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Walmart: Rx for an upgrade

BY Mike Troy

The pharmacy at Wal-Mart is in for some major changes in the coming years as the retailer looks to upgrade its prescription drug departments in keeping with a broader strategy to make the customer experience at its stores fast, clean and friendly.

Such attributes have not historically been associated with shopping at Wal-Mart, but the company set out to change that perception in late 2005 when it embarked on a sweeping three-year transformation plan. There were lots of changes among senior personnel and the structure of such groups as merchandising, marketing and operations, but what customers noticed most was the arrival of new brands throughout the store, shorter checkout lines, less clutter as inventory was eliminated and a new advertising slogan that touted, “Save money. Live better.”

More recently, other more visible changes have become increasingly evident as the process of making stores fast, clean and friendly has extended to store-remodeling projects that involved new signage, a more vibrant color scheme, the removal of palletized merchandise displays to eliminate clutter from the aisles of stores and the relocation of key key departments. That’s where changes to the pharmacy come in, since one of the missing links to deliver on the notion of providing customers with a fast, clean and friendly experience relates to the layout of stores and specifically the location of pharmacies within supercenters. As supercenter growth accelerated in the 1990s, the prevailing store design involved positioning such destination departments as pharmacy throughout the store to generate customer traffic throughout the building. That meant the pharmacy was located on the general merchandise side of the building as opposed to the more frequently shopped food side of the store, where it would have been more convenient to customers.

The strategy worked well, but eventually, as consumer attitudes regarding the value of their time changed and chain drug competitors grew ever more convenient, Wal-Mart discovered that the location of its pharmacies, often obscured by tall fixtures and merchandise displays, left it at a competitive disadvantage.

“The consumer is in charge, and you cannot force them to do what you want them to do,” Wal-Mart’s chief merchandising officer, John Fleming, said recently at a retail conference sponsored by the University of Arkansas. “We are not getting the conversion we want when we put the pharmacy on the other side of the box.”

Conversion has been a key word at Wal-Mart for several years, as the retailer has recognized that the key to growth involved becoming more effective at getting the people who already are in its stores to buy more merchandise rather than attracting more customers to stores that are already heavily trafficked. As it relates to pharmacy, a key to conversion involves repositioning the department and related health and beauty categories to the food side of the store where they are immediately visible to customers when they enter the building.

The layout is similar to that used by Target and was first experimented with by Wal-Mart at a prototype store that opened in Plano, Texas, several years ago. The concept since has been deployed in selected new stores and also can be seen in such remodeled locations as Wal-Mart’s store in Rogers, Ark. The aging supercenter underwent a major facelift that involved new category adjacencies, the new orange, yellow, green and blue color scheme to identify major departments and a clearing of merchandise displays from main aisles. The latter change improved access to the pharmacy, which now is located adjacent to the food department. The new design also features a health and beauty department adjacent to the pharmacy where fixtures are positioned at an inviting 45-degree angle, as opposed to running parallel or perpendicular to the store’s main aisles, as generally is the case.

The recently completed Rogers store will be toured by members of the financial community when they are in northwest Arkansas for Wal-Mart’s annual analysts’ meeting. At that meeting, the company is expected to provide details on what happens next now that the three-year transformation program has run its course and an accelerated remodeling program appears to be a logical course of action.

That’s because Wal-Mart steadily has reduced domestic new store growth since 2006 when supercenter expansion swelled to 281 units. Fewer than 200 units were opened in 2007, and based on Wal-Mart’s prior guidance, 170 stores are slated to open this year as the company’s annual capital expenditure budget falls to a range of $13 billion to $14 billion. New supercenter openings are expected to fall even further next year with only 140 units planned, leaving more of the company capital budget available for an accelerated remodel program that promises to improve the pharmacy experience.

Words to live by

Wal-Mart’s adoption of the phrase, “Save money. Live better,” came at a particularly opportune time last fall as the nation’s economy went into a tailspin, and the prospect of saving money resonated loudly with consumers.

Company executives are willing to concede as much in discussions of improved financial results, but they are also quick to point out that much of the credit also is due to improved integration between marketing, merchandising and operations. Said integration has enabled the company to more effectively execute a broad range of initiatives over the past three years, including a major change that required a big adjustment on the part of suppliers of health-and-wellness products.

The change began about a year ago as Wal-Mart sought to project a more consistent look throughout its stores and created a style guide that would determine the appearance of prepacked displays that have long been a staple of Wal-Mart’s merchandising strategy. The displays helped reduce labor costs at the store level because they simplified restocking, and they are an effective way to accelerate the process of item introductions. However, as Wal-Mart merchandising and marketing groups underwent a change in leadership in recent years, it was determined that the prepacked displays could be a useful tool in helping the company create greater consistency and reinforce the brand message of, “Save money. Live better.”

As a result, suppliers were provided a style guide dictating the use of colors on prepacked displays, the placement and size of the words, “Save money. Live better.” The change initially rankled suppliers who were accustomed to such displays being all about their brand but now needed to incorporate Wal-Mart’s graphics and colors into the design. Suppliers in health-and-wellness categories were affected more than most because those departments are areas of frequent item introductions and the small sizes of individual packages lend themselves well to prepacked displays.

Today, as a result of the change, most endcap and aisle displays near the pharmacy and the adjacent health-and-wellness departments have a similar look with Wal-Mart’s signature blue color and the phrase, “Save money. Live better,” prominently positioned alongside the branded messaging.

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Battery makers upgrade power sources, get more shelf space

BY Mike Duff

LOS ANGELES and ST. LOUIS, Mo. As new products keep rolling in from major battery brand manufacturers, retailers are updating their marketing to maximize the potential of increasingly specific product functions.

On Aug. 18, Energizer announced the launch of its new Advanced Lithium battery, one designed to reliably power wireless gaming accessories, digital cameras, hand-held games or MP3 players.

Five weeks earlier, Panasonic introduced the EVOLTA battery, which it characterized as the world’s longest lasting AA alkaline battery cell in more devices. EVOLTA represents a certain resistance to battery specialization. “We see the trend in batteries going toward more ‘middle-drain’ applications as the reduction in power consumption needs of appliances has resulted in less high-drain devices needing primary battery power. EVOLTA eliminates the confusion for consumers and gives them confidence that our battery will perform well across many applications,” said Matt Sora, vice president of sales and marketing.

While others keyed on batteries, Duracell focused on the kind of line extensions. Among the new products debuted was Duracell Daylite, the cornerstone of new flashlight line designed to take LED lighting to the next level, the company stated, by capturing and using 100 of the light generated versus 70 percent in more typical instances. The flashlight introduction came hard on the heels of the debut of Duracell’s My Pocket Charger and the PowerSource Mini, which were developed to complement cell phones, BlackBerrys and MP3 players.

Ultimately, said Duracell spokesman Kurt Iverson, battery producers are bringing technology to bear in developing more effective, longer lasting products that use innovation to provide power more efficiently. “In the case of the Daylite flashlight, it’s getting a product to work using less battery power and still produce a brighter beam of light,” he said.

The involvement of major battery brands in a range of portable energy dependent items certainly is stretching traditional brand boundaries and merchandising concepts as well.

Jacqueline Burwitz, spokeswoman for Energizer said that, while the brand remains the one that keeps on going and going, the company’s merchandising support has evolved with its product line. “It has changed. Now it’s a matter of pairing the right battery with the right device,” she said.

Battery makers have encouraged many retailers to create ancillary product display spaces that complement the products they power, but drug chains haven’t necessarily bitten, as many prefer to depend on a battery center merchandising program. “We have those sections,” said Stacy Rinehart, a USA Drug spokeswoman. “We have our batteries in those displays.”

That doesn’t necessarily mean, however, that drug chains aren’t changing to the existing market.

Rather than develop secondary displays, Walgreens focuses on appropriately expanding its battery centers to make it easier to shop for specific applications, said Robert Elfinger, a company spokesman. 

“The battery section has grown significantly,” he said. “Customers are starting to understand that high-draining devices such as digital cameras are getting specific batteries, and they are looking for some of the new high-tech batteries. We’re expanding the battery sections to accommodate them.”

Thus, drug chains, for the most part, feel as if a battery center, usually conspicuously positioned, makes sense in terms of both attracting customers and return from floor space, as it can keep pace with developments in the category if properly configured to changes in the market.

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Survey says 40 percent of shoppers plan to start holiday gift-shopping before Halloween

BY Jenna Duncan

WASHINGTON The National Retail Federation today released results of its 2008 Holiday Consumer Intentions and Actions Survey, run by BIGresearch, showing that the average American holiday shopper plans to spend more than $800 each on holiday shopping.

The NRF’s survey results showed that 40.2 percent of consumers said that they will begin  holiday shopping before Halloween and survey respondents plan to spend about $832 on average on holiday items. This average reflects only a 1.9 percent increase over last year’s average total: $816.69. It’s the lowest anticipated spending increase NFR launched its survey in 2002.

Forty percent of survey respondents said that sales and/or promotions is the biggest lure to where they will shop, while 12.6 percent said they will seek “everyday low-prices.” Only 5.6 percent said they would choose holiday shopping locations based on convenience and 5.2 said it depends on customer service.

NRF president and chief executive officer, Tracy Mullin, said, “Retailers are going into this holiday season with their eyes wide open, knowing that savings and promotions will be the main incentive for shoppers. No one is canceling Christmas because money is tight, but consumers will be sticking to their budgets and looking for good deals when deciding where to spend this holiday season.”

Survey repondents also said they would spend about $51.43 each on decorations, $32.43 for greeting cards and postage, $95.04 on candy and food and $22.61 on flowers. The Internet has seen steady rates of shoppers: 44.2 percent of the shoppers in the survey said they were buying gifts online, flat from 44.3 last year. NRF has said that it predicts holiday sales to increase 2.2 percent over last year, for a total of $470.4 billion.

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