Wal-Mart to Adapt Stores to Local Demographics

Discussion
Apr 19, 2006
George Anderson

By George Anderson

By its own estimation, Wal-Mart has 1,500 stores that serve what it calls a “significant” African-American population, 1,300 in areas where there are a large number of Hispanics
and 300 serving Asian-Pacific-American consumers. In addition to these ethnic distinctions, Wal-Mart has stores in a variety of locales serving consumers of different economic
circumstances.

The retailer has developed its “store of the community” initiative to better serve the needs of consumers in these local markets. Pat Curran, executive vice president of store
operations for Wal-Mart, told Dow Jones Newswires, the initiative places great emphasis on targeting ethnic tastes.

While the company is in the process of rolling out its “store of the community” program, Wal-Mart already has seen success where it has been implemented.

Wal-Mart’s Curran pointed to a store in Evergreen Park, Ill. as an example. The store serves a customer base that is more than 90 percent African-American. Wal-Mart has increased
the store’s sales by altering the product mix to include more ethnic food selections and health and beauty care items.

The retailer’s new Exsto urban fashion line is designed to better meet the fashion requirements of consumers in stores such as Evergreen Park.

Moderator’s Comment: What type of top and bottom line impact can retailers such as Wal-Mart and others expect from
taking a more targeted ethnic approach to store layout, product selection, etc.? Is ethnicity more important than other factors, such as income, when determining how to best serve
local shoppers?
– George Anderson – Moderator

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10 Comments on "Wal-Mart to Adapt Stores to Local Demographics"


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Matt Werhner
Guest
Matt Werhner
14 years 10 months ago

Eventually, many retailers will move in this direction in order to meet the specific needs of their customer bases and stay competitive. Consumer’s buying habits vary by regions of the country. I agree 100 percent with Christopher’s point in that Wal-Mart must not limit their employee’s ability to order and replenish items in order to meet local demand. This is a crucial aspect. Buying habits, shopping, and product preferences also vary by ethnicity and these groups are further divided into sub-groups. The danger lies in heavily targeting one group and alienating another.

MARK DECKARD
Guest
MARK DECKARD
14 years 10 months ago
In the early 90’s when Wal-Mart was rapidly expanding into new markets across the US, a regional buying program was implemented to regionalize and localize the assortments based on what demographic and seasonal timing knowledge could be gathered from a variety of sources, including comp shopping of local stores. Although somewhat rudimentary, it was hugely successful, but far from perfection. 15 years of history and technological advances later, this deeper application of available data is simply a new level of precision tuning, aided by an army of vendors analyzing data to optimize sales on their own products via Retail Link. Remember CPFR – Collaborative Planning Forecasting and Replenishment? Wal-Mart invented it years before the catchy acronym became the rage in the late 90’s. The company has always sought and responded to the requests of customers and merchandising advice from the “boots on the ground” which is Mr. Sam’s legacy and the root of the company’s long term success. I’m confident that it will continue to do so with unrelenting persistence that is the signature Wal-Mart… Read more »
Mark Burr
Guest
14 years 10 months ago

If I understood some of the comments right, would it mean that the answer is ‘consumer marketing’ rather than ‘ethnic marketing’?

Gwen Kelly
Guest
Gwen Kelly
14 years 10 months ago

I’m getting in on this late and all of the previous comments have made great points. Dan’s comments pretty much mirror my own thoughts on this topic with one exception. Clearly demographic adaptations can be accomplished and optimized. At the end of the day, at the essence of solving the puzzle is acknowledging the core customer base (largely but dictated by geography and ethnicity combined) and providing the in-store experience that will give customers that which they want and need? The retailer who masters that reality will be the winner. Wal-Mart’s strategy around its “store of the community” initiative seems to be demonstrating that reality is top-of-mind.

Dan Raftery
Guest
14 years 10 months ago

George, Wal-Mart already has the income thing figured out. What we are now seeing is the world’s greatest mass retailer applying at least the foundations of targeted marketing. It’s taken a while, but this turn was probably forecast ages ago by some of the more prolific monks in our industry. My guess is that the result will be 4 or 5 ethnic variations on the main theme, which is still a mass market approach, just narrowed a bit. This will be more complicated to pull off than it sounds.

Dr. Stephen Needel
Guest
14 years 10 months ago

The bigger issue is not ethnicity – we’re back to the early ’90s and target marketing or micro-marketing for a retailer. This was the recognition that a particular store’s franchise wants a certain mix of products. The franchise may be income-based, ethnic identification-based, gender-based, religion-based (e.g., living in a Chasidic area) and so forth. Assuming logistics can be worked out so that economy-of-scale losses are minimal, it will always be to the retailers’ benefit to do so.

Christopher Fink, CMC
Guest
Christopher Fink, CMC
14 years 10 months ago

Nothing good will happen unless retailers & manufacturers work together to improve service level behind locally-tailored products. My area Wal-Marts are routinely out of stock on local fast-sellers since corporate instituted the ‘auto-replenishment’ order system. Wal-Mart’s system appears to limit store personnel from ordering to accommodate anticipated demand (or punish their overstocks); instead stores order extra to fill-in out of stocks because the computer didn’t foresee local demand shifts. Get service levels fixed and the concept of tailoring is a sure winner.

Ryan Mathews
Guest
14 years 10 months ago

Ethnicity is an issue but not the issue. All “ethnics” aren’t the same, and so ethnic format stores run the risk of alienating as many as they please. It’s also politically charged. Let’s remember that this is the same company whose website listed Planet of the Apes and Willy Wonka and the Chocolate Factory under African-American interest. There’s just no substitute for KNOWING your customers and that starts when you quit making broad-based assumptions about them and start speaking to them as individuals.

Bernice Hurst
Guest
14 years 10 months ago

For every group there are inevitably sub-groups, only some of which will conform to the larger group’s preferences. Targeting an infinite number of sub-groups may be next to impossible but restricting targeting to the larger group only may increase exclusion and discontent. Translation – each ethnic group includes people of different ages, genders, religious beliefs etc. Claiming to target the entire population of any particular ethnic group is no better than targeting the entire population of the town, city, country, world. Furthermore, shoppers’ purchasing patterns are not always defined by the groups to which they belong. People want and need different things on different days. Trying too hard to categorise makes life difficult for everyone.

Mark Lilien
Guest
14 years 10 months ago

There are at least 2 different ways to customize a local store’s assortment: (1) assume you know what the local demographics will want versus (2) statistical analysis of the store’s selling history, paying only minor attention to the local demographics. In other words, if the store sells what you perceive to be “urban fashion forward” clothing, don’t worry about whether the store is in an urban area or not. The sell-through sends the message that customers prefer it. Too often, custom tailoring the assortment is done via “conventional wisdom” instead of actual buying behavior.

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