Keeping shelves better stocked to boost sales and top line revenue is a priority among Wal-Mart executives working to break the cycle of negative to flat comparable store sales that have dogged the retailer for the past year.
Jeff Davis, chief financial officer for Walmart U.S., recently outlined the retailer’s strategy to drive sustainable sales growth by leveraging what they believe are strong Wal-Mart fundamentals. Davis spoke at the Jeffries Global Consumer Conference in Nantuckett, Mass., on June 19. He said the retailer desires to drive sales in physical stores but also across their digital platform and that effort starts with ensuring the shelves in all stores are well stocked.
Davis and Bill Simon, CEO of Walmart U.S., have each said the retailer recently revamped the way the product gets to the shelf and is reordered.
“What we've done this past year is we really try to demystify what we were doing. Previously we had a number of algorithmic exercises we were asking our associates to go through in order to make sure we had the right product in the right place. But we just quite honestly we got down to the basics and went back to simplifying the process,” Davis said. “It is about receiving inventory in the evenings and getting it on the shelf. It's about making sure that if it is not on the shelf that it is appropriately put into a bin in the back.”
He said when the items are sold, Wal-Mart’s point of sales data system lets them know to go pick it and get it back on the shelf.
“It is that simple,” Davis said. “And what is amazing about this is we actually have seen a significant improvement not only in our associate satisfaction, our productivity, the customers are also responding and we are actually seeing a lift in our comps in those stores that are actually executing the best on this what we call OSA First.”
ROOM TO GROW
Simon also said the in-stock percentages are higher after the retailer moved to the less cumbersome method of tracking inventory in the store. During the recent shareholder media day (June 5) he said simplifying the process “eliminating the algorithmic gymnastics in the former system” has made a difference in execution and the result has been improved in-stocks for the retailer, better than historical levels.
Davis said the in-stock goals of 95% have been increased as high as 97%. With nearly $280 billion in U.S. sales last year, just one percentage point improvement holds potential for sales to grow.
“We're really pleased by what is happening there and it is helping us drive our comps in certain key categories,” Davis added.
With reduced store labor and thousands of new products added to the average supercenter, on-shelf availability has been at the forefront of Wal-Mart and its suppliers’ minds for sometime.
Duncan Mac Naughton, chief merchandising officer for Walmart U.S., has said the out-of-stock issue is a multibillion dollar opportunity for the retailer and its supplier base. Last summer, these phantom sales prompted Wal-Mart to announce the testing a program called SPARC 2.0 to help give suppliers more visibility into their inventory sitting in stores.
In theory, SPARC 2.0 allows suppliers and third party merchandisers to access inventory data with their smart phones instead of having to wave down a Walmart worker and use a “telzon” device to see their in-store inventory. It also gives the supplier using the application the ability to print labels for missing products and “pick lists” to get the shelves restocked as soon as possible.
SPARC 2.0, dubbed the the Supplier Portal Allowing Retail Coverage initiative, was put to use in about 150 stores last fall in hopes of raising on-shelf-availability of product sold by the retailer. Wal-Mart admitted that out-of-stocks were problematic in some stores and expected SPARC 2.0 to make a difference.
The retailer did not provide an update on the SPARC 2.0 program despite two requests, but one of the early adopters — Crossmark — gives the program high marks. As a third party merchandiser, Crossmark works inside Wal-Mart’s stores on behalf of the retailer as well as supplier customers.
“I think SPARC 2.0 has been a great success. The ability to get the important OSA-related work done in-store without asking for the help of a Walmart Store associate is very important to our productivity and the return on our client’s investment,” said John Owen, executive vice president for Walmart and Sam’s Club Team at Crossmark.
Owen said the industry strives for 99% in-stock percentage.
“I applaud Walmart for being forward thinking on this. When on shelf availability improves we all win, and most importantly we do a better job of serving our Walmart customer,” he said.