Scoop is one of Walmart’s exclusive fashion brands. It has also entered into agreements with national brands such as BCBG Paris.
Melissa Repko | CNBC
SPRINGDALE, Arkansas – Disguised mannequins. Eye-catching displays of elegant furniture and colorful swimsuits. And store signs that promote exclusive brands and nationally recognized.
Walmart̵[ads1]7;s redesigned SuperCenter, located just 16 miles from Northwest Arkansas’ headquarters, reflects the retailer’s ambitions to get more customers to contact their stores and websites to fill the wardrobe and living room, along with the refrigerator.
It is the dealer’s new model, and it will soon spread across the country. Walmart plans to open 30 more redesigned stores by the end of January and hundreds more in the following fiscal year, said Chief Merchandising Officer Charles Redfield.
He said that the locations will vary slightly and will have different elements in the pilot store. They will be used to test and learn before Walmart rolls out the look wider, he said.
Walmart is the country’s largest grocery by revenue, but it wants to drive more sales of goods with higher margins such as clothing. Over the past five years, the retailer has launched new brands and partnered with companies such as Reebok, Gap and Justice to expand its offerings in clothing, home and other discretionary categories. These brands have often come with a higher price point and focus on style. Many are expanding to several of Walmart’s large box stores.
The retailer’s strategy has become more urgent, after Walmart’s first quarter result disappointed Wall Street last month and cut expectations for profits. Walmart’s mix of goods during the period contributed to the loss of revenue. As customers spent more on groceries and gas due to inflation, some decided not to buy other, more profitable items such as clothes and TVs – the very purchases that tend to increase profits.
A changing consumer
A withdrawal of discretionary expenses affects retailers in general, especially since the companies were in a period a year ago when buyers had extra dollars from stimulus checks. For Walmart, sales of general merchandise in the United States fell in the first quarter, drawing fewer dollars than the year before, although total net sales in the United States rose to $ 96.9 billion, according to Walmart’s records.
To exacerbate problems, retailers – including Target, Kohl’s and American Eagle Outfitters – have amassed excess inventory as consumers stumble upon some popular pandemic items, look at the budget and decide to spend on travel or eating out instead of items.
Walmart reported that they also had surplus goods, with inventory levels up around 33% compared to a year earlier. The 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 dealer wants to be. He estimated that around 20% of that profit is goods that the company will “just wish away.” The company declined to comment on its strategy to sell through its products, 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 the company’s records. It fell to 28% in the last quarter. At Target, 54% of sales come from general merchandise, according to the latest annual report.
There is a great opportunity for Walmart if it can use the frequency of grocery shopping in stores and the popularity of online alternatives such as side-by-side retrieval to increase overall merchandise sales, said Robby Ohmes, a retail analyst for Bank of America.
In addition, he said, creeping prices could encourage a new or rare Walmart customer to give the discount store a try.
“Everyone sort of handles inflation,” Ohmes said. “There are going to be groups of people at Walmart who would not normally do that – so they can have 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 Find” screen with makeup, skin care, hair and other items for $ 3, $ 5 or $ 9 each. It also sells prestige brands through a new agreement with the British beauty retailer SpaceNK.
Melissa Repko | CNBC
Lid of lower prices
On its website and in an increasing number of its stores, Walmart has expanded its styles and price levels. Along with cheap basics, it sells sundresses and tops from exclusive brands, Scoop and Free Assembly, which customers can pack for the holiday or party. It has jeans a customer can wear for dinner from Sofia Jeans, an exclusive brand developed together with the actress Sofia Vergara.
And at home, Walmart also sells more ambitious styles – including a collection developed with Clea Shearer and Joanna Teplin, the stars behind Netflix’s “The Home Edit”.
In Walmart’s redesigned store in Arkansas, a display shows Thyme & True, one of the retailer’s exclusive home brands. Customers can scan a QR code to learn more about the items or order them online.
CEO Doug McMillon said Walmart’s reach will help it better cope with 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 prices for customers living on a tight budget. It will have the low prices not only on important foods like rice, cans of tuna and macaroni and cheese, but also on general items 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 scale, how many of these customers can you attract in areas you may not have done business with so often?” he said. “Can we move some volume into clothing and homes and maybe even some of the consumption categories as people become even more value-conscious?”
Walmart attracted consumers to basic goods and groceries, but lost them when they traded other goods, Redfield said.
“They had to go somewhere else to get what they want from a style and quality point of view, so we said, ‘We have to fix it,'” he said in an interview.
Walmart has launched exclusive clothing brands, including the active & swimwear line Love & Sports, to pressure customers to buy more general goods. These brands are in front and in the center of a new store in Springdale, Ark., Located near Walmart’s headquarters.
Melissa Repko | CNBC
Silk crunchies, craft beers and sundresses
Inside the redesigned Northwest Arkansas store, the clothing department has fewer racks and wider aisles to encourage surfing. It has dedicated areas similar to mini-brands for national brands, such as Reebok and the children’s clothing brand Justice. And that puts Walmart’s own fashion and home brands at the center with mannequins and exhibitions that suggest how to put together an outfit or a room.
Walmart gives directly to consumer brands that reason with younger, social media-savvy customers several square meters in the stores as well, including the shaving company Billie and the dog food company Jinx.
One of the other big changes? The price tags are smaller near the national clothing brands and Walmart’s high clothing brands – a major break from the dealer’s tendency to make the numbers large and bold.
“We sell clothes in a grocery store, but that does not mean we have to sell clothes as if they were groceries,” said Alvis Washington, Walmart’s vice president of marketing, store design, innovation and experience. “Clothes are a discretionary category. It’s emotional. You want them to fall in love with fashion.”
“This is where you actually want them to look, feel, touch the item and then validate the choice by looking at the price point of it,” Washington said. “We let the product be the hero and set the tone.”
Even in the grocery department, the store has a different look. The wine entrance is larger and includes expensive red wines and champagnes from the top shelf. The craft beer section is also prominent. Both changes are aimed at a more trendy millennial customer, Redfield said.
“We’ll be selling a lot of underwear and socks,” he said. “We sell a lot of underwear and socks. We will continue to sell it, but we will not force our customers to go anywhere else when they want something special.”