How can you beat $2.87 for a T-shirt?
Wal-Mart is betting the price can’t be replicated as it flexes its enormous sourcing muscles to bring apparel items into its stores at rock bottom prices. Its emphasis on price comes as the retailer struggles with declining profits and flat sales — which it foresees lasting for the rest of the year.
“Last year, we sold a $1.68 cami,” Steve Bratspies, chief merchandising officer of Wal-Mart U.S., said at the Raymond James 37th annual institutional investors conference on Tuesday. “We sold millions of items. In this apparel program, called ‘Shocking Value,’ we’re following that up with the $2.87 No Boundaries T-shirt. Come up and feel the quality and just touch this product. This is an incredible quality product for $2.87, and you’re going to see it maxed out on tables in our stores with [different] colors. It really, really looks good.”
Few retailers have the ability to sell the volume Wal-Mart can.
“We’re going to have a lot of fun this summer with a product called Bubble Wands,” Bratspies said. “We’ll sell a six-pack of Bubble Wands for $3.88. You say, ‘OK, that’s sounds good.’ We’re going to sell six million of them.”
A year ago, Wal-Mart sold one million Bubble Wands at $4.97 each. How will it sell six million now? “One rollback of the price and mass displays,” Bratspies said.
Wal-Mart is leveraging prices to increase sales. That’s nothing new. What’s different, is the customer, defying assumptions about the retailer’s typical shopper. The consumer is young — 79 million are Millennials entering their prime spending years. Nearly half of those Millenials — 48 percent, versus 28 percent of Baby Boomers — are multicultural. “Millennials are the most value-driven generation,” Bratspies said.
Busy Millennials are demanding a new level of convenience. “They want to see more shopping experiences,” Bratspies said. “They want to shop Wal-Mart, and they don’t care if its online, mobile, or in the store. They want a seamless shopping experience, and that’s what we’re working on delivering.”
Wal-Mart increased its market share of Millennial moms by 450 basis points in the last two years. “People asked what we’re doing that’s working,” Bratspies said. “They definitely subscribe to the idea of one-stop shopping. Our low-price model and budget approach to shopping works very well for them.
“This year, we’re going to start to invest in price again as a business, and you’re going to see a multibillion-dollar investment over the next couple of years,” he said.
Like other retailers, Wal-Mart’s best customers are those who shop both in stores and online. Wal-Mart’s store-only customer spends about $1,400 a year, while the online shopper spends $200. The customer who shops both spends about $2,500 per year.
“We have to continue to take cost out of our business to be able to invest in price as we go forward,” Bratspies said. “We have aggressive plans around order fill rates, greater efficiency at the shelf, improving speed and creating a lot more customized programs at the local level.”
The fresh grocery business is “a huge priority, because it’s a big traffic driver,” Bratspies said. “We know that when we get fresh right, the entire box benefits. We’re looking at how we source products globally.”
Fresh departments are being remodeled with angled fixtures to appear more spacious and offer better sight lines.
Wal-Mart is boosting private label, which drives loyalty and incremental trips. “The penetration of private brands is increasing both in stockkeeping unit count and in new items,” he said. “That will continue to increase. We’re investing in product development, sourcing technology and new talent to build this business.”
National brands are important, primarily because customers want them, and because they highlight the value of private labels when prices are compared side by side. Bratspies said the retailer is building a best-in-class product development lab at its Bentonville, Ark., headquarters.
With aging Boomers in mind, the company is expanding health and wellness. The retailer, which operates 4,500 pharmacies and 2,900 vision centers, in October held America’s Biggest Health Fair, a four-day at more than 4,000 locations where it provided 280,000 health screenings and gave out close to 200 million healthy product samples.
Wal-Mart is trying to drive cost out of its system, including “taking most of the co-op marketing out of our business and encouraging our supplier partners to put that into the cost of goods,” Bratspies said.
As reported, Wal-Mart closed 105 stores in the Express pilot. The retailer is continuing to open Neighborhood Markets, which are being redone with a new design. “There are a couple of different prototypes that we’re working on,” he said.