Wal-Mart Chief Details New Segmentation Scheme

NEW YORK - Wal-Mart Stores, Inc., the world's largest retailer, is working on an ambitious new strategy to make its U.S. stores more relevant by setting aside its cookie-cutter past, and instead positioning stores for specific demographic groups, said Eduardo Castro-Wright, president and c.e.o. of yesterday during a presentation at the Goldman Sachs Global Retailing Conference here.

Castro-Wright, who oversaw a similar approach when he was at Walmex, Wal-Mart's Mexican operation, said each the company's U.S. stores will custom-fit its merchandise assortments to reflect one of six demographic groups -- African-Americans, the affluent, empty-nesters, Hispanics, suburbanites, and rural residents - depending on market characteristics.

The executive said the new strategy has already begun in some stores, but will take up to 24 months to become implemented throughout the U.S. store portfolio.

The new strategy requires a shift in corporate structure and methods, Castro-Wright admitted. "We are changing the structure of the company so that we can drive this kind of approach across the entire chain," he said. New teams have been put in place to focus on the six demographic groups, he said.

Before Castro-Wright was on board as the head of Wal-Mart Store,, the company's 27 regional general managers had always lived in Bentonville, and spent a few days a week visiting stores in their territory. Starting last fall, the c.e.o. began moving them into the regions they supervised. These managers' compensations are now tied with specifics regions, Castro-Wright said during his presentation.

Driving the company's new thrust on demographics is Wal-Mart's marketing A-team.

"We now have one of the premier teams in marketing research of any company," Castro-Wright said. "That has allowed us to work on the long term. We're using our data, synchronized data, and market research to segment our offering for target customers so we can drive growth in returns.

"Segmentation delivers results," added Castro-Wright. He cited one of Wal-Mart's Hispanic-focused stores in Houston, where, in an unusual move, the retailer is using a third-party Hispanic bakery to provide fresh-baked goods. While this particular ploy strategy might not make sense in many Wal-Mart stores, as cost savings are the essence of the retailer's business model, the investment seems to be paying off in Houston, he added.

"In this store, sales per square foot are 7.6 percent above our other Houston supercenters." Gross margin is significantly higher, too, he added.

In addition to working on the new segmentation strategy, Wal-Mart has been re-energizing its low-price, "Rollback" messages in recent weeks to win back shoppers who've been scared away by high gasoline prices, Castro-Wright noted.

"Our customers are cutting down on their [gasoline] filling trips during the week, so shopper frequency has dropped. They don't want to drive the extra miles required to get to Wal-Mart." He noted, however, that weekend sales are higher than before. He said the Rollback program is meant "to convince customers it's worth driving the extra miles to Wal-Mart" to save money.

The retailer is also rolling out a new staffing program this fall to shorten checkout lines. The initiative, which has been tested in four markets, has reduced checkout wait times by an average of 8 percent in test stores, Castro-Wright said.
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