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Wal-Mart: The Name On The Door
Is the Same; The Thoughts Inside
Are Very Different

Jim Prevor’s Perishable Pundit, April 10, 2007

What’s in a name? Will Wal-Mart be as successful if it is a different company?

This is more than an academic question. This past Friday, Wal-Mart announced that Pat Curran, who was the Chief Operating Officer for the Wal-Mart Stores division, has been reassigned to Executive Vice President of People for that division.

Bill Simon was made Chief Operating Officer and is now responsible for Store Operations. Bill was hired two years ago to head up the Professional Divisions, formerly called Special Divisions. Now the Professional Division consists of optical and pharmacy but at one point included a group of what were once all leased departments, including jewelry, shoes, tire and lube centers, etc.

There is no real problem with Bill. He has a good reputation as a very bright guy and fits the mold of most of the folks that Eduardo Castro-Wright, President and Chief Executive Officer of Wal-Mart Stores-U.S.A., has put into positions.

What is interesting is that now there is no one with any historical connection to Wal-Mart’s heritage in any major responsible position in Merchandising, Marketing or Operations. No one hired by Sam Walton, no one steeped in the Wal-Mart culture.

Now, having bright people approaching problems without historical baggage might not be a bad thing, but it is a very different thing.

Change has always been a part of the evolution of Wal-Mart. You don’t grow to be the biggest retailer in the world, operating different formats on different continents without being willing to change.

But, up till very recently, change was built on the cultural foundation that had established the company and seen it through to achieve such great success. So as new ideas were evolving, there were always individuals in these key areas that acted as a “conscience” and provided an “institutional memory” that connected the future to the past.

Of course, one can always argue that radical change was needed, but Wall Street and the vendor community have both failed to fully absorb how dramatic the change has been in the way Wal-Mart has been transformed on a cultural, core value level.

Let us do a quick comparison and contrast of core values that Sam Walton and David Glass would have recognized with what they seem to be evolving into in the regime:

HISTORICALCONTEMPORARY
EDLPPromotion/Advertising-Driven
Single Item/Price MerchantsMulti-Item Solution Merchants
Sales-DrivenMargin-Driven
“Sell as cheap as you can.”“Get as much for the product as you can
Net/net negotiatingSupplier-funded activity
No short term strategiesAppease Wall Street with knee-jerk tactics
Win-win strategies with suppliersWal-Mart wins first then maybe the supplier wins
“Our people make the difference.”“Our executives make the difference.”
“A big company that acts like a small company.”“A big company that acts like a big company
“Spend money because you NEED to.”“Spend money because you can afford to.”
“The answers to our problems lie within us.”“The answers to our problems lie with outside consultants.”
“We are a merchandise-driven company.”“We are a marketing-driven company”
“We sell for less.”“We sell SOME things for less.”
“We are a company that buys and sells products for a profit.”“We are a geo-political entity with a multitude of interests and responsibilities and we buy and sell things to fund these activities.”

In effect, although the name Wal-Mart may be on the door, this is no longer Sam Walton’s company.

This hasn’t happened by accident. Someone, presumably Lee Scott with the agreement of the Board of Directors, has decided that the cultural foundations that have served Wal-Mart well since it was founded are not the basis for moving forward in the future.

This may be a correct decision, but the “contemporary” Wal-Mart we detail above seems less certain in its response than the old. To say that the future is to be found in doing sales or having vendors pay for things is just to say that Wal-Mart will be less distinctive than it has been. But, of course, if it is less distinctive, how will it maintain a distinctive competitive edge?

There also seems to be an assumption that Wal-Mart is capable of executing many things that, certainly in fresh foods, it has shown no ability to do.

When we contrast the notion of a single item/price merchant with a multi-item solution merchant, we are talking about the difference between selling one type of towel on an end cap at a great price with a multi-item display of four types of towels, a bathroom trash can, a soap dish, a tooth brush holder, etc.

These types of displays are complex to execute, especially when the Achilles heel of Wal-Mart has always been irregular execution. Even if some of these ideas are good ideas, they are worse than useless if they can’t be executed effectively across an enormous scale of stores

This is especially a problem for food in general and perishables in particular. Wal-Mart is a general merchandise company that happens to now sell food, and it has never invested in the manpower and training necessary to oversee operations for food, especially perishable food. This is where Wal-Mart is different from Meijer, which has a supercenter concept similar to Wal-Mart but a very different cultural center built on selling food.

Some of the changes will result in a short-term burst of earnings, like hitting suppliers up for money. But, very quickly, suppliers will get wise to the new game and Wal-Mart will pay for every cent it asks for in higher prices.

For perishables, much depends on who the new Executive Vice President of Food will be. If the Pundit ran Wal-Mart, we would go visit Bruce Peterson and urge him to come back in that position.

Bruce was hired by Sam Walton and built the produce and perishable operations up in a company very different from the Wal-Mart of today.

Any company that doesn’t welcome new ideas is likely to fail, but any company that forgets its roots is likely to flounder, rootless, uncertain where it came from and where it needs to go.

Wal-Mart now has a lot of new ideas and no roots at all. Bruce Peterson sitting at the table would inject a much-needed rootedness to the corporate conversation.

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