Wal-Mart eyes lower prices, products and Primark
Walmart is focusing on prices, assortments and “systematic” sourcing
Retail giant Wal-Mart Stores has set out some of its plans to improve sales and market share, including more competitive apparel prices, better assortments, and "systematic" sourcing – and says it welcomes the US arrival of Primark later this year.
The goals, outlined to investors last week by Wal-Mart US CEO Greg Foran after eight months in the role, aim to build on the positive comparable store sales growth booked by the company in the fourth quarter.
Among actions already taken to cut prices "without compromising service or assortment," he cites efforts by the softlines teams to develop a cami, or a tank top, for this season – "great quality, unbelievable price, $1.68. We projected sales for this item to be 30m units this season versus 6m that we did the previous season. [We have] upped the order to 50m units."
Foran also praised the apparel team for driving strong comps over the last year, adding: "When we get the assortment right, we know that the customers respond."
But he noted, too, that: "While we are the largest private label player in the US, we can and should do more," especially when it comes to providing a more competitive price offering in some private label areas.
With its focus on EDLP (every day low prices), the retailer is looking at "how we source product in a very systematic, sensible way, including commodity pricing, especially as we see some of these key materials falling worldwide."
Foran adds: "Wal-Mart's formula is no secret. We use the productivity loop to deliver lower prices to our customers.
Responding to an article in last week’s Wall Street Journal, which suggested the retailer was squeezing its suppliers for more savings, Foran suggested this was nothing new. "You ought to be disappointed [if] a business that’s our scale and size is not…out there checking the prices of commodities and having appropriate discussions."
He also emphasised that it’s "really difficult to have low price unless you have low cost," but that "if you put too much pressure on some cost in your business…it does make sales difficult to achieve. It’s a bit like squeezing a balloon; you can start incurring cost elsewhere in your organisation because you are not as efficient or effective in things like marking product down.
"At the end of the day we don’t want to run a business where margins are going up and costs are going up. We actually want the opposite to occur. We can’t do that unless we grow the top-line. So that’s why we’re very focused on sales, that’s why we’re focused on getting the assortment right, that’s why we’re focused on how we lay stores out."
Another challenge Wal-Mart is relishing is the arrival of value fashion retailer Primark, which is due to open its first US stores later this year.
"When [our merchant team] look at the jeans that might be on sale in Primark or the T-shirt, we’re pulling it to pieces [to] understand where they’re sourcing from. Its slightly different duty rates when you bring product into America."
"We’re going to compete very, very aggressively with Primark or anyone else in their space. We won’t back away from having great prices."
In the three months to the end of January, Wal-Mart's net income rose 12.1% to US$4.97bn, while revenue grew 1.4% to $131.6bn. Comparable store sales increased 1.5%.
Acknowledging that a lot of work still needs to be done to build on this momentum, Foran explains: "We want this year to be the year of improving our stores. So by the time we hit holiday season, our stores are clean, tidy, well merchandised and run by engaged associates."
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