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Walmart Heads Back to the Future

They're ba-ack. I'm talking about the 8,500 products that Walmart (WMT) removed to make way for swankier fixtures and streamlined assortments. In its continued effort to stem the tide of a second straight year of sales declines, Walmart is giving up on trying to lure well-heeled customers and headed back to its working class roots. But carrying 10 varieties of toilet paper or toothpaste and calling it a one-stop-shop won't be enough.

More stuff, less cost
A new pricing strategy is in order. A few years ago, Walmart tossed aside "everyday low prices" in favor of "rollbacks" on select items, a move that one former executive likened to a "cancer" that gave competitors like Target (TGT) leeway to hold their prices.

Bentonville execs have instituted several new efforts aimed at turning things around. For one, store managers and product buyers are tasked with checking the competition more often to help ensure Walmart has lower prices on the right mix of items. This will help when managers finally realize that Target undercuts them on a variety of goods.

The retailer is also working more closely with suppliers (think strong-arming to get the most at cost) to lower the cost per item and pass those savings on to customers. And if customers find the item of choice cheaper elsewhere, Walmart promises to match the price of any local competitor's printed ad for an identical product -- even if the shopper doesn't produce the ad.

The latter may cost the retailer a bit of money in the short term as some shoppers try to game the system, but Walmart's looking to build back loyalty as well as sales. If it has to eat some of the cost, I suspect management will look the other way.

Fresh ads
All that industrial spying is going to be in full effect when the world's largest retailer launches its new ad campaign next month. In May, Walmart's "It's Back" ads will tout the company's renewed focus on matching local rivals' prices as products such as fishing tackle, fabric and brand-name groceries find their place among the other 142,000 items carried in most Walmart supercenters.

Location, location
Products, a promise, and a new set of ads may be enough for shoppers to consider Walmart again. However, once they're in the store, they need to fill their carts in order for the strategy to turn the negative sales tide. So Bentonville's management needs to re-master its merchandising efforts too.

Sales at Walmart's namesake U.S. stores account for almost two-thirds of its more than $420 billion in total revenue. Getting comps up by just 1 or 2 percent could have a huge impact on company profits.

To do this, Walmart needs to take a hard look at store layout and recalibrate. In keeping with the men buy, women shop theory of retail, Walmart stores need to cater to both browser and strategic shopper. Maybe those fishing lures need to be more front and center, say next to the shaving cream and deodorant. Likewise, push the kid's clothes closer to the entrance/check out (a la Target), so a harried mom can get the goods without dragging her brood all the way to the back of the store. Toys might be an easier sell across the aisle, too.

Walmart's got an edge over Dollar General (DG) and other similar discount chains. It's overhauled many of the stores in the U.S. chain since 2009 with new layouts, low-profile shelving, bright interior paint scheme, enhanced lighting and easy-to-read signage. The result: Walmart usually feels spacious and organized compared to the cram-jammed shelves of a Dollar General. The latter averages just over 7,000 square feet per store (smaller than most supermarkets) and carry 12,000 core products on cheap fixtures under the glare of industrial-grade lights. Even bargain hunters would rather browse a kindly-lit big box.

With a few minor adjustments to merchandising, Walmart may have the crowds clamoring once again.

Image via Walmart

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