Scoop is one of Walmart’s exclusive fashion brands. It has also reached agreements with national brands such as BCBG Paris.
Melissa Repko | CNBC
SPRINGDALE, Arkansas — Mannequins in costume. Striking displays of chic furniture and colorful swimwear. And signs for stores that promote exclusive and nationally recognized brands.
Walmart’s redesigned SuperCenter, located just 16 miles from its Northwest Arkansas headquarters, reflects the retailer’s ambitions get more customers to come to your stores and website to fill their closets and living rooms, along with their fridges.
It’s the retailer’s new model, and it will soon roll out across the country. Walmart plans to open 30 more redesigned stores by the end of January and hundreds more in the next fiscal year, chief merchandising officer Charles Redfield said.
He said that the locations will vary slightly and will have different items from the pilot store. They will be used for testing and learning before Walmart releases the look more widely, he said.
Walmart is the nation’s largest grocery store by revenue, but it wants to drive more sales of higher-margin items like clothing. Over the past five years, the retailer has launched new brands and partnered with the likes of Reebok, Gap and Justice to expand its offerings across apparel, home and other discretionary categories. Those brands often come with a higher price tag and a focus on style. Many are expanding into more big Walmart stores.
The retailer’s strategy has taken on more urgency after Walmart’s first-quarter profit disappointed Wall Street last month and lowered earnings expectations. Walmart’s merchandise mix in the period contributed to the earnings loss. As customers spent more on groceries and gasoline due to inflation, some chose not to buy other more profitable items like clothing and televisions, the same purchases that tend to boost profits.
A changing consumer
A pullback in discretionary spending is hitting retailers across the board, especially as businesses move past a period last year when shoppers had extra dollars from stimulus checks. For Walmart, US general merchandise sales fell in the first quarter, attracting fewer dollars than in the same period a year earlier, even as overall US net sales rose to $96.9 billion. , according to documents filed by Walmart.
Compounding the problems, retailers including Target, Kohl’s and American Eagle Outfitters have stockpiled excess inventory as consumers shun some popular pandemic items, eye the budget and decide to spend on travel or dining out instead. of goods.
Walmart reported that it also had excess merchandise, with inventory levels up approximately 33% compared to the prior year. US CEO John Furner said last week at an investor day that it will take “a couple of quarters” to get back to where the retailer wants to be. He estimated that about 20% of that surplus is merchandise the company would like to “just wish away.” The company declined to comment further on its strategy to sell through its merchandise after Target shared its aggressive inventory plans.
About 32% of Walmart’s net sales in the US have come from general merchandise in recent years, according to company filings. That fell to 28% in the most recent quarter. At Target, 54% of sales come from general merchandise, according to its most recent annual report.
There’s a big opportunity for Walmart if it can use the frequency of in-store grocery shopping and the popularity of online options, like curbside pickup, to boost overall merchandise sales, said Robby Ohmes, a retail analyst. from Bank of America.
In addition, he said, rising prices may encourage a new or infrequent Walmart shopper to give the discount store a try.
“Everyone is managing inflation,” Ohmes said. “There will be groups of people that will meet at Walmart that they normally wouldn’t, so they may get a better flow of customers as people become more value-conscious.”
Walmart is expanding the price points in its beauty department. It recently added a “Beauty Finds” display with makeup, skincare, hair, and other items for $3, $5, or $9 each. It also sells prestige brands through a new deal with UK beauty retailer SpaceNK.
Melissa Repko | CNBC
The lure of lower prices
On its website and in a growing number of its stores, Walmart has expanded its styles and prices. Along with inexpensive basics, it sells sundresses and tops from exclusive brands Scoop and Free Assembly that customers can pack for vacation or a party. She’s wearing jeans a customer might wear to dinner from Sofia Jeans, an exclusive brand developed with actress Sofia Vergara.
And at home, Walmart also sells more aspirational styles, including a collection developed with Clea Shearer and Joanna Teplin, the stars behind Netflix’s “The Home Edit.”
In Walmart’s redesigned Arkansas store, a screen shows Thyme & Table, one of the retailer’s exclusive home brands. Shoppers can scan a QR code to get more information about the items or order them online.
Chief Executive Officer Doug McMillon said Walmart’s range will help it better weather a period of inflation.
At an investor day earlier this month, he and other Walmart executives stressed that the retailer will continue to offer entry-level price points for customers living on a tight budget. You’ll have those low prices not only on key foods like rice, cans of tuna, and mac and cheese, but also on general merchandise like T-shirts and tennis balls.
But it can also attract customers who have more money to spend, McMillon said.
“As you move up the revenue ladder, how many of those customers can you attract in areas where you might not have been doing business with them as often?” he said. “Can we move some volume into apparel and home and maybe even some of the consumable categories as people become even more value conscious?”
Walmart attracted consumers for basics and groceries, but was losing them when they shopped for other items, Redfield said.
“They had to go somewhere else to get what they wanted from a style and quality standpoint, so we said, ‘We have to fix that,'” he said in an interview.
Walmart has launched exclusive clothing brands, including the Love & Sports line of swimwear and sportswear, to encourage customers to buy more general merchandise. Those brands are front and center at a new store in Springdale, Ark., which is close to Walmart’s headquarters.
Melissa Repko | CNBC
Silk scrunchies, craft beer and sundresses
Inside the redesigned store in northwest Arkansas, the clothing department has fewer shelves and wider aisles to encourage browsing. It has dedicated areas that resemble mini-stores for national brands, such as Reebok and children’s clothing brand Justice. And it puts Walmart’s own fashion and home brands front and center with mannequins and displays suggesting how to put together an outfit or a room.
Walmart also offers direct-to-consumer brands that resonate with younger, social-savvy customers more square footage in stores, including shaving company Billie and dog food company Jinx.
One of the other big changes? Price signs are smaller near national clothing brands and Walmart’s raised clothing brands. — a big break from the retail trend of making numbers big and flashy.
“We’re selling clothes in a grocery store, however, that doesn’t mean we have to sell clothes like a grocery store,” said Alvis Washington, Walmart’s vice president of marketing, store design, innovation and experience. “Clothing is a discretionary category. It’s emotional. You want them to fall in love with fashion.”
“This is where you really want them to look, feel, touch the item and then validate the choice by looking at the price point,” Washington said. “We’re letting the product be the hero and set the tone.”
Even in the grocery department, the store has a different look. The wine aisle is larger and includes expensive red wines and premium champagnes. The craft beer section also stands out. Both changes are geared toward a more modern millennial customer, Redfield said.
“We are going to sell a lot of underwear and socks,” he said. “We sell a lot of underwear and socks. We’ll continue to sell that, but we won’t force our customers to go somewhere else when they want something special.”
Source: www.cnbc.com