Carol Spieckerman's Brain On ... The Shops at Target

In her latest contribution as a Retail Wire panelist, Carol gives cautious kudos to Target for creating a 2.0 version of its often-aped, limited edition brand strategy.

Read the full discussion

Here's what she had to say ... I'm glad to see that Target finally stepped up with a 2.0 version of its limited availability brand strategy. This one checks quite a few boxes.

1. Exclusivity - Critical when price transparency is pervasive.
2. Traffic - Frequent brand launches drive looky loos.
3. Reputation - Supporting, not annihilating, small business.
4. Brand Boost - "The Shops at Target" moniker rolls up to Target, regardless of which brands are being featured.
5. Frequency (and fun) - Treasure hunts turn on trips (just ask Costco).

My only concern is that, unlike the growing number of online marketplaces, Target isn't just passively granting space to third party sellers, they are actively managing the execution of a revolving door of new brands, in multiple categories, under tight-ish time constraints, and with companies not used to executing under a large-scale wholesale model.

If it comes together, this will be a nice addition to Target's bag of tricks.

Earth-shattering Events that Escaped (Almost) Everyone in 2011

In Carol's latest article for the International Licensing Merchandiser's Association (LIMA), Carol calls out a couple of retail developments that barely made a ripple and gives her take on how they will transform retail in 2012 and beyond.

Global Power Launches State-of-the-art Satellite

Grabble, Kosmix, OneRiot…What may sound like adult parlor games are actually a series of acquisitions made by Walmart under its newly-formed @WalmartLabs division. Headed up by the braniacs that came as a part of the bargain when Walmart acquired Kosmix back in April, @WalmartLabs has already more than made up for any of the virtual time that Walmart lost futzing with its physical assets during the much-maligned Project Impact era. A Facebook-mining gifting app and all manner of personalized shopping and couponing capabilities have already been conjured up.

Make no mistake though, the steady stream of incubation and innovation coming out of this lab isn’t just transforming Walmart’s “social web” trajectory, but raising the social, mobile, and big data bar for everyone in the retail orbit.

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Walmart Resonates Part III: Brands in Command

Special notices: We will be in the greater New York area this week conducting retail trajectory presentations and client strategy sessions. Contact Carol Spieckerman directly to request a meeting.

Don't miss Carol Spieckerman's webinar, Cover Your Assets! The Retail Touch Point Transformation, tomorrow, Wednesday, 11/16/11.  Register online at LIMA's website now.

Last week, I shared my first and second takes on Duncan Mac Naughton’s presentation as part of the Bentonville Bella Vista Chamber’s WalStreet speaker series. Today, I wrap it up with Part III.

Read Part I: Productivity and Plentitude

Read Part II: All Hail Scale!

Separation Anxiety

Back in May, Michael Moore talked about Walmart’s reintroduction of entire categories, rather than just products. Mac Naughton called these “heritage” categories (we call them “the three Fs,” meaning firearms, fishing, and fabric) and he added a somewhat surprising twist to the story. As important as EDLP and OPP (opening price points) are to Walmart, widening the price separation between good, better, and best punctuates their value on the price continuum.

Context is everything, so as Walmart completes its last-phase replenishment of many good-tier OPP items that were cut during Project Impact, it is simultaneously layering on a higher ceiling of best offerings, particularly in its heritage categories. The chorus of Walmart naysayers might call this a risky scheme, but a quick reality check proves otherwise. Strapped consumers don’t always favor a steady stream of cheap, throw-away items and in fact they often prefer to make select investments in high-quality, durable goods that will withstand some wear and tear.

Walmart is currently driving double digit comps in the hunting category by offering items such as $900 shotguns and, in fishing, by raising the fishing rod price threshold from $45 to $100. The company is really just participating in the high-low dynamic that is currently driving all of retail: with dollar stores gaining wider acceptance among higher-income shoppers, retail’s bottom has been lowered, making the entry-level market more saturated and competitive. At the same time, the luxury market continues to buck economic trends as the “haves” keep having. It’s for this reason that retailers such as J.C. Penney who are fighting their deeper descent into the murky middle are bringing in higher-priced items (such as $80 Liz Claiborne handbags). One person’s handbag is another’s hunting rifle; “luxury” is in the eye of the shopper.

Private What?

Walmart’s 2009 revamp of its mega-private brand, Great Value, ranks right up there with Project Impact in terms of industry buzz, and many have taken it as a sign that Walmart was going to embark on a private brand-a-palooza across multiple categories. While those dire predictions never really came to bear, the one-two punch of Great Value’s power proliferation in consumables and Project Impact’s curtailment of national brands created a palpable perception imbalance, if nothing else.

Mac Naughton didn’t hedge one bit on the branding front – national brands are what drives the authority that girds each category and, in apparel, Walmart now sees national brands such as Levi’s Signature as critical to quality perception as well. Walmart’s recent announcement that it will return to the basics that it arguably never abandoned and shutter its New York apparel office had many speculating about the brand implications (establishment of the office in 2009 was another move that had many predicting a private brand takeover). My head obviously wasn’t the only one that snapped around when Mac Naughton went all “national brand” on the audience, as a clarifying question regarding the role of private brands in Walmart’s overall strategy was raised during the Q&A. He didn’t hesitate to put a finer point on the situation, calling Walmart a “house of brands for less,” and stated that private brands would be deployed only when a price that customers need is not available. Suppliers, start your branded, OPP engines!

Mac Naughton also provided additional color by saying that, when Walmart stopped building stores, 9,000 dollar stores “showed up.” The horse they rode in on was “a bunch of entry level price point products” that Walmart couldn’t meet with their brand portfolio at the time. Walmart’s first choice is now a national brand, but if a suitable one can’t be had, they’ll push a private brand forward. In Mac Naughton’s words, “it’s all about price.”

Although Walmart’s appetite for licensed products is well-known in the licensing community, one doesn’t often hear Walmart execs call out licensing as a focus area. Mac Naughton did when he referred to a successful OPP backpack program that featured a licensed Hello Kitty version. I took that to mean that licensed brand providers will find new opportunities in the future, if they can bring on the value.

Scattergories

Mac Naughton blazed through Walmart’s point of view on additional categories. In home, the focus will be on sheets, towels, candles, floor care, and outdoor living. What’s left, you ask? The tchotchkes and pieces that once took up room but didn’t have a point of view. They’re outta there.

The focus in Walmart’s back-of-store entertainment area will be on “value and immediacy,” since the innovation hasn’t really been there lately. 3D didn’t deliver as expected, so Walmart is determined to win in OPP here just as they are in other categories. Walmart rakes in $300 million a year, with its $5 movie bin and its $5 CD business up 13 percent. Mac Naughton threw in a bit of imagery to make the point, saying that Walmart’s core customers are doing “head dives” into those bins (ouch!). Walmart’s overall share of new movie releases is an impressive 40 percent and they had a 45 percent share of the Transformers 3 release. The trick is to drive a bit of aisle crossing when that peak-time traffic hits the store.

If the shelf hogs aren’t flying off the shelves, doubling up on the high-turn, high-profit items that attach to them makes a lot of sense, particularly on the heels of Toys 'R' Us' announcement of its expanded and re-designed CE departments which will feature tablets, headphones, media players and Apple accessories. Walmart is focusing on all manner of iPad, iPod, television, and printer add-ons and increasingly relying on Walmart.com and its in-store delivery mechanisms to execute bulkier pieces, particularly in smaller stores that can’t dedicate the space.

It’s Beginning to Look a Lot Like…

Walmart began working on holiday 2011 at noon on December 25^th, 2010, according to Mac Naughton. A cross-functional team has been chiseling away since then on defining Walmart’s holiday point of view and plotting its product flow, daily sales, and service plans. Layaway kicked off in mid-October (earlier for associates) and Walmart’s Christmas price guarantee will ensure that they aren’t beat on price, even after the sale. Walmart’s previous announcement of its ad match program doesn’t run counter to the EDLP philosophy according to Mac Naughton. It just takes care of the anomalies.

Walmart has also taken a stand on which items will drive its holiday must-haves. Mac Naughton shared the top five, which are Elmo Rocks, Leap Pad, Fidget, Call of Duty, and the IPad II.

Mac Naughton closed his presentation by saying that he is as “serious as a heart attack” about growing the business. With Walmart  just reporting positive comps for third quarter and its first revenue gain in two years after nine quarters of negative same-store sales, hopefully he will be able to breathe easy come 2012.

Walmart Resonates Part II: All Hail Scale!

Special notice to our East Coast clients and readers! We will be in the greater New York area next week conducting retail trajectory presentations and client strategy sessions. Contact Carol Spieckerman directly to request a meeting.

Yesterday, I shared my take on Duncan Mac Naughton’s presentation as part of the Bentonville Bella Vista Chamber’s WalStreet speaker series. Today, I continue with Part II.

Read Part I

Hands off!

Dollar stores and small box masters like Aldi and Tesco’s U.S. Fresh & Easy have set a new standard in skeleton-crew efficiency and low-touch merchandising solutions. Walmart is laser-focused on in-store productivity and achieving its on-shelf goals without requiring employees to handle merch multiple times. In his speech, Mac Naughton mentioned a “one touch” goal that will lower systems costs and keep employees where they are most effective: on the selling floor or at the register. Walmart also continues to evaluate its DC locations to ensure that fewer miles are driven to get goods to its stores. Achieving these efficiencies will become even more critical as Walmart opens more of its small format Express and Neighborhood Market stores in the coming years. Both concepts promise to bring the organization into new urban and rural territory that can’t be efficiently serviced through its traditional delivery routes.

Souped-Up Scale

As I noted in a recent blog article, retailers are rethinking scale and attempting to make the most of the assets that they already have, whether virtual or land-based. True scale is no longer achieved through thousands of stores, but it isn’t achieved through millions of online impressions or mobile transactions either. It’s all of these combined. Walmart has obviously been thinking a lot about how to leverage the scale it already has, as well as how to build more in the future. Mac Naughton directly addressed this when he called Walmart’s 4,000 stores “existing assets” and when he spoke of leveraging its strengths in a multi-channel world, rather than trying to win at someone else’s game (hello, Amazon!).

Although Walmart’s Express stores have been portrayed by the media and other observers primarily as a small-format move, building site-to-store scale is a huge part of the Express story, and one that is largely overlooked. All of those small stores will not only service new customers in neighborhoods that used to only have dollar stores, but will serve as pick-up locations for the over 40,000 unique items that Walmart offers online. Walmart is augmenting its self-cannibalizing supercenter model with a new fleet of small formats that will forage new ground while facilitating online purchases.

Just since Mac Naughton’s presentation, two 1,000 square-foot, low-inventory Walmart’s have popped up in the downtown areas of Los Angeles and San Diego. The sign outside says Walmart.com for a reason; the displays inside promote holiday gifts including toys, big-screen TV’s, computer tablets and home theater products that draw from online stock. Orders placed at the stores ship free through a rebate program and instant gratification can be satisfied through store-stocked accessories like 3-D glasses, remote controls and headsets (look for more on Walmart’s CE strategy in part III).

Walmart's site-to-store capabilities have the potential to give it a killer advantage over dollar stores, which have built massive scale through store proliferation while largely ignoring online opportunities. Dollar General recently changed that with its September e-commerce launch, but the site went live with direct shipment, rather than site-to-store capabilities.

Sorting out the dizzying array of accessibility options that retailers are offering has become increasingly difficult. Site-to-store is now another of the many arrows in retailers’ product delivery quivers, and even that is no longer a one-size-fits-all proposition. Mac Naughton breaks Walmart’s offerings into three categories based on customer need states: fast, faster, and fastest.

Fast: Site-to-store or site-to-FedEx. Mac Naughton cited site-to-FedEx as a way to give underpenetrated markets access to Walmart’s EDLP prices. To me, that means that folks in big cities can shop Walmart without having a location anywhere near. Some of retailers’ biggest markets are now store-less, which answers the question “Why are they running ads here when there aren’t any stores?” (Don’t shoot the media buyer just yet).

Faster: Free home shipping, now available for 100,000 items with purchases over $45, within a three-to five-day time frame.

Fastest: Pick up today service. Shoppers can choose from 25,000 items online and have them shipped to a local store the same day. According to Mac Naughton, Walmart is working hard to increase the number of items in the pick up today family.

Walmart is also working very closely with its newly-created @walmartlabs division to optimize its multi-channel mojo, and I predict that the ideas incubating in the lab right now will be game-changers for the entire industry. Walmart has announced its digital acquisitions, but it’s the fruit that they bear that will transform the retail trajectory. Update: Check out today's announcement from @walmartlabs

Density Intensity

Back on terra firma, although Walmart has recently shuttered its Marketside concept, it is clearly invested in pursuing not just multi-channel but also multi-format retailing (and, as mentioned before, the two are now inextricably linked). Walmart is shifting capital away from remodels and toward accelerating the growth of its store base. Mac Naughton outlined a format “hierarchy” that still places supercenters at the top of the heap, with Division 1 stores continuing to be converted into highly-profitable supercenters.

Neighborhood Market stores have produced five consecutive quarters of positive comp store growth, and Mac Naughton says that the returns on these stores are now approaching those of its supercenters.

Walmart Express is slated to be the new kid on a growing number of blocks and Mac Naughton acknowledges that the company is still tinkering with the concept, including deciding which locations will include pharmacy and/or fueling stations (two more capability advantages that Walmart enjoys over dollar stores). Walmart’s Express stores have the potential to be the real scale-builders for Walmart, and are the best weapon in its battle against dollar stores and those pesky mid-size formats in the drug tier that keep pushing into non-core categories like food and alcohol.

New store development is once again de rigueur at Walmart, but as a point in the productivity loop. Walmart is wringing cost efficiencies out of its store builds by scrutinizing every element, from fixtures, signage, and other hard pieces to store layouts. Where will savings realized from these efforts go? Where else? Into building more stores, which will drive top-line growth.

Part III will reveal some surprising twists in Walmart's pricing and branding strategies.

If you want us to ping you when Part II posts and be notified of our retail trajectory updates, simply enter your email address in the subscription box in the right column and you'll be on your way!

Want to know what these and other retail trajectories mean to your total retail strategy? Planning your 2012 sales or marketing meetings and want to kick things off with a beyond-trend presentation on what really matters in retail? Contact Carol Spieckerman directly.