumer.
It’s a good, intelligent move. Remember, they’re testing. Usually, you can see all kinds of tests going on at their stores around Bentonville. They’ve just moved this particular laboratory to Plano. It seems everything Wal-Mart does is criticized by somebody, for some reason or other. And they just keep moving. They’d be foolish not to test the waters here, and interpret it in any way that it makes sense for them. Sushi and organic and big screen TVs are becoming somewhat more mainstream, or at least aspirational, for many of Wal-Mart’s shoppers. And if you really study Wal-Mart’s demographics, they aren’t THAT different from Target’s. I wouldn’t expect a dramatic rollout of a new concept by Wal-Mart anytime soon. They’re slow, methodical, careful and generally pretty accurate with meeting consumer needs. It works.
Bringing in more expensive and already available products will not entice upscale shoppers to Wal-Mart. These shoppers will have more fun in Costco, and even Sam’s Clubs.
FIRST, please address WM’s image & reality; and forgo minimum labor; sterileness, if you will; and an executive mindset that believes in “low price / middle of the road quality or lower.”
It takes a long time to change consumer perception, whether they’re current or non shoppers!
Years ago, Sam Walton would visit competitors’ stores armed with his yellow notepad. He would write down those things that the competitor was successfully executing. Then he would bring that information home and adopt it.
This constant change was, in many ways, the driving force that made the company a success. As we all know, the world is changing. A static business model is dangerous, at best.
It is refreshing to see that, over a decade after Sam’s passing, the company is still using a yellow notepad. They’re looking at what the competitors are doing right, bringing it home, and doing it better.
I have little doubt that they will be successful.