CUSTOMER-CONSCIOUS

STEPHANIE FAGNANI

By the end of this year there are expected to be close to 800 Wal-Mart Supercenters in operation worldwide and all of them will function with the same goal in mind: focusing on the customer.

It sounds like a common and seemingly simple modus operandi, but company executives say it is one of the main reasons for the retailer's success -- that and its everyday low prices. And, transferring these practices over into Wal-Mart's Supercenter food outlets has paved the way for the merchandising giant to dominate the grocery channel in much the same way it has the nonfood channel.

Retail analyst Jeffrey Edelman was recently quoted as attributing Wal-Mart's successful second quarter (ended July 31, in which the company grew net sales 19.9% to $46 billion) to several factors, one being "continued expansion in its average ticket due in large part to the greater inclusion of food in its mix."

Indeed, 1999 saw a 15.2% increase in food supercenter units open for operation, all boasting low prices and sharp attention to consumer needs.

As evidence that the practice really does work, Don Cannon, senior vice president of food merchandising for Wal-Mart Stores, Inc., Bentonville, Ark., shared some statistics with a crowd of his peers during the annual Grocery Manufacturers of America conference, held this June at The Greenbrier in White Sulphur Springs, W. Va.

At the time of the gathering, Wal-Mart was operating 3,875 units, presiding over approximately 1,035,000 associates and had generated $167 billion in sales in 1999. Sales for this year are expected to reach $190 billion, Cannon said.

"Some things never change -- the focus must always be on customers," he lectured. "Being big isn't the answer; serving the customer is.

"Simplification will drive efficiency, which will be driven by culture and the three basic beliefs -- respect for the individual, service to our customers, striving for excellence. All of these things create ownership to all associates in the company and it unleashes associates to be great merchants," he said.

According to Cannon, the supercenter premise works so well because it extends the promise of value and price to food and makes the concept of one-stop shopping a reality.

By Jan. 31, 2005, Wal-Mart anticipates having 1,450 supercenters up and running in all regions of the world, he said. Wal-Mart International currently boasts 176 stores in Canada and international sales accounted for about $7 billion during the company's second quarter, all driven by EDLP, Cannon said. In China, the latest international store to open was built underground, and Wal-Mart will design more multilevel formats in the future, he said.

"We're actively involved in the global process; we recognize the changing marketplace," Cannon told his audience.

Wal-Mart also operates discount food centers and will have 150 such food centers by year's end, extending fresh foods into these stores. In addition, Wal-Mart will open 12 new club stores -- Sam's Club units -- this year, as well as new distribution centers in Johnstown, N.Y.; Corinne, Utah; and Opelika, Ala. All work with common distribution and all food initiatives have the same goals: driving competitive store sales and being real community stores, Cannon said.

Designed to "complement the neighborhood market," Cannon said, most food areas occupy about 40,000 square feet and carry approximately 20,000 to 25,000 items. Most, like one that recently opened in Fishkill, N.Y., are located adjacent to the rest of the store.

Divided by a simple aisle sprinkled with benches, the Fishkill Wal-Mart Supercenter features 13 aisles of dry grocery with its beverage section placed in the back of the store. The dairy section can also be found in the rear of the store.

Frozen aisles are located right off the produce department, which would be the first section customers would encounter if they were to enter the food area directly without going through the other section.

Frozen encompasses four 22-foot freezers placed along the side in between the dry grocery aisles and the meat case perimeter. In addition, the store has 28 frozen doors in five aisles.

During a recent visit, SN found the freezer doors to be abundantly signed, with tags pointing out everyday-low-price savings alternating with green tags that heralded "We'll match it: any competitor's coupon." Another freezer door was specifically labeled "home-meal replacement," and contained a 40-ounce serving of Wal-Mart's private-label Great Value lasagna for $3.97.

Cannon said the retailer has expanded its frozen-food doors over the years, without noticing any change in sales patterns. "The more we add, the more we're driving sales."

Savings throughout the dry-grocery aisles in Fishkill on the day of SN's visit included a 9-ounce jar of Herr jalapeno cheddar dip for $1.78; Kellogg cereals, two 19-ounce boxes of Rice Krispies or two 25-ounce boxes of Frosted Flakes for $5; and two 15-ounce boxes of General Mills' Cheerios, also for $5.

The store had a separate section, 22 pegs in all, dedicated to beef jerky, and featuring special items like Jack Links turkey jerky; Pecos Bill's beef jerky, 8-ounces for $5.68; and a Slim Jim spicy canister, 5-ounces for $2.50, which was originally $2.77.

Outsized items on sale that day included Kraft Miracle Whip mayonnaise, 1 gallon for $5.28; Vlassic Dill Pickles, crinkle-cut chips, 1 gallon at $3.87; and Del Monte fruit cocktail in light syrup, 6 pounds for $4.77.

Unique to the beverage aisle was a 33-cents-per-gallon refill station sponsored by Culligan water. On display at the refill location was a pamphlet titled "Know What You Drink, Culligan Store Solutions," which contained information about vended drinking water and store water treatment.

According to Cannon, rollback programs, like the ones seen by SN, are continuous and the retailer's practice is to roll back and maintain the price while increasing the quality of the products.

Something else Wal-Mart watches closely is customer shopping patterns, he said.

"About 35% of the supercenter business comes in after 6 p.m. Sometimes we will turn a dairy case three times in one day," Cannon said.

Knowing the local community that each store serves is crucial to grocery retailers, said Cannon, and "Having the right thing in each stores isn't about SKU count.

"We're good merchants with a willingness to fail. Our greatest treasure is our customer and our customer's loyalty," he said.