Target and Wal-Mart Give Individual Attention to Customers
Target and Wal-Mart Stores may be the biggest mass merchandisers
in the country, but both believe business results can be improved by tailoring
what they do to individual shoppers.
Last week, Target announced it would begin
delivering its
weekly online ad, "My TargetWeekly," in a new, customizable
form.
The ad, which is
seen by 1.2 million visitors to Target.com on a weekly basis, now lets consumers
create views customized to their preferences as well as providing alerts to
shoppers when their favorite products are on sale. The chain will also add "My
TargetWeekly" to its Facebook page.
"Target is doing what smart retailers have to do: Go to where the customers
are," Rebecca Lieb, vice president at Econsultancy, told USA Today. "You
have to engage people on their own terms."
For its part, Wal-Mart is looking
to custom tailor product offerings to shoppers on a store-by-store basis. While
one-size-fits-all may offer some operational efficiencies and associated savings,
the chain knows that giving shoppers what they want is the key to selling.
A Tampa
Tribune report offered a contrast between two of the chain’s
stores just six miles apart in Florida.
One location offered "jugs of
‘Big John’s’ pickled sausages, $3 camouflage baseball hats and $8 ladies housedresses" and "a
3,000-square-foot section of the store sells yarn, craft supplies and fabric
by the yard."
The second "proudly
displays a row of $1,500 HDTVs, hip college clothing, and not a single bolt
of fabric."
Doug Stephens, founder of Retail Prophet Consulting and a RetailWire BrainTrust
member, told the Tribune, "The days of buying containers of stuff
and loading it into stores with the goal of selling it through over a year
are over."
Target is also adapting product selection based on location.
Jennifer Glass, a spokesperson for the chain, said that stores in urban areas,
for example, offer a wider variety of furniture and household goods intended
for smaller dwellings.
Discussion Questions: Do you think Target and Wal-Mart, based on company
and store size, are capable of achieving a "neighborhood store" feel by
altering product selection on an individual location basis? Do initiatives such
as "My TargetWeekly" help to create a more personal relationship
between retailer and consumer?
Given Walmart’s expertise in supply chain management, it’s essential that they put this skill to good use micro-managing assortments by store. Making this work requires great logistical execution (by both Walmart and its vendors), adept use of its data warehouse, flexible planogramming and above all a committed culture.
Target has tried over the years to tailor its assortments for local preferences and–like Walmart–has better IT tools today than ten years ago to help make it happen. The added initiative of using social-networking techniques to focus their marketing efforts makes perfect sense, and we can expect to see other retailers follow Target’s lead.
Yes, with the right insights into shopper behavior and preferences any retailer can tailor their offering to become more of a “neighborhood store.” The challenge is doing this efficiently and profitably. There are obvious scale issues related with not only the execution, but also the analysis. Proper analytics requires easy to interpret output, supported by large and integrated data models that allow multiple views into the drivers of sales, penetration, buy rate, loyalty, product affinities, segmentation schemes, etc. With these insights, retailers can effectively balance scale and localization.
I’m confused. Hasn’t Walmart been doing this since way back in 2006ish through its SOC (Store of the Community) initiative? No doubt their efforts are becoming more sophisticated and the focus now is on adapting smaller footprint stores to local tastes vs. tweaking 3-5% of the assortments in the bigger boxes, but still. Nothing new conceptually and everyone from Best Buy to Macy’s has since followed suit.
OK–let’s not get too excited here. Less than 1% of households are seeing Target ads on a weekly basis, so this is hardly customizing to Target shoppers. And the ability to customize online presentations to a user willing to let cookies reside on their system has been around a while.
For Wal-Mart, we’ve always had (here in NW Atlanta) different store assortments for stores that are 10 miles apart. Most stuff is the same, and that’s to be expected, but I would go to one store for my guns, ammo, and hunting supplies and another for household linen (okay, I wouldn’t actually go for guns and ammo, but if someone wanted to, I could tell them which store was more likely to carry it).
It is definitely “possible” for Walmart and Target to achieve a “neighborhood store” feel by altering product selection on an individual location basis; however, I remain very, very, very, skeptical that the concept will filter down to the store level in a truly meaningful effective way. I have done business with both organizations, and continue to do so, for more than 20 years, and I find it very challenging for me to believe that either retailer has a system, or the people in place to make this happen beyond just the surface.
I’m with Ms. Spieckerman–I believe Wal-Mart has been utilizing this approach for some time. As data analysis has gotten better and faster I would simply see this as an extension of their historic practices, i.e., an evolutionary rather than revolutionary change. In many case the result is less dramatic than the examples in the article–more of a broader selection of certain categories rather than the addition or elimination of them.
Absolutely, it is possible. It will take focus, time, commitment, and money. They definitely have the revenue to support the effort.
Years ago I worked with a local Wal-Mart where the local manager was concerned about the bad press in the community (i.e., local stores Mom and Pop closures). We were successful in making that Wal-Mart the “happening” place in the community. It can be done but takes effort and execution.
Target, Wal-Mart, and likely just about every other retailer has and will continue to tailor product selection to specific locations to respond to the market differentiation by demographic. If you don’t think so, visit a Wal-Mart or a Target near or on a college campus–especially in late August. There is no question this activity occurs.
With respect to Target’s efforts to tailor views to the customer, this is an example of ‘the experience factor’ of the value equation being defined much differently than one’s imagination even a few short years ago. The customer ‘experience’ today is far different and has factors are yet to be defined. Most different is the vehicle in which customers connect with the retailer and the expectations for the information available. The interactive nature of that experience is equal to if not greater than those in-store, as it is the gateway to entry of the store. Consumers pass those gateways in seconds versus days and hours doing so physically. Most, if not all retailers are likely way behind the consumers expectations in this area. Execution has a completely different definition–selection just as much. Along with the physical site, retailers have a better opportunity to move product to respond based on online interaction, creating the ability to respond to a consumer’s needs much more quickly.
Localized assortments are a must, not a differentiator. But the notion that stores with the square footage of a Walmart or a Target will feel like a “neighborhood store” once the assortments are localized is delusional.
My local CVS has succeeded in creating that feeling for me, but only because the pharmacy associates know my name and talk to me. The fact that the store now carries more food is convenient, but it’s really the interaction I have with the PEOPLE that makes the difference.
Target and Walmart can do a way better job balancing and localizing their assortments, but that will just help their return on inventory investments. The stores are what they are–big box mass merchandising operations. That works well for a large swath of the population and for others (like me) not so much.
There is no new news here. Wal-Mart has been executing customized assortments for years. They have over one hundred basic sets, with variations on each. They have the technology and capabilities to pull it off better than any retailer.
And, be assured, it is not about “feel,” it is about business. If you provide the customers with the products they want, you are going to generate more revenue. The execution of this concept is simple. One needs the technology and all the information will be there. However, most retailers are not focused on the operational end to pull this off. They are still into buying and promoting rather providing and selling.
As for Target…customized online advertising is easy and should be expected in any online campaign. But then again, it is a matter of how the retailer thinks. Are they trying to get the customer to buy what they offer or are they trying to offer what the customer wants to buy?
Data continues to help improve the way retailers do business. RetailLink and dunnhumby are two great examples. I would suggest, however, that not only data being collected at store level be used to make assortment decisions, but also feedback from store managers. Giving a Store Manager a more active role on what is carried could be very helpful. They should have the best handle on their market, consumer behavior and overall economic conditions.
Hy-Vee does an impressive job of letting their store managers run each store as a profit center. Larger retailers could do the same with some up-front work.
I was in my local Wal-Mart last night looking for a common item in the pharmacy area and couldn’t find it. An employee saw me and asked if he could help. My item he said was discontinued on the new planogram that they just reset this week. He said he had already had other customers asking for the discontinued item but there was nothing he could do as these decisions are made in Bentonville. I explained to him that he was driving his customers to Target or Walgreens and he said he was sorry but nothing he could do.
This may be a good business decision for Wal-Mart based on profits but I have to question if their losing customers has been properly factored in. But Wal-Mart is “too big to fail” and apparently makes more good decisions than bad ones.
Target and Wal-Mart will never become the neighborhood store but they have already proved that they can one, tailor a store to fit the markets they serve and two, raise the level of customer service to make a more favorable impression.
Carol is correct; Walmart has been doing (and improving) on their store of the community approach for many years. This program started well before 2006 and was a focus within Walmart as far back as 1990. At that time their focus had more to do with seasonality and timing, but they did have regional buyers in the field helping to fine tune stores assortments regionally.
One of the most significant challenges that Walmart, Target and any other geographically diverse chain faces is in being able to execute modulars at a fine enough level to really serve individual stores. It is a daunting task when considering the challenges that include assortment planning, purchasing, distribution, replenishment, operations and logistics.
That said, it is the holy grail, and the quest must continue.
I agree with other comments and thought Wal-Mart had been attempting this for a few years now. What I don’t see is it being carried through to the store level as a differentiator.
Wal-Mart and Target are behemoths in this industry. They are also like the ocean liner, The Queen Elizabeth, not being able to change direction very quickly. Because of their gross size alone, it takes time to change what they have been doing for so long.
My other concern is at the store level. Wal-Mart and Target may say and dictate these changes from the corporate level. Communicating this to the store level and expecting their poor customer service to adapt to it is another major project. Finding someone on the floor at either store who is willing to assist is often a challenge. There seems to be a fear of making eye contact lest they just might have to speak to and assist a customer.
Charles has it right–localized store schematics mean little absent a systematic practice for implementing them on a daily basis in the store. Four years ago a Walmart executive stated that it used 300 different localized POGs for just three cooler doors in the dairy department. Multiply that across the full range of departments and the intricacy goes through the roof.
The typical store manager doesn’t stand a chance at fully meeting these implementation requirements, which means compliance is chronically poor. I believe this circumstance tends to thwart even the best-considered local merchandising and Shopper Marketing plans.
The largest chains suffer most from this challenge, since the psychic and geographic distance between HQ and individual store is greatest. While I am in favor of localized planning in principal, large retailers first need to refocus on their master systems for making stores work effectively. That will require true collaboration between merchants and operations people who are too often at odds today.
For both Walmart and Target, just about anything is possible, given their resources, the commitment to doing it and the time necessary to get it done. Both have the ability to execute what they conceive.
The question is whether these initiatives are significant enough to move the bottom line in any meaningful way. Both have succeeded by driving efficiencies of scale, slashing costs, and being the low-price store for their customers. anything that raised costs was to be eliminated.
These initiatives, by definition, raise marginal costs, and as such fly in the face of the fundamental business model. If they push to make them a significant part of their operations, they are at odds with their business model. And if they don’t push to make them a significant part of their operations they are insignificant, and likely a distraction from their core mission.
As much as they might like to tailor and customize assortments and marketing messages, in the end they are and will remain mass-merchants, and their customers expect them to consistently deliver the lowest possible prices, day in and day out.
Wal-Mart still follows their one-size-fits-all philosophy, so all this talk about being community oriented is pure hogwash.
When you give individual store managers flexibility in ordering, then you get results. I was amazed with how my local Kmarts have adjusted to FiveBelow stores within a mile of their locations. Last year each individual Kmart ordered thousands of backpacks for back to school and had to price reduce them by 60 percent a week before school started to become price competitive with FiveBelow. This year, different scenario. Kmart orders backpacks in sensible quantities, almost sells out store stock, doesn’t need to have a drastic sale, and the store manager sleeps better at night, because he now has plenty of available sales floor space to unload the Halloween Ghoul shop merchandise from his back cargo shipment containers.
Being a neighborhood or local store is “in” with consumers but translating this into the “feel” of the store is much more difficult, especially considering the store size of a Target or Walmart. Customizable product selection and sales alerts are always a plus with consumers.
Walmart has done an outstanding job of differentiating assortments and tailoring them to local consumers. A recent visit to a Walmart in Appalachia revealed an immense hunting section, complete with blaze orange sweatshirts and an impressive variety of ammunition; Walmarts near my city carry none of this. And the weak economy will continue to pressure big chains to address local preferences.
Much like the battle between good and evil, the “localization” vs. “standardization” conflict always has, and always will exist: it’s not just the cultural issues (someone in Arkansas unable to visualize snow in June) or knowledge issues, but the basic problem of customization vs. economies of scale.
This is not a new question and perhaps the answer has not changed, “anything is possible.” The challenge, honestly, is whether shoppers will respond favorably to such a shift. Looking at Wal-Mart, they have already incorporated varying degrees of localization and have deployed different formats–whether this concept generates what they had hoped/intended is their call.
It’s worth reiterating, shoppers have the final vote with their feet and their dollars.
Yeah, right. The day when retailers achieve consistently high standards of customer service on an individual basis is the day when pigs stop flying. This is blah, blah, blah of the highest order. It is a great idea, but it will never happen. Customers are wising up to retailers. This is actually a realistic posting. Instead of raising expectations that retailers cannot match, they should lower expectations and then wow us with flashes of brilliance in store. Good luck to Target & Wal-Mart. They’re going to need it!
We may disagree on the extent to which Wal-Mart has or has not been effective in localizing its assortments but it seems to me that there are a couple of points that are difficult to dispute.
1. The Wal-Mart model thrives on scale. The more narrow and deep the assortment…the better. That’s just the way it works.
2. America is rapidly becoming 3 countries under one roof. The 2010 census will show that growth is largely concentrated in three regions (the North East, the West and the South).
3. Within these regions, there are no longer large, homogeneous consumer segments for which demand and preferences can be easily predicted as was the case with the Baby Boomer generation. Family composition and lifestyle is shifting dramatically and ethnic markets are growing in influence.
Add to all this with a hyper-connected consumer who knows “what’s new” before Wal-Mart does and it necessitates an entirely new degree of nimbleness. One that flies in the face of the model that got Wal-Mart to where they are today.
Merchandise mix, competitive pricing, and the advertising and availability of a store are the motivation to have customers come to your store; customer service is how you influence how a customer feels about your store.
Of course, altering product selection on an individual location basis always has and will continue to improve the sales and profit margin and to draw the consumer into each location. But to feel like a “neighborhood store,” I don’t think so for the most part. You are not going to get that “everybody knows me by my name” feeling into a customer and for the most part I do not believe that the consumer expects that from a Big Box retailer.
Delivering a weekly online ad and providing alerts when their favorite products are on sale probably will give some feeling of being connected and recognized. It is a great use of new technology to aid customer service through a convenient and direct channel.