Inside Wal-Mart's Sustainability Index

Adapted by Sheldon Cwinn from an original post on GreenerComputing.com

 

Wal-Mart is working with consumer-goods manufacturers and a group of universities, to measure the sustainability of every product it sells. In time, sustainability labels could provide us with information about the environmental and social attributes of consumer goods, much as nutrition labels tell us about the content of the foods we eat.

Here's are some of the system's conundrums however:

PepsiCo buys lots of renewable energy, while a Coca Cola plant recycles plastic bottles. Should environmentalists drink Pepsi or Coke?

Dell is "carbon neutral." Hewlett Packard says it designs for the environment. Whose laptops are more "green"?

So many choices, so little reliable guidance: Clorox GreenWorks or Seventh Generation? Local or organic strawberries? Paper or plastic? Who's to say?

Wal-Mart, that's who.

The giant retailer ($440 billion in revenues in 2012) is developing an ambitious, comprehensive and fiendishly complex plan to measure the sustainability of every product it sells. Wal-Mart has been working quietly on what it calls a "sustainability index" for more than a year, and it will take another year or two for labels to appear on products. But the company's grand plan—"audacious beyond words" is how one insider describes it—has the potential to transform retailing, by requiring manufacturers of consumer products to dig deep into their supply chains, measure their environmental impact and compete on those terms for favorable treatment from the world's most powerful retailer.

There is, of course, lots to say about this. One thing that needs to be clear is that Wal-Mart does not intend to own or manage this index. although the company is driving its creation. To see who's involved, check out the Sustainability Consortium, which is being led by faculty at the University of Arkansas and Arizona State University. Other universities have been asked to join but they are wrestling with such thorny questions as whether measuring the environmental impact of, say, a flat-screen TV qualifies as academic research and what it means for businesses including Wal-Mart to pay for the effort. One academic, who's enthusiastic about the idea of an index, told a recent U.S. publication "Greener Computing" he's getting questions like these from colleagues: "Are we getting hoodwinked into being a corporate shill? How can we defend this as academically legitimate research?" It'll be interesting to see if prestigious institutions like Duke and the University of Michigan lend their imprimatur to this effort.

It probably goes without saying that measuring the environmental impact of a product is a challenge. The consortium intends to use a tool called Life Cycle Assessment, which measures production, shipping, use and disposal. The consortium website says:

The Consortium has set an initial and ambitious goal of establishing the scientific standards to measure the sustainability of consumer products and is committed to ensuring that the system it establishes is credible, transparent, and user-friendly.

Measurements of sustainability will be holistic and account for both environmental and social imperatives throughout the entire life cycle of the product including manufacture, distribution, consumer use, and post-use. These measurements will be derived from four areas: energy and climate, material efficiency, natural resources, and people and community.

Notice the reference there to "social imperatives." Wal-Mart wants "people and communities" to be part of the index, meaning that such squishy questions as wages and factory conditions in the developing world will have to be factored into the accounting. "There are all sorts of thorny issues," an insider says. "Do you use U.S. working standards in the developing world?"

Matt Kistler, Wal-Mart's sustainability leader, says the objectives of the index are to:

• Facilitate selection of an exciting basket of preferred products
• Drive innovation and continuous improvement
• Continuously track Walmart's supply chain performance
• Empower Walmart's buyers/suppliers and make them accountable

On that last point, Matt has a presentation that includes a list of 16 specific questions for Wal-Mart suppliers–as I recall, the company has about 60,000 suppliers–asking if they have measured their greenhouse gas emissions, set public targets for reducing waste, tracked the origin of the things they make and managed social compliance at their factories. No wonder the consumer goods makers are nervous about the index.

The index, Kistler says, is being designed to "create a race to the top."

If all goes according to plan, this will be be an amazing race to watch.

Wal-Mart's Inventory Problems Continue.

 Adapted from Bloomberg.com

“We have to get better and remain laser-focused every day because momentum can turn against you in a second,” said Bill Simon, the executive vice president and chief executive officer for Wal-Mart’s United States operations, according to minutes from a February 1 meeting, seen by Bloomberg at the end of last month.
 

Shares of the retailer are up 23.08 percent over the past 12-months and 9.59 percent this year to date, but those fundamentals belie serious problems at Wal-Mart. Earlier in February, an email from Wal-Mart’s vice president of finance and logistics, Jerry Murray, leaked to Bloomberg announced to the world that the company’s sales were a “total disaster.”

The situation was exacerbated when Simon commented at an executive officers’ meeting, leaked once again to Bloomberg, that the company has inventory problems. “We run out quickly and the new stuff doesn’t come in,” he stated, noting that these “self-inflicted wounds” were Wal-Mart’s “biggest risk.” As the publication outlined in an article published Tuesday, Wal-Mart does not have enough workers to restock the shelves, according to interviews conducted with store workers. In the past five years, the company has added 455 stores in the United Stores, a 13 percent increase according to regulatory filings. But the company’s employee count dropped by approximately 20,000 in the same period…

This thinly spread workforce has had widespread consequences. As several interviews with Wal-Mart customers served to prove, shoppers are moving elsewhere. “If it’s not on the shelf, I can’t buy it,” former customer Margaret Hancock told Bloomberg recently. “You hate to see a company self-destruct, but there are other places to go,” she added, noting that Wal-Mart’s loss has been a gain for stores like Target and Safeway.

The problem is not that Wal-Mart does not have the merchandise to fill its shelves, a point that was emphasized by the company in response to Bloomberg’s article. But it is piling up in aisles and in the back of stores because of its labor issues.

“Our in stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country,” Brooke Buchanan, a Wal-Mart spokeswoman, said in an emailed statement. “Two-thirds of Americans shop in our stores each month because they know they can find the products they are looking for at low prices.

But despite the points that Buchanan highlighted in that statement, customer satisfaction has continued to deteriorate. Last month, the American Customer Satisfaction Index ranked Wal-Mart last among department and discount stores, and in the past six consecutive years, the company has either tied or taken the bottom spot. Even worse, in the last week, Wal-Mart traded at a 1.4 percent discount to Target on a price-to-earnings basis; comparatively, over the past two years the company has averaged a 5.9 percent premium to its rival, and it even traded as high as a 22 percent premium in January 2012.

Zeynep Ton, a retail researcher and associate professor of operations management at the MIT Sloan School of Management, has carefully assessed the company’s customer satisfaction problems. “When times were good and people were still shopping, the lack of excellence was OK,” he told Bloomberg. “Their view has been that they have the lowest prices so customers keep coming anyway. You don’t see that so much anymore.” Shoppers are “so sick” of Wal-Mart’s inventory problems, he added.

As Ton’s assessment indicates, Wal-Mart’s inventory problems have coincided with slowing sales growth, a problem noted by Murray in his leaked emails. In the company’s earnings conference call on February, CEO Bill Simon stated that same-store sales in the United States for the 13 weeks ending on April 26 will be little changed.

What Other Retailers Can Learn From Wal-Mart

 
Mickey Alam Khan is editor in chief of Mobile Marketer and Mobile Commerce Daily

Whatever people might say about Walmart, the discount retailer understands the power of marketing – on television and, increasingly, on mobile. Consider its Walmart Rollbacks campaign.

The Bentonville, AR-based company has unleashed a torrent of TV commercials drawing attention to discounts across all merchandise. That effort coincided with a splash on its Web site at www.walmart.com and also through an SMS campaign to consumers on its opted-in database.

The Walmart texts are fairly matter of fact. Here are three sent to this writer this month reproduced in their entirety:

"FREE MSG: Walmart Rollbacks. 17-21oz Frosted Flakes, Froot Loops, Corn Pops & Apple Jacks now $2.94, was $3.28. Reply HELP for Help;STOP to Cancel"

"FREE MSG: Walmart Rollbacks. 40oz Heinz Ketchup $1.98, was $2.42. Slimfast RTD Chocolate now $5.00, was $5.97. Reply HELP for Help;STOP to Cancel"

"FREE MSG: Walmart Rollbacks. 24pk 12oz cans of Coke, Pepsi & Dr. Pepper for just $5. That’s $.25 per can. Price may vary in OK, WI, HI AK, NY, PR & CT."

These text messages from Walmart’s 63257 common short code were sent almost a week apart. Notice how they push everyday items – nothing fancy, but household staples such as cereals, ketchup and soft drinks.

SupercenteredWalmart’s goal is obvious: drive traffic to its stores.

The Rollbacks campaign comes just as major retailers are ramping up their spring marketing efforts.
Plus, the government is indicating that the economy is on the mend and consumers are opening wallets, so it’s logical for marketers and retailers to feel more confident about their marketing outreach.

The interesting development with this economic recovery, however slow or tepid it may be, is that Walmart’s last-quarter earnings did not grow at the usual clip while sales were up.

The general consensus is that discounters tend to perform better when the economy slumps since consumers are under pressure to shop for bargains. So when the economy improves, consumers also spend more at department stores, specialty retailers or malls – at least, that’s the conventional wisdom.

Which means that in good times discounters such as Walmart must run more marketing to convince consumers to shop by price instead of paying more for brand loyalty at other retail chains.
But Walmart is clever: the retailer did not forget to mention brand with price in its SMS messages. Hence the mention of Heinz Ketchup, Slimfast and Coke, Pepsi, Dr. Pepper in its texts.

Point is, Walmart is using SMS as a tool to drive traffic to stores. It doesn’t cost much and it is timely. The calls to action are simple and related to offers of that week or, in this case, the Rollbacks.
Walmart’s TV, circular, online and mobile Rollback efforts are all coordinated.

Why more retailers can’t ape Walmart or do one better is baffling. Tapping the existing customer base to sign up for opted-in SMS alerts is the logical first step. The next is to build this relationship with offers that really matter to the opted-in consumer.

This writer signed up for Walmart SMS offers last November when the program launched. SMS messages seemed to cease after the holidays until the spring effort reactivated SMS to support other media.

That Walmart short code costs only $500 per month to lease – chicken feed for a retailer whose annual sales last year was $450 billion
                                                                                                                                                                                                                                                                                                                                                                                                                                                               It’s not to say that other retailers aren’t doing what Walmart is with SMS. Victoria’s Secret is even better with its SMS marketing, as has been well-documented.

SMS can stoke desire, even if it’s not eye-candy material – in other words, an application.
Retailers sometimes miss the wood for the trees, fussing over elaborate mobile measures when the easiest and the first step should be creating an SMS program backed by a memorable short code and keywords.

What’s good for Walmart should be good for all retail. Walmart is talking to consumers about the thing that matters heavily to them – price – in the language they most commonly understand: SMS.
Walmart gets it. The common short code offers the common touch.

Editor in Chief Mickey Alam Khan covers advertising agencies, associations, research and mobile marketing issues, as well as column submissions. Reach him at mickey@napean.com.

  

Wal-Mart's Empty Shelves Leave Consumers Searching for Alternatives.

Customers Flee Wal-Mart Empty Shelves for Target, Costco

By Renee Dudley - Mar 26, 2013 9:47 AM ET Adapted from Bloomberg.com

Spencer Platt/Getty Images 

 

Margaret Hancock has long considered the local Wal-Mart Stores Inc. (WMT) superstore her one- stop shopping destination. No longer.

  

Last month, Wal-Mart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company had either tied or taken the last spot. 

During recent visits, the retired accountant from Newark, Delaware, says she failed to find more than a dozen basic items, including certain types of face cream, cold medicine, bandages, mouthwash, hangers, lamps and fabrics.

The cosmetics section “looked like someone raided it,” said Hancock, 63.
Wal-Mart’s loss was a gain for Kohl’s Corp. (KSS), Safeway Inc. (SWY), Target Corp. (TGT) and Walgreen Co. (WAG) -- the chains Hancock hit for the items she couldn’t find at Wal-Mart.
“If it’s not on the shelf, I can’t buy it,” she said. “You hate to see a company self-destruct, but there are other places to go.”

It’s not as though the merchandise isn’t there. It’s piling up in aisles and in the back of stores because Wal-Mart doesn’t have enough bodies to restock the shelves, according to interviews with store workers. In the past five years, the world’s largest retailer added 455 U.S. Wal-Mart stores, a 13 percent increase, according to filings and the company’s website. In the same period, its total U.S. workforce, which includes Sam’s Club employees, dropped by about 20,000, or 1.4 percent. Wal-Mart employs about 1.4 million U.S. workers.

Disorganized Stores

A thinly spread workforce has other consequences: Longer check-out lines, less help with electronics and jewelry and more disorganized stores, according to Hancock, other shoppers and store workers. Last month, Wal-Mart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company had either tied or taken the last spot. The dwindling level of customer service comes as Wal- Mart (WMT) has touted its in-store experience to lure shoppers and counter rival Amazon.com Inc.
Wal-Mart (WMT) traded at a 1.4 percent discount to Target last week on a price-to-earnings basis after averaging a 5.9 percent premium to its smaller rival in the past two years. Wal-Mart traded as high as a 22 percent premium to Target in January 2012. Wal-Mart rose 0.3 percent to $75.05 at 9:45 a.m. in New York.
“Our in stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country,” Brooke Buchanan, a Wal-Mart spokeswoman, said in an e-mailed statement. “Two-thirds of Americans shop in our stores each month because they know they can find the products they are looking for at low prices.”

‘Getting Worse’

Last month, Bloomberg News reported that Wal-Mart was “getting worse” at stocking shelves, according to minutes of an officers’ meeting. An executive vice president had been appointed to work on the restocking issue, according to the document.
At the supercenter across the street from Wal-Mart’s Bentonville, Arkansas, home office, salespeople on March 14 handed out samples of Chobani yogurt and Clif Bars. Thirteen of 20 registers were manned -- with no lines -- and the shelves were fully stocked.
Three days earlier, about 10 people waited in a customer service line at a Wal-Mart in Secaucus, New Jersey, across the Hudson River from New York, the nation’s largest city. Twelve of 30 registers were open and the lines were about five deep. There were empty spaces on shelves large enough for a grown man to lie down, and a woman wandered around vainly seeking a frying pan.
Wal-Mart’s restocking challenge coincides with slowing sales growth. Same-store sales in the U.S. for the 13 weeks ending April 26 will be little changed, Bill Simon, the company’s U.S. chief executive officer, said in a Feb. 21 earnings call.

Target Premium

“When times were good and people were still shopping, the lack of excellence was OK,” said Zeynep Ton, a retail researcher and associate professor of operations management at the MIT Sloan School of Management in Cambridge, Massachusetts. “Their view has been that they have the lowest prices so customers keep coming anyway. You don’t see that so much anymore.”
Shoppers are “so sick of this,” said Ton, whose research, published in Harvard Business Review, examines how retailers benefit from offering good wages and benefits to all employees. “They’re mad about the way they were treated or how much time they wasted looking for items that aren’t there.”
Retailers consider labor -- usually their largest controllable expense -- an easy cost-cutting target, Ton said. That’s what happened at Home Depot Inc. (HD) in the early 2000s, when Robert Nardelli, then chief executive officer, cut staffing levels and increased the percentage of part-time workers to trim expenses and boost profit. Eventually, customer service and customer satisfaction deteriorated and same-store sales growth dropped, Ton said.

‘Too Expensive’

“When you tell retailers they have to invest in people, the typical response is: ‘It’s just too expensive,’” Ton said.
Adding five full-time employees to Wal-Mart’s (WMT) U.S. supercenters and discount stores would add about a half- percentage point to selling, general and administrative expenses, according to an analysis by Poonam Goyal, a Bloomberg Industries senior analyst based in Skillman, New Jersey. Assuming the workers earned the federal minimum wage and industry standards for health benefits, the added costs would amount to about $448 million a year, she said. In the year ended Jan. 31, Wal-Mart generated $17 billion in profit on revenue of $469.2 billion.

Barren Landscape

At the Kenosha, Wisconsin, Wal-Mart where Mary Pat Tifft has worked for nearly a quarter-century, merchandise ready for the sales floor remains on pallets and in steel bins lining the floor of the back room -- an area so full that “no passable aisles” remain, she said. Meanwhile, the front of the store is increasingly barren, Tifft said. That landscape has worsened over the past several years as workers who leave aren’t replaced, she said.
“There’s a lot of voids out there, a lot of voids,” said Tifft, 58, who oversees grocery deliveries and is a member of OUR Walmart, a union-backed group seeking to improve working conditions at the discount chain. “Customers come in, they can’t find what they’re looking for, and they’re leaving.”
Years ago, supervisors drilled a message into employees’ heads: “In the door and to the floor,” Tifft said. That mantra now seems impossible to execute.

‘No Manpower’

“There’s no manpower in the store to get the merchandise moving,” she said.
At the Wal-Mart store in Erie, Pennsylvania, 26-year-old meat and dairy stocker Anthony Falletta faces a similar predicament.
“The merchandise is in the store, it just can’t make the jump from the shelf in the back to the one in the front,” said Falletta, who works the second shift. “There’s not the people to do it.”
In both stores, departments have merged, leaving some areas with limited or no staff coverage, they said, and workers rarely have time to finish all their tasks by the end of the day. In the morning, employees scramble to set out new merchandise, put returns back on shelves and handle customer inquires, they said.
“There is definitely some links broken in the chain, and I don’t know how long they’re going to go on like this,” Tifft said.

Vicious Cycle

Wal-Mart is entangled in what Ton calls the “vicious cycle” of under-staffing. Too few workers leads to operational problems. Those problems lead to poor store sales, which lead to lower labor budgets.
“It requires a wake-up call at a higher level,” she said of the decision to hire more workers.
Falletta, the meat and dairy stocker in Erie, said his weekly hours are unpredictable. He would like to work a full 40 hours and sometimes gets only 25. Falletta and others interviewed for this story said management bonuses are based partly on minimizing store payroll.
According to Rochelle Jackson, who works at the jewelry counter at a store in Springfield, Missouri, a supervisor recently explained the number of hours available to schedule employees corresponds to sales performance: The worse the sales number, the fewer hours available.
“We’re not getting as many sales because there’s simply no one to help the customers throughout the stores,” said Jackson, 24, who has worked at two Wal-Mart stores since 2009. “I asked, ‘Why can’t we have enough hours to make the store work?’ They said, ‘It’s orders from Home Office,’” she said.

Cutting Hours

Jackson said her store began cutting hours a year ago, adding that “it hasn’t been really bad until this year.”
Staff shortages at cash registers during peak hours require Jackson and her co-workers on the sales floor to check shoppers out “while we are trying to restock the shelves, help customers and do other assigned projects,” she said. The so-called Code 7 to the registers leaves a vacuum across the store’s departments, she said.
Customers looking for groceries ask salespeople in the shoe department for help because they can’t find what they’re looking for, Jackson said.
In the fall, Tim White, a 36-year-old attorney, tried to buy wall paint at the Wal-Mart near his home in Santee, California.
“You wait 20, 25 minutes for someone to help you, then the person was not trained on mixing paint,” White said. “It was like, you have to help them help you.”

‘Maddening Inability’

White, who has six children, said while long checkout lines irritated him, “the number-one reason we gave up on Wal-Mart was its prolonged, horrible, maddening inability to keep items in stock.”
The store would go weeks without products he wanted to buy, such as men’s dress shirts, which he found only in very large or small sizes and unpopular colors, he said.
“Pretty soon, they were even out of those,” White said. “I would literally check every so often at different Wal-Marts. They would go two or three months with the shelves looking exactly the same.”
When Wal-Mart was out of stock of his preferred types of shaving lotion or razors, White would “drive next door to Target where they had it in stock all the time,” he said.
The White family’s visits to Wal-Mart -- which had been a several times a week occurrence -- became less and less frequent until they stopped this year. The eight-member clan now shops at Target and Costco Wholesale Corp (COST).
“Things might be a little bit more expensive, but not so much so that it would keep me away,” he said.

Costco Productivity

Ton’s research has centered on retailers that include discount club Costco, whose chief executive officer, Craig Jelinek, offered his support publicly earlier this month for legislation to raise the federal minimum wage.
Costco, which offers a starting hourly wage of $11.50 in all states and employee schedules that are generally predictable, has higher worker productivity and a lower rate of turnover than its competitors, Ton found.
Hancock, the retired CPA in Delaware, said she hasn’t abandoned Wal-Mart altogether because she likes the low prices on the items she can find in stock. White, the shopper in California, said those low prices were crucial to his family as he started out his career.
“When I was in law school, it really helped us out,” White said.
Wal-Mart shoppers for more than a decade, White’s family continued to shop there even once he started earning more money.
“I was pro-Wal-Mart even when our friends rolled their eyes,” he said. “I don’t defend them anymore.”
He added a caveat: “They could get us back if they fixed these problems.”
To contact the reporter on this story: Renee Dudley in New York at rdudley6@bloomberg.net

Understanding Wal-Mart's Business Strategy

By Sheldon Cwinn

Business strategies Wal-Mart uses and how they differentiate their services and products.

There are 3 generic business strategies and they consist of

- The Focus strategy,
- The Differentiation strategy,
- and Overall Cost leadership strategy.

The Focus strategy is usually defined as focusing on offering products and services to a particular market segment or buyer group, within a segment of a product line, and/ or to a specific geographic market. The Differentiation strategy is defined as offering a product or service that is perceived as unique in the marketplace. Wal-Mart‘s business strategy is Overall Cost Leadership, offering their customers great quality service and products at a lower price than their competition. Overall Cost Leadership is defined as offering the same or better quality product or service at a price that is less than what any of the competition is able to do. In achieving this goal it relies on superior Supply Chain Management through automation and supplier relationships, that ensures products are available to their customers when they need it. The items offered are broken down into products and services, products. Products would be privately labeled brands such as, “George, Metro 7, Mainstays, as well as national brands such as Tide or Levis. Services that they offer would be tire changes, oil changes, and photo printing.

There are 5 market forces that govern the way supply chains operate and how Wal-Mart reduces both buyer and supplier power.

The five forces are
- buyer power,
- supplier power,
- threat of substitute products and services,
- threat of new entrants,
- and rivalry among existing competitors.

Wal-Mart follows the five forces business strategy.

Buyer Power - is affected by how big your purchasing power is and how much revenue you constitute to your suppliers as well as other things. For instance Wal-Mart has a lot of power with suppliers because it buys so much of their inventory and is thus a large percentage of those companies revenues. It is no surprise then that these companies have lived and died with Wal-Mart's orders and would do anything to protect their business with them. Buyer power constitutes about 55% of the five forces model that Wal-Mart uses, since the Company’s sole purpose is to ensure that its customers are, “Saving Money, Living Better”. Buyer power would also include their employees. Wal-Mart was the first national chain to institute employee discounts. It considers its employees as "associates" and gives each employee respect. Wal-Mart also gives them support through an open door policy. Wal-Mart also provides great job security (Wal-Mart rarely fires anybody - thay may cut their hours though....) Wal-Mart's intent is to create happy employees which transfers to happy customers. More then that, Wal-Mart employees are fiercely loyal. Did you know that 15% of all product sourcing comes from employee suggestions, and employee purchases account for 8% of all purchases! That amounts to billions of dollars comming from its own workforce.
Supplier power -  Wal-Mart ensures that its suppliers come from a diverse group and that it never relies on any particular single supplier in any given fine line or product category. Furthermore, Wal-Mart is always turning over suppliers, and introducing new products in each product category. This diversity is passed on to consumers, and makes their shopping experience more exciting. The average Wal-Mart store has about 80,000 SKUs on sale. A few years ago Wal-Mart changed its merchandising policy by cutting the amount of items sold by each Wal-Mart store by 25%. The idea was to carry more inventory of established products. This proved to be less successful.  It is the diversity of merchandise at store level that keeps consumers comming back again and again. This represents 35% of Wal-Mart's marketimg strategy.
Threats of Substitution - Because Wal-Mart is always sourcing new products and new vendors, the threat of competition to suppliers is enormous. Here is how Wal-Mart uses the threat of competition to its advantage. Vendors are considered "partners". As such they are "protected" and have first right of supply to the company. For example, if you are selling Wal-Mart scented candles, and Wal-Mart has found an alternative supplier of less expensive merchandise, they will then ask if you can match the prospective new competitor's prices. Because Wal-Mart usually represents between 20% and 50% of most suppliers purchases, it doesn't take long for the supplier to price match. The threat of competition acts like a guillotine over each supplier's head.
Threats of new entry To create entry barriers, Wal-Mart employs exhaustive market research on what customers are actually purchasing. They then ensure that they are able to deliver, and become the only store chain offering that product at a price the customers and afford. An example would be Norelco razors. Wal-Mart's supplier relationship with their supplier is that they get new models 60 days in advance of other retailers. Furthermore Wal-Mart does away with accessories like supplying a case with the razor, so Wal-Mart not only has the product first, but also has the product at the lowest possible price.
Rivalry - is how competitive an industry is. For instance, if there are lots of companies selling essentially the same products, there will always end up being a price war which will severely hurt the company' profits. Wal-mart has such low prices that it has made it tough for competitors to make a profit. Actually what Wal-Mart does is target about 100 items that consumers need on a daily basis, usually consumable products like Tide. They then take very little profit on those products and offer them at prices significantly lower than the rest of the market. This way consumers have the illusion that the other 80,000 items are also at the lowest possible price. In fact, they use their private lable brands to make proce comparisons difficult. Also it will have specific lines of products developed by national manufacturers, for example Levis Jeans. If you purchase a pair of Levis at your local Wal-Mart, you will notice that the jeans come from "the Signature Series..." In fact the jeans are made for Wal-Mart in factories over-seas to Levis specifications. They wind up with a product line that costs 65% at retail of what Target sells Levis jeans for. And Levis can get away with it , and still have Target as a customer because strictly speaking Wal-Mart  is not selling the same product.

Wal-Mart's Supply Chain - The Result of a Convergence of Technology

By Brittany Wallach - walmart.blogspot.ca

“Sam Walton didn't care much for technology. The legendary patriarch of Wal-Mart Stores was well-known for his lack of excitement about ‘computers,’ as he called the company's IT systems. ‘Truthfully, I never viewed computers as anything more than necessary overhead,’ he wrote in his 1992 memoir, Made in America. ‘A computer is not—and will never be—a substitute for getting out in your stores and learning what's going on.’ Many still consider Wal-Mart's pioneering, IT-driven supply chain to be the world's most efficient, and the company's technology standards still command respectful attention from its thousands of suppliers.” – (Thomas Wailgum, cio.com)


The leading innovative progression of technology through Wal-Mart has been a key issue to its success. The technology aspect of the retail giant has kept Wal-Mart’s prices lower than its competition. Wal-Mart’s networks are cutting edge, communicating to every employee in the company from the cashier to the CIO. Strategically outsourcing their technical communication has allowed Wal-Mart to focus on the business itself with efficient mobility and low prices. The biggest move Wal-Mart has made to improve their system intelligence is outsourcing their databases to NCR Corporation bringing their total disk storage to over 7.5 terabyte make it the largest commercial database system in the world. The Neo Vista Company, providing Wal-Mart with software which was tailored to match the requirements of the database environment makes a great collaboration with their NCR databases. The software provided by Neo Vista, ERP, has helped management effectively communicate with other departments such has accounting and human resources which is called Data-Mining. Data mining enables any employee in Wal-Mart to access key information about any particular item sold in real time. To help the communication, Wal-Mart has pioneered satellite system linking stores and headquarters, but has switched to the frame relay method of transmitting data over shared, publicly owned phone lines which is used on its DS3 network that runs at 44.736 Mbps which virtual circuits connects multiple offices. Although one can see how a Data-Ware house is the foundation of Data-Mining, the incredible idea of reaching the information from any location has been so innovative that it had brought Supply Chain Management a basis for any retailer.



What my team has found the most interesting about Wal-Mart is the simplistic idea which had created supply chain management. The interesting aspect of the whole idea is how it all comes together. There has been so much though and innovation developed to create the success of supply chain management. The company who controls the database, the company who provides a particular software, the LAN connections, interface and the devices and components such as the network hubs which all collaborate to enable employees to access make sense of the information. Wal-Mart has been the pioneer of Supply Chain Management and it would not exist without the network planning and configuration of the Data-Warehouse, Data-Mart and Data-Mining.

18 Amazing Facts About Wal-Mart

by:  Sheldon Barry Cwinn (adapted from Business insider.com)

Sometimes we forget just how amazing Wal-Mart actually is. These crazy 18 facts will allow you to understand the enormity of Wal-Mart as a global corporation....


1- In fiscal year 2012, Wal-Mart registered approximately $444 billion in sales, which is $20 billion more than Austria's GDP. If Wal-Mart were a country, it would be the 26th largest economy in the world. 

2 - Wal-Mart has more employees worldwide — 2.2 million — than the population of Houston. The mega-retailer employs 1.4 million people in the U.S. alone.

3 - If Wal-Mart was an army, it would have the second largest military in the world, behind China

4 - Wal-Mart is bigger than Home Depot, Kroger, Target, Sears, Costco, and K-Mart combined.

5 -The average family of four spends over $4,000 a year at Wal-Mart.

6 - Each week, Wal-Mart serves more than 200 million customers at more than 10,400 stores in 27 countries.

7 - One of every four dollars Americans spend on groceries is spent at Wal-Mart.

8 - In 2010, CEO Michael Duke's annual salary of $35 million earned him more in an hour than a full-time employee makes in an entire year.

9 - In 2009, Walmart sold more bananas than any other item.

10 - China's exports to Walmart accounted for 11 percent of the growth of the total U.S. trade deficit with China between 2001 and 2006.

11 - If  Wal-Mart's more than 900 million square feet of retail space were spread out over one place it would take up roughly 34 miles, which is about 1.5 times the size of Manhattan.

12 - Wal-Mart parking lots alone take up roughly the size of Tampa, Florida.

13 - In the year 2000 Wal-Mart was sued 4,869 times, or about one lawsuit every 2 hours.

14 - 90% of all Americans live within 15 miles of a Wal-Mart store.

15 - The Walton family has given away about 2% of its net worth to charity. Bill Gates has given 48%. Warren Buffet has given away 78%.

16 - An additional Wal-Mart Supercenter per 100,000 residents increases average BMI by 0.25 units and the obesity rate by 2.4 percent.

17 - The most frequent destination typed into the GPS TeleNav is Wal-Mart

18 - Roughly 4,700 (about 90 percent) of international stores operate under a banner other than Wal-Mart, including Walmex in Mexico, Asda in the UK, Seiyu in Japan, and Best Price in India.

10 Companies That Love Wal-Mart

Source: excerpted from business insider.com

Company 1 - Helen of Troy.

Helen of Troy manufactures and distributes personal care products such as hair dryers, healthcare products such as skin care, and small appliances to Wal-Mart. They also own the OXO brand.

Helen of Troy does $236.3 million per year to Wal-Mart. That represents 20% of its sales and .07% of Wal-Mart's annual costs.






Company # 2 - Jardin Inc.

Jarden sells a variety of outdoor and indoor goods. Its outdoor solutions segment sells air beds, camping stoves, coolers, gas grills, lanterns, and sleeping bags. Jarden's consumer focused group sells Mr. Coffee coffee products, as well as indoor heaters, toasters, irons, and fans.

Jarden does $1.34 billion /yr. with Wal-Mart. That represents 20% of their business and  0.4% of Wal-Mart's annual revenues.

Company 3 - Kellogg

Kellogg manufactures and markets cereal and other convenience food products. Products under the Kellogg name include Cheez-it, Corn Flakes, Coco Pops, Mini-Wheats, Pringles, Rice Krispies, and Special K.


Kellogg does $2.64 billion which represents 20% of its sales and 0.79% of Wal-Mart's annual costs..




Company 4 - Church and Dwight


Church and Dwight develops and markets household, personal care, and specialty products under various brand names. Most notably, Church & Dwight is known for Arm & Hammer products, Trojan condoms, and Nair.


Church and Dwight does $632.3 million / yr. to Wal-Mart representing 19% of its business and        0.19% of Wal-Mart's costs..

 Company 5 -  Hanes Brands

Hanesbrands designs and sells a range of basic apparel products. The company offers T-shirts, underwear, casualwear, socks, and activewear. Brands owned by Hanesbrands include Hanes, Champion, Wonderbra, and Just My Size among others.

Hane's sells $1.16 billion / yr. to Wal-Mart which represents 25% of its annual sales and 0.35% of Wal-Mart's annual costs..

Company 6 - J.M. SmuckerCo.

J.M Smucker manufactures and markets branded food products. The company's main products include coffee, peanut butter, fruit spreads, baking mixes, canned milk, and beverages. Brands licensed by Smuckers include Folgers, Dunkin Donuts, Smuckers, and Millstone

Smuckers sells $1.25 billion / yr. to Wal-Mart which represents 26% of its annual revenue which is 0.39% of Wal-Mart's annual costs..



Company 7 - Cott Corp.


Cott Corp. sells private-label beverages including carbonated soft drinks, flavored waters, juice, and ready-to-drink teas. Cott operates under the Cott, Red Rain, and Orient Emporium Tea Co. brand names.

Cott does $737.7 million to Wal-Mart annually which represents 31.6% of its sales and 0.22% of Wal-Mart's annual costs..



Company # 8 - MoneyGram

  Moneygram provides payment services worldwide. It operates in two segments: Global Funds Transfers (GFT) and Financial Paper Products. The GFT segment provides money transfer and bill payment services while the Paper Products segment provides money orders to consumers through retail and financial institution agents.

MoneyGram does $361.9 million to Wal-Mart annually, representing 29% of its sales and 0.11% of Wal-Mart's annual costs.


 

Company 9 - Clorox

Clorox manufactures and markets consumer and institutional products. The company operates under four segments, Cleaning, Lifestyle, Household, and International. Clorox products include Clorox bleach and Kingsford charcoal.

Clorox's annual sales to Wal-Mart is $217.5 million representing 26%  of its sales and 0.34 of Wal-Mart's annual costs.





                                                                                     Company 10 - Tootsie Roll

 Tootsie Roll manufactures and sells candy products. Brands under the Tootsie Roll name include Charms, Blow-Pop, Tootsie Roll, Dubble Bubble, and Charleston Chews

Tootsie Roll does $124.,1 million with Wal-Mart annually which reflects 23% of its sales and 0.04% of Wal-Mart's annual costs.

Even Wal-Mart Thinks 'Made In The USA' Can Be Competitive Again

By Sam Ro - Business insider.com

When anyone thinks low priced goods, they usually don't think "Made in the USA." Cheap goods usually come from places like China, Vietnam, and Indonesia.

However, this perception is slowly changing as rising overseas labor costs and higher shipping costs are forcing U.S. companies to bring manufacturing back to the states. This is being touted as the American manufacturing renaissance.

In fact, this trend is so powerful that even Walmart, the leader in everyday low prices, believes "Made in the USA" is a smart and profitable strategy.

Citi analyst Deborah Weinswig recently met with Walmart management. Here's what she took away: Proudly Made in the U.S.A. — While global sourcing remains a significant source of EDLC opportunity, we believe that the $50B commitment to increase domestic sourcing over the next decade should benefit topline and profitability at WMT U.S. Domestic sourcing will help the company avoid wage inflation overseas and shipping costs, while increasing flexibility through shorter lead times and generating positive reputational buzz. WMT U.S. kicked off the initiative this week with Georgia state sourced towels, priced at $8.97 for bath size. They are offered in 600 stores and will be in an additional 600 stores by Sept., supported by local marketing

Why Do So Many Vendors Have It Wrong ??

By Sheldon Barry Cwinn

Most vendors that sell to Wal-Mart do not realise this but basically, selling to Wal-Mart means selling on consignment. Wal-Mart cleverly disguises this by "advancing" money to you according to your Vendor Agreement. But, make no mistake about it, your merchandise is strictly on consignment and faces the prosepect of  50/50 markdowns, being returned to you, or a combination of both. Here are some stories that you should consider......

• Touch My Monkey!  The Wal-Mart buyer came to a well-established apparel manufacturer one day with a concept of doing several children's sleep sets with the theme "Touch My Monkey." This was to be a Wal-Mart private lable initiative. Dutifully the manufacturer went out and designed 12 different pieces of artwork for the "Touch My Monkey" line. Six designs were eventually approved. Then the manufacturer was beaten up in price. The entire project was to be done "as a favour" to the buyer at very low margin. Well guess what?  One hundred and twenty thousand sleep sets were produced. When they got to the stores, no manager wanted to place the merchandise on sale because they found the sleep sets vulgar. Wal-Mart returned  a great portion of the merchandise, and the manufacturer is no longer in business today. Moral of the story.... even if you supply private lable goods to Wal-Mart, they are there on consignment only.
• Sour Puss! The story of Vlasic Pickles is a typical Wal-Mart vendor tale of woe. Vlasic's sold a half gallon of pickles in Winn Dixie  for $2.99 a jar. The pickle buyer from Wal-Mart got inspired. How could he better Winn Dixie? He approached the Vlasic company, could they produce a gallon jar of pickles that would sell at retail for $3.99? Wal-Mart would purchase over one million jars of pickles a year, and Wal-Mart would only make a nickle a jar. It would be a tesiment to Wal-Mart's "We sell for less" mentality. The jars would go into "Action Alley" the mid-aisle as the consumer walked into the store and the pickles would flyy off the shelf....err floor in this case! Know what? They did!!!!!! There was only two problems. The first was that Vlasic's couldn't get enough pickle cucumbers to satisfy Wal-Mart's order. The second, no other retailer wanted to touch Vlasic's products because they could never match Wal-Mart's price point! And, Vlasic's couldn't make enough money on the Wal-Mart order to avoid Chapter 11. The company had other problems besides the Wal-Mart one, but the Wal-Mart problem sure did not help. Vlasic's couldn't reorganize and the pickle division was acquired under banruptcy by H.J. Heinz.
• Naturally Delicious! Two partners Bob & Doug went into the business of marketing Doug's mother's  all-natural salad dressings. The small company became profitable, but Bob and Doug were eking out a living. If only they could sell to Wal-Mart! That would solve all of their problems. Wal-Mart has "new vendor fairs", usually sponsored by a chamber of commerce, and held all over North America. Prospective new vendors show their wares to Wal-Mart buyers and Wal-Mart helps the smaller regional companies become vendors. Bob and Doug went to the New Vendor Fair in their area. The buyer dipped his finger into a few flavors of the delicious salad dressings. Eureka! He loved them. Just lower the price by 15% and Wal-Mart would order a ton of salad dressing. And they did! Wal-Mart buyers have thousands of miles of shelf-space to fill, so the orders just kept right on comming! Business was booming until one day. You see natural salad dressing has a shelf life. Eventually the buyer called to return thousands of bottles of dressing. The small company quickly went bankrupt.

Vendors seldom get it right. The relationship with Wal-Mart is really a partnership. One where the vendor has a say as to where there merchandise goes in the store, and which stores their merchandise goes to. Automation with a product like Wisdom Analytics can help analyze trends at store level and can help vendors build a profile of where their merchandise should go. Factors such as long-range weather trends, demographic, and geo-analytical information is analyzed at store level. Wisdom is a fantastic tool to help you know where to place your merchandise in order to assume the least possible risk.

The moral of the story is - never forget that your merchandise in a Wal-Mart store is exactly that - your merchandise. To succeed you have to get the replenishment metrics right, know about the stores you are selling through, and apply a heaping helping of good old common sense. Consignment is consignment no matter how you dress it up! 

Wisdom Analytics

Target Vs. Wal-Mart in Canada

The Showdown in the Great White North.
Target Versus Wal-Mart in Canada!
 By Sheldon Barry Cwinn.




Well it has finally happened....

Target has officially opened their first three stores in Canada, an event eagerly anticipated and planned for not so much by Target but by Wal-Mart! In one of the greatest turf wars in Canadian retail history, Wal-Mart has positioned itself in a very advantageous  position to win the battle of the discount retailers.  In fact, Wal-Mart hasn't gone on the defensive, but rather Wal-Mart's strategy was to create a new offensive.

Let's see how Wal-Mart plans to use the arrival of Target in Canada as a means to greatly increase its own sales, and why Wal-Mart will win the ensuing battle of the discount retailers.

Strategy # 1 - Big box versus Small Box
In order to beat Target, Wal-Mart needed to expand quickly. Furthermore, Target's strategy was to purchase Zeller's locations with locations mostly in shopping centers, and not stand-alone stores. This was exactly contrary to Wal-Mart's philosophy. Wal-Mart traditionally opens large Super Centers and in the United States has turned many of its Base Stores into Super Centers. Wisely, Wal-Mart recognized that this just wouldn't work against Target.

So what did Wal-Mart do? They created a new type of store which can be dubbed " the mini store". A regular Wal-Mart store (Base Store) has between 90,000 and 150,000 square feet. They usually required construction of self-contained buildings requiring the purchase of real estate and complicated construction. In fact, you will rarely find a Wal-Mart store in a shopping mall.

Mini Stores are stores that are well-suited to shopping centers. They are typically between 60,000 - 75,000 square feet. Mini Stores were fast to setup, with less risk and less investment. They could be implemented quickly and they could easily fit into failing strip malls that had plenty of cheap retail space, and secondary shopping malls that were in decline. Best of all, they could not only be set up in a manner that would increase Wal-Mart's retail footprint, but they could also easily be set up in the general proximity of a Target store. And, that is exactly what is happening. Almost everywhere there is a new Target store opening, there is a spanking new Wal-Mart store in close proximity.

Strategy #2 - Purchase the Zeller's Stores Target didn't want!
If target didn't want certain Zeller's stores why would Wal-Mart want them??

Target selected its Zeller's lease holdings very carefully. But their selection was more based on the store's location. Target is in startup mode. So it needed stores in most major cities, and then a store in the east, west, north, and south of the city. Their strategy is not to saturate the retail landscape in any given geographic area, but rather to plant their feet there.

On the other hand, Wal-Mart is using a strategy of saturation. The Zeller's stores that it occupied all had established shopping patterns that Wal-Mart could take advantage of. Better still Zeller's stores were typically around 75,000 square feet, which is perfect for the Mini Store concept. Even better Wal-Mart could occupy the Zeller's locations and convert them into Wal-Marts very quickly. And that is just what has happened! Wal-Mart has expanded its retail locations by about 33% before Target ever got out of the gate!

Strategy #3 - The battle of the Private Lable
A decision that Target made in its entry to Canada was to import its private label merchandise from the United States. And why not? Target has a reputation for quality. It uses a higher price point than Wal-Mart to offer what some consider superior quality.  To the consumer its a value equation of  price versus quality. In the United States Target often will win that value equation. In Canada however this will translate into merchandise that is imported from the United States. The costs to the consumer will be much higher than they would be State-side. No doubt Target will not win the value equation as often.

Now look at the new Wal-Mart stores. They all have "George" signage in  the front of the building alongside the Wal-Mart sign. Wal-Mart has invested lots of money developing George as a Canadian brand and it is time for Wal-Mart to cash in on this brand equity. Also, Wal-Mart has greatly improved the quality throughout the George product line without a major increase in prices. In fact, this can be attributed to the growth in the number of stores - you get more economies of scale from having close to 400 stores in 2013 than having 350 in 2012!

Conclusion
With the arrival of Target in Canada, Wal-Mart has proven why it is the world's largest company. It has shown excellent agility and used the impetus of Target's opening in this country as an incentive to grow its own business dramatically.  In fact it has reinvented itself to not only combat its arch rival but to prosper by it.

Wisdom Analytics

Wal-Mart Feeling The Pinch of Delayed Tax Refunds

 

Wal-Mart CFO Charles Holley:

Americans Still Feeling The Pinch of Delayed Tax Refunds

 

 

(Reuters) - Wal-Mart Stores Inc's U.S. customers are still contending with delays in getting their tax refunds this year, with volume running about a third lower than normal, the discount chain's finance chief said on Tuesday.

Wal-Mart has cashed some $2.7 billion in tax refund checks at its U.S. stores so far this year, Chief Financial Officer Charles Holley said at an investor conference that was broadcast over the internet. At this point last year, that amount was about $4 billion.
Holley said that he expected tax refunds volumes, which help drive sales at the retailer, to catch up during the quarter.

As of February 21, when Wal-Mart announced quarterly results, it had cashed $1.7 billion in tax refund checks, compared to $3 billion a year earlier.
Federal tax refunds are arriving later than expected this year for some lower-income Americans due in part to closer scrutiny by the U.S. Internal Revenue Service of earned income tax credit claims, the IRS said last month.

The delays are largely responsible for a slow start to the current quarter, which began in February, the company said last month. Tax refund checks are a key source of revenue for retailers like Wal-Mart, as shoppers who held off on big purchases at the holidays get caught up.
The company expects sales at its U.S. stores open at least a year, or same-store sales, to be about flat during the current quarter. A year earlier, such sales rose 2.6 percent.

Wisdom Analytics

Wal-Mart Named Top Mobile Retailer of 2012

Author: Holly Matheson  copyright Technocrati.com
Published: May 13, 2013 at 4:12 pm

Retail business owners and marketing experts can learn a thing or two from Wal-Mart, it seems. Named the top mobile retailer of 2012 by the National Retail Federation, Wal-Mart won the acclaimed title by implementing new and improved mobile initiatives that included social media, apps, QR codes, push notifications and an improved mobile website.
It's no secret that shopping at Wal-Mart is often a stressful experience, but if you happen to walk into the store and see more people than ever looking down at their smartphones while shopping, there's probably a good reason for it.
While it is common for consumers to use their smartphones to search the web for better deals and prices on their most desired products, Wal-Mart has taken the initiative to use the technology to their advantage. From app features that show customers exactly which aisle to find products on to the ability to create a shopping list from home that details the cost and information of each product to determine the approximate total cost before going to the store, it's easy to see why Wal-Mart has been chosen for this most prestigious award.
It has been said time and time again that retailers who are not maximizing the potential of mobile commerce are at a greater risk of being left behind the competition and Wal-Mart has proven the validity of that argument. Not only did the retailer make major updates to its smartphone app, but numerous improvements were also made to its iPad app, including a feature that allows consumers to view and flip through the local store ads to find great deals and discounts on top products. Finally, Wal-Mart recently added a new Scan & Go feature that allows app users to scan a products bar code in-store and then transfer the list upon arrival at the self-checkouts.
With recent research proving that an outstanding 4 out of 5 consumers visit retail websites or apps prior to shopping, the new year is an ideal time for retailers to jump on board the mobile commerce train, learn a lesson or two from Wal-Mart and begin implementing strategies that will help them to surge ahead in the coming year.

Wisdom Analytics

Smaller Format Stores Fuel Wal-Mart Expansion

Wal-Mart Expands Using Smaller Format Stores
By Lydia Dishman - Forbes.com

Big box is so last decade. That’s why Walmart is upping the ante on its expansion efforts with smaller stores. According to Bill Simon, head of Walmart’s U.S. division who spoke on an industry conference call yesterday, “They compete really well against multiple channels,” including competitors such as Dollar General, Walgreens and supermarkets.
Simon said the company plans to add 115 new outlets that have less than 60,000-square-feet of selling space this year. Walmart’s not abandoning the big box yet. Simon says to expect 125 Supercenters to open this year, too.
Though Simon asserts that about 90% of Walmart stores are in supersize territory, this isn’t Walmart’s first foray in shrinking store footprints. The company’s attempts include Neighborhood Markets which launched in 1998 and is designed to shoehorn its grocery offerings in smaller towns. The similar format Supermercado de Walmart followed in 2009 and are mostly located in areas with a high concentration of Hispanic residents.

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Marketside, Walmart’s experiment to offer U.S. shoppers a convenient location to purchase prepared food, produce, wine and other groceries inexpensively launched in 2008 and shuttered in 2011. The world’s largest retailer left the Marketside website up in what appears to be an online “suggestion” box for consumers.
If the company seems particularly bullish on these expansion efforts it may be because Walmart’s fourth quarter financials were looking good. Walmart U.S. added more than $10 billion in net sales during fiscal 2013 and fourth quarter comps at stores open at least one year were up 1%. Simon points out that Walmart has nearly $13 billion in free cash flow to invest “primarily in food and consumables, because we know that’s a traffic driver in our business.”
Groceries will certainly drive sales in smaller stores, not to mention health and beauty aids (hello aisles full of vitamin supplements and shampoos). Even with less shelf space and low prices, Walmart can still make bank in the volume of transactions as the formats catch on as customers seek value, not volume.
Lower margins could be offset by packing the selection with private-label merchandise, a strategy Walmart employed successfully in Mexico with its Bodega concept.
In an age when consumers are flocking to shop on the Web in bigger numbers, small format is relative. As Simon observes, existing Neighborhood Markets are all enabled with e-commerce and Site-To-Store capabilities, “So you have that endless aisle that we can offer that others might not be able to offer.”

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