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Wal-Mart to Customize Stores to Boost Neighborhood Appeal

September 08, 2006|From the Associated Press

Wal-Mart Stores Inc. will retool its 3,256 U.S. stores over two years to give them a more customized mix of goods and layout for six key groups of customers, including Latinos, African Americans and affluent shoppers, the executive in charge of Wal-Mart's U.S. operations said Thursday.

The move is the latest strategy twist for the world's largest retailer as it struggles to revive growth rates that have fallen behind smaller rivals such as Target Corp. Bentonville, Ark.-based Wal-Mart also recently posted its first quarterly drop in profit in a decade.

The approach, called segmentation, follows months of new initiatives from Wal-Mart to make sure each store is better tailored to its locale and to lure more affluent shoppers, who may come to Wal-Mart for groceries and basics but skip the company's more profitable aisles such as apparel and electronics.

Eduardo Castro-Wright, president and chief executive of Wal-Mart U.S., said stores would get a mix of products and layout to appeal to one of the six target groups -- based on what market research showed was the best approach for that location.

The target groups identified by Wal-Mart's market researchers are Latinos, African Americans, "empty-nesters/boomers," and affluent, suburban and rural shoppers, according to Castro-Wright's slide presentation.

But he said the approach would not require changing more than a small part -- about 3,000 -- of roughly 200,000 items sold by a typical Wal-Mart Supercenter, the retailer's largest stores that combine merchandise with a full grocery section.

And each demographic category will include hundreds of stores, so the retail chain will not be sacrificing the economies of scale that have allowed it to offer low prices, Castro-Wright said.

"At the end of the timeline, anywhere from 18 to 24 months, we will have all of this implemented across the chain," he said. He did not specify when that timeline would begin.

For now, Wal-Mart is testing the approach in 20 to 40 stores.

In Houston, one store is adopting a Latino identity, in part by offering more Latino grocery products and a fresh-from-scratch bakery.

The store's sales per square foot are 7.6% higher than at other Houston Supercenters. It also has a higher gross margin, which means more profit per item sold.

In the Chicago area, Wal-Mart has defined a store in Evergreen Park as African American, offering more urban apparel and a gospel, rap and urban music selection. Gross margin in that store is far above other Chicago-area Wal-Marts, Castro-Wright said.

In March, Wal-Mart opened an upscale store in Plano, Texas, aimed at shoppers in that affluent Dallas suburb. It includes high-end electronics, more fine jewelry, hundreds of types of wine and a sushi bar.

Shares of Wal-Mart rose 14 cents Thursday to $45.54.

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