Everyone has an opinion about Walmart. Four decades ago, Walmart changed the retail business, and small independent retailers couldn’t keep up with that change. The first change that Walmart instituted was buying in large quantities. The second was buying cheap, according to Pittsburgh executive consultant Susan McGalla. Walmart didn’t care much about the quality of their products when the chain first got started, but the executives in charge at the time quickly realized that was a big mistake. McGalla said Walmart spent a lot of money and did a huge amount of research to solve that problem. Walmart developed a quality control department that set standards for all vendors. Those standards change the quality of the products that Walmart offered consumers.
Over the years, other retail giants have taken several lessons from the Walmart playbook, and those companies have taken a major bite of Walmart’s market share. McGalla is familiar with how the retail business works because of her association with American Outfitters, and Wet Seal. Both of those companies were hurt by Walmart initially, but McGalla changed the direction of both companies and pulled them out of the destructive Walmart wake.
Ms. McGalla said Walmart has made several mistakes over the years, and those mistakes are now impacting the profitability of the company. One major mistake was not stocking shelves in a timely manner, and another was not paying hourly employees a decent wage. Walmart is facing serious sales and profit issues in today’s market, according to McGalla, and the company is trying to correct things before the chain takes a major Sears-type nose dive.
McGalla said Walmart is making two new changes to head off disaster especially in the chain’s superstores. The executives have decided to cut the number of products it sells in its big stores. McGalla said rather than selling four sizes of mustard in those stores; the stores will only carry two sizes. Superstores normally carry 120,000 products and executives have already cut 2,500 of those products, and more cuts are on the way, according to McGalla. Cutting the assortment of products in those stores could hurt sales, but McGalla thinks the opposite might happen.
Another big change is the height of their shelves in the checkout area. That doesn’t sound like a major change, but that will eliminate millions of dollars in sales because there will be no room for gum, candy and magazines in those areas. The reason, according to McGalla, is for visual effect. Critics say cutting millions of dollars in gum and candy sales is a bad idea, but McGalla thinks the stores need a facelift, and this is one of the first steps in the process. McGalla thinks Walmart stores look tired and out of touch with today’s consumers. In order to keep up with the competition, Walmart must change its image.
An image change doesn’t happen overnight. It is an expensive process, and that means stockholders won’t be happy. But it is necessary if Walmart wants to stay on top. Sears was in a similar situation 25 or 30 years ago, and the executives didn’t’ react. McGalla said retailers that don’t react to market changes usually lose consumer confidence and when that happens, reorganizing or going out of business becomes a nasty reality for them.