Convenience and customization

Wal-Mart just got a lot bigger. The already gigantic general merchandise chain is on the eve of introducing three Supercentre stores - in London, Ancaster and Stouffville, Ont. - and plans to unveil four more in the new year, also in Ontario (Sarnia, Scarborough, Vaughan, and Brampton). Measuring between 165,000 to 200,000 sq. ft., they will house all of the general merchandise Wal-Mart is known for, plus enhancements to apparel, electronics, home décor and grocery, including, for the first time, fresh produce, baked goods and meat.

Wal-Mart just got a lot bigger. The already gigantic general merchandise chain is on the eve of introducing three Supercentre stores – in London, Ancaster and Stouffville, Ont. – and plans to unveil four more in the new year, also in Ontario (Sarnia, Scarborough, Vaughan, and Brampton). Measuring between 165,000 to 200,000 sq. ft., they will house all of the general merchandise Wal-Mart is known for, plus enhancements to apparel, electronics, home décor and grocery, including, for the first time, fresh produce, baked goods and meat.

Mario Pilozzi, who has been president/CEO of Mississauga, Ont.-based Wal-Mart Canada for the past four years, says it’s the next phase of the retailer’s ongoing evolution that began when it first arrived on Canadian soil in 1994.

‘We have expanded the assortment right from the get-go, and we have been adapting to more of what the customer wants. In 1998, we came out with our first pantry with a few items, and last year, we opened a pantry over 5,000 sq. ft., with 7,000 items. [The Supercentre] is the next step,’ he says. In most of the countries Wal-Mart operates in, it’s already a heavy hitter in the grocery category.

What kind of opportunity exists here? Wal-Mart Canada won’t divulge market share data, but recent figures from CIBC World Markets suggest that the total grocery market size of Ontario alone is $22.3 billion. Loblaw has 40.7% of that pie, Metro 20.1%, and Sobeys 12.3%. At this pre-Supercentre stage, Wal-Mart has a mere 3.5%.

Pilozzi, who joined Wal-Mart Canada in 1994, and had been with Woolco Canada for about 30 years, explains the new Supercentres will address the needs of time-starved customers. ‘They want to get whatever they need, as much as possible, under one roof in a convenient fashion. That is why we believe this is the right time to get into a Supercentre.’

Pilozzi says advertising will continue to focus on value, while also getting across the one-stop shop message by showcasing a wide assortment of goods. ‘With TV there are different spots for different reasons. We have paid more attention to ‘store of the community,’ we have commercials in different languages, and commercials for a particular business, but there’s always the message of good value.’ Agency partners are Toronto-based Publicis, as well as Allard-Johnson in Quebec.

In-store will also continue to be an important medium for the retailer, as emphasized by the launch of ‘shopcast’ in the Supercentres (see sidebar). Pilozzi explains that communication starts in the parking lot, with messaging on cart carrels and on the building, and then continues inside through POS. ‘You walk into our front doors and there’s communication on rollbacks, there’s what we call our comp rail where consumer items and prices hit you right away. You walk into our departments with our huge signs over end caps, with our flags, with our Made in Canada program, with our private-label signing – it’s all communication.’

Strategy sat down with Pilozzi at Wal-Mart HQ in the weeks leading up to the launch of the trio of Supercentres to find out more about the launch of the mega-stores, as well as how they will fit into Wal-Mart’s overall strategy of serving the needs of time-pressed consumers in a customized fashion.

How do you get into customers’ heads?

We are moving towards regionalization.

Once upon a time it was all centralized here in Toronto; today we have two regional offices. We have an office in Montreal, so our regional VP no longer sits here in Toronto and tries to manage the Eastern part of Canada. They live and shop in that community, so they understand it better. The regional manager who operates the Western provinces lives in Calgary. So part of our home office is in Calgary. So that is, in essence, an admittance that we have to do a better job locally and focus on the local customer.

We [also conduct] quite a few focus groups. We have subscribed to software and applications that give us a good makeup of the different communities where we have stores or want to put up stores. We have the tools

[to customize].

Why have you decided to become more decentralized now?

You as a customer want to be treated as different as you are. You as a customer are smarter, much more educated, you have access to all the retailers in the world through your desktop, and you know what’s available and therefore you demand those products. And if you demand them, we have to have them. That didn’t exist 10 years ago.

What are some examples of localizing as a result of regional office/research input?

What’s important is that our regional VPs can become the CEO of a local business…we know better what local customers want and we can react to opportunities like the Calgary Stampede [as an] example.

In apparel, we know that the Prairies actually have bigger, taller people, so sizing is specialized. Tofu is popular is some places and irrelevant in others. Sports like fishing need different products and different marketing market by market. We have, and market, ethnic food, ethnic health and beauty, cosmetics, in areas where ethnic specialization makes sense. We need to know differences exist store to store, and we need to treat our stores individually.

How is your marketing structured?

We have a great team that was pulled together following the tragic death of Lou Puim, our past marketing VP. We have a marketing director, Mike Dombrow, individuals who head up key areas like advertising, and people in the field who figure out what marketing makes sense locally, where they live and work. The team rolls up directly to our chief merchandise officer Mike Huffaker. For us, marketing goes way beyond ads and signs. Marketing works hard to understand our customers, how they want our relationship to be today and in the future and from region to region.

All your ads seem to be Canadian-made – is your desire to appeal to local differences a factor in this decision?

How can you focus on a local customer and then market a U.S. commercial that’s one size fits all? One does not fit all, so we don’t believe it’s the right thing to do. Does that mean we will never have a commercial from the U.S.? As long as it fits the Canadian consumer.

How does your new CSR strategy fit into the larger picture?

We have five branches of CSR – [environmental sustainability, ethical sourcing, diversity, people (HR) and store of the community] – and there is a committee working on those [each with a senior executive member heading it]. [In terms of the environment], we have done a lot of work with our buildings and they are a lot more efficient. We are purchasing renewable power. We’ve been on the track of ethical sourcing for quite a few years, and that’s a committee I head in Canada. I’ve been in China and Bangladesh and I try to understand what makes a good factory. So I’m personally involved with that.

With diversity, we have been trying for many years to be a company of the people, in other words, to be a reflection of our customer base. Now we’re paying more attention to it. And [then there's] store of the community.

If you ask any company, do you care about these issues, everybody’s going to say: ‘Of course we care.’ And we cared in the past also. But we really never dedicated resources, and as of a year ago, we started to dedicate resources and have people responsible for it.

Why dedicate resources to these initiatives?

It’s more important to consumers. Whenever you hear of topics that are close to the public’s heart, sustainability comes up. [With Hurricane Katrina], because of our size, we were able to have a positive impact. Our U.S. CEO Lee Scott pointed to this example of using our size for good, and said let’s pay more attention to it and be better at it. We always cared about ethical sourcing, and it made good business sense to save energy, but we’re paying more attention to it now.

Can you expand on the idea of store of the community? What type of local programs do you run?

We ask our store managers and the management team to be part of the community, understand its needs and make a contribution. We have a matching grant, so if there’s a need in a particular community and the store has a fundraising event, we say: ‘For every dollar you raise, we will match it.’ It gives store managers ownership, in the sense that it’s all about their community. It’s all very personal. And I think that makes a huge difference.

WAL-MART GETS TRENDY

Have you noticed that Wal-Mart’s apparel advertising has gotten much more, well, with the times? It’s no coincidence, says president/CEO Mario Pilozzi. In fact, it is part of the retailer’s strategy to reach out to increasingly fashion-hungry consumers with new marketing, a new retail presentation, and new categories within the clothing mix.

‘The trend now is to be more relevant, and trendier, so the marketing overall has to reflect that,’ he explains. ‘If you walk into most of our stores, the visual merchandising is different. We are trying to merchandise more of a co-ordinated look, rather than one item for a price. So as our merchandising strategy changes, the marketing strategy has to follow.’

To that end, Wal-Mart held a fashion show in downtown Toronto at the end of September to showcase the designs of its U.K.-conceived, ‘cheap chic’ George label. Co-ordinated by an international group of Wal-Mart employees (including Canadian and U.K. fashion and marketing teams), with external assistance from Toronto-based public relations firm National and a team of fashion-show professionals, the event drew hundreds of spectators who gathered to watch 22 models strut their stuff, including Canada’s Next Top Model Andrea Muizelaar.

The show was one component in a national ‘It’s all about style’ campaign for George, which includes print ads in fashion and lifestyle pubs, with images ranging from high-fashion creative to models dressed in everyday garb accompanied by advertorial copy featuring a ‘London Style Report.’ Meanwhile, new billboard ads in Toronto, Calgary and Vancouver launched on Oct. 2.

Adds Pilozzi: ‘Our brands are becoming more defined, and the customer is starting to see more of what they’re looking for [at Wal-Mart].’

George in particular has performed extremely well, and Wal-Mart has expanded the collection from women’s wear, to lingerie, maternity, plus-size, accessories, men’s wear and children’s wear. Swimwear is up next. In fact, since its debut two years ago, George has spurred double-digit growth in the entire women’s apparel category at Wal-Mart. Apparently, it pays to be fashionable. LD

WAL-MART TV HAS A SPOT FOR YOU

When Canada’s first Wal-Mart Supercentres open this month, they’ll have an in-store TV network that will broadcast ads and company info.

And the new medium is one other advertisers can eventually tap into, says Mario Pilozzi, president/CEO of Wal-Mart Canada. ‘We believe the best means of communications is in-store, because you [can] communicate directly with your customer,’ he says. It will roll out nationally throughout 2007 and ultimately the plan is to be chain-wide.

LCD screens will be installed in high-traffic areas and at cash registers, where consumers will learn about universal store initiatives like Rollbacks and gift cards, as well as get targeted information that is relevant to specific departments and local needs, like community fundraising events.

Supported by Toronto ‘narrowcasting’ company ShopCast (www.shopcast.tv), Wal-Mart ShopCast TV has been four years in development and is modelled in part on a similar nine-year-old network broadcast in the U.S. The Mississauga, Ont.-HQ’ed retailer has high hopes for its ability to grab the attention of Canadian shoppers at the first moment of truth. And Wal-Mart traffic clocks in at one million a day.

Initially ShopCast will be operating a check-out channel at the Supercentres, with a full-scale rollout planned for Jan. 24 involving 10 Ontario stores and bumping up to nine department channels. In January ShopCast will invite national advertisers to buy into the first year of the network (Jan. to Sept.), and to participate in rollout research. Ultimately, advertisers can buy by demo or day part and geo-target. The check-out channel will have a cost per thousand somewhere between $4-$5, and within the store, channels will be priced on a per store, per two-week cycle basis.

Certainly, the findings of a comprehensive pilot of the program in Meadowvale, Barrie, Brampton, Oakville, and Etobicoke, Ont. (five stores were compared against five control stores), look promising. Conducted by Muldoon and Company in conjunction with Starch Research, the results of 1,000 surveys and multiple focus groups suggest that customers are getting the messages loud and clear. In fact, 57% said it ‘reminded them of products available at Wal-Mart,’ and 35% said it ‘informed them of products they did not know Wal-Mart carried.’

And the additional sounds and sights didn’t seem to bother shoppers either: 90% said Wal-Mart was creating a ‘more pleasant shopping experience’ and 81% said it is ‘a great addition to the store.’ By Lisa D’Innocenzo with files from Mary Maddever