ICSC: International Council of Shopping Centers

Wal-Mart launches new merchandising strategy

Wal-Mart is effectively breaking its 3,400-unit U.S. division into six smaller chains that will target specific consumer segments: affluents, African-Americans, boomers, Hispanics, rural residents and suburban residents. For example, stores aimed at African-Americans will feature more urban-style apparel and ethnic hair care products in addition to expanded gospel and rap music selections. The chain is renovating units at the rate of about 300 stores per year to reflect the new merchandising strategy, Wal-Mart U.S. president and CEO Eduardo Castro-Wright told investors at a conference today. Most of the chain’s rural units will see little change, while suburban and urban locations will change the most, he added.

The chain hopes the new strategy will reinvigorate same-store sales growth, which has been slowing in recent years. And though its product mix will become much less uniform than in the past, Wal-Mart’s sheer size will help it maintain the low prices consumers have come to expect from the chain. “You can drive specificity without sacrificing economies of scale,” he said.

So far, 200 stores have undergone conversion, he said. At one Houston store recently converted to the Hispanic-targeted model, sales per square foot are 7.6 percent higher and gross margins are 156 basis points higher than those at other Houston Wal-Marts, he said. At a suburban Chicago store converted to the African-American-targeted model, gross margins are 250 basis points higher than other area stores.

And the reorganization goes beyond the stores themselves. District managers will no longer be based at Wal-Mart headquarters in Bentonville, Ark., but will live in the markets they oversee in order to stay in touch with local consumers, Castro-Wright said. Executives’ compensation will be tied to regional performance rather than the company as a whole, he added.

The process will take between 18-24 months to execute, Castro-Wright said.