Wal-Mart a recap of year one

Buying more than 100 Woolco stores in one fell swoop gave Wal-Mart instant mass in Canada and created media-fuelled pandemonium in the country's retail sector.But, one year after its arrival in Canada and a little more than three months after its...

Buying more than 100 Woolco stores in one fell swoop gave Wal-Mart instant mass in Canada and created media-fuelled pandemonium in the country’s retail sector.

But, one year after its arrival in Canada and a little more than three months after its grand opening last November, is the American colossus sweeping all before it as many expected?

There is no definitive answer.

But there is evidence to suggest Wal-Mart Canada, a wholly owned subsidiary of the Bentonville, Ark.-based retailer, will need more time before it begins to run like a thoroughbred.

Most say 1995 will provide the litmus test.

George Hartman, a retailing analyst at BBN James Capel in Toronto, says Wal-Mart’s start in Canada was disappointing by that retailer’s standards although not by the standards of others in the industry.

Hartman, in a January copy of bbn’s client publication Dispatch, says it is clear Wal-Mart Canada’s 1994 sales results were below expectations and the anticipated rush of customers did not materialize.

Bill Woodard, vice-president and chief administrative officer of Wal-Mart’s international division, disagrees with Hartman’s assessment.

In its 1994 annual report, publicly traded Wal-Mart records net sales of US$67.3 billion and a net income of US$2.3 billion.

Britt Beemer, chairman and founder of America’s Research Group in Charleston, s.c., uses a baseball analogy to suggest how well Wal-Mart Canada is doing.

Beemer, who is familiar with the Canadian market because of his work for The Brick furniture stores and Sealy Canada, says the company has hit a double rather than a home run.

He also researches Wal-Mart in the u.s. on behalf of his client, Kmart.

According to Beemer, Wal-Mart did not place high expectations on the converted Woolco stores because they are too small.

In fact, many people – Beemer included – said when Wal-Mart acquired the Woolco stores they thought it was something of a trial to see just what the company could do.

Two Canadian retail consultants, John Winter and Ed Strapagiel, are both Wal-Mart supporters, the former unequivocally so.

Winter, the Toronto-based president of John Winter Associates, says it is ‘total crap’ to say that Wal-Mart Canada is not doing as well as it might.

He says he has spoken to about ‘a dozen Wal-Mart malls’ and adds they say sales have been ‘extraordinary.’

Strapagiel, vice-president at Kubas Consultants in Toronto, is not as colorful in his opinion as Winter, but also maintains nothing he has seen would lead him to believe Wal-Mart Canada is sub-par.

He says Wal-Mart does not need ‘boffo sales’ to make money because ‘they run so lean.’

If Wal-Mart has any problems to work through, they could be summed up under the headings ‘pricing strategy,’ ‘real estate’ and ‘image.’

Ed Gould, managing partner at National Public Relations in Toronto and Wal-Mart’s official spokesman here (Wal-Mart Canada President Bruce West was on vacation and unavailable for comment), says when it comes to prices ‘Canadians have been trained to shop on sale.’

Or put another way, consumers in this country are used to the high/low pricing strategies employed by most Canadian retailers.

Wal-Mart, says Gould and others, uses an everyday low pricing strategy which it has popularized across the u.s., but which is not nearly as well known to Canadians.

Hartman says, in last December’s Dispatch, Wal-Mart Canada’s grand opening was anything but and the retailer muffed ‘a glorious chance’ to introduce its stores and price strategy to Canadians.

He says the Canadian reaction to Wal-Mart’s Nov. 8 and 9 opening was lacklustre, noting consumers here are conditioned to respond to price promotions.

Hartman supports his argument by pointing out on those two days last November, Zellers, one of Wal-Mart Canada’s main competitors, fired a two-flyer, deep-discount salvo that brought that retailer two of its best sales gains days in the second half of 1994.

No one could be reached for comment at Zellers, or at Canadian Tire, another of Wal-Mart’s main competitors.

Winter, who has done some work for Wal-Mart Canada, is bullish about everyday low pricing.

He says it has won hands down in the u.s. and will eventually come out on top in Canada.

Others are not so sure.

In a Feb. 6 speech in Toronto, Don Beaumont, president and chief executive officer of Kmart Canada, pointed out everyday low pricing is not retail nirvana.

‘Certain commodity type items lend themselves to everyday low prices, while in other categories the consumer is programmed to sale-type activities,’ Beaumont told the Canadian Hardware, Housewares and Home Improvement Show.

‘The theoretical advantages of removing retailers from the drug of high/low retailing are obvious,’ he said.

‘Credibility of pricing, reducing advertising costs, fewer advertised merchandise remainders, more predictable replenishment, etc.

But, Beaumont said ‘total withdrawal is painful for existing high/low retailers.

‘Many have tried it,’ he said. ‘Sears in the u.s., Montgomery Ward, Target Stores and Eaton’s [in Canada,] to name just some.

‘Few have been able to make the transition.’

Beaumont says Kmart Canada has found there is more to retailing in the 1990s than deciding whether to go with an everyday low price policy, so the company has opted for a policy of blending everyday low prices with high/low sales.

He says Kmart discovered in recent research that its customers actually want a ‘great sale’ on an everyday low price.

As for Wal-Mart’s real estate, most observers say the former Woolco stores are too small to make plain the extent of Wal-Mart’s retailing savvy.

Hartman says Wal-Mart Canada is ‘vastly underrepresented’ in large markets such as Toronto and Vancouver and at a competitive location disadvantage.

The intangible matter of image may also be something to consider when assessing Wal-Mart Canada’s progress so far.

Beemer, a Southerner, points out Wal-Mart is a company rooted in the U.S. South and performs exceptionally well there, but does not fare as well in the U.S. North (and maybe Canada.)

Inheriting the Woolco mantle through its purchase of 122 stores may also have affected Wal-Mart Canada’s performance.

Hartman suggests some underperforming Woolco stores, such as the one in Halifax, may have led to continued underperformance under the Wal-Mart banner.