Bloomberg seized some movement by the worlds largest retailer to add back some SKUs pared in year old Win-Place-Show program as a sign that the pendulum was swinging back from SKU rationalization. They quote one head-hunter as indicating that manufacturers are stepping up efforts to staff now that they have a seat back at the Bentonville table. I can hear the cheers from a half dozen CPG sales executives as they hope this will reverse the SKU-Rat programs not only at Wal-Mart, but at Safeway, Kroger, Walgreens, Supervalu and even 7-eleven.
Logistics Viewpoints Adrian Gonzalez gives a little more guarded view in his March 11 post quoting the retailers COO Bill Simon. Mr. Simon acknowledged at the BOA Merrill Lynch Conference that they were adding back some items to avoid disappointing some consumers. He indicated that these were anticipated course corrections and that the real reason for Wal-Marts traffic declines in the fourth quarter, were much more connected to the severity of shopper disruption from the Project Impact remodels which started in 09 and will not be complete until 2014. Major remodels on 15-19% of the fleet each year is bound to have some impact on traffic.
All of that cheering reported earlier might well end with Morgan Stanleys Mark Wiltamuth announcing on the 19th that the worlds largest retailer will dramatically increase grocery promotions over the next six weeks. He called it a major setback for U.S. grocers. Shares of grocers stocks reacted immediately, dropping about 2% in aggregate.
Wiltamuth indicated this action was built to address Wal-Marts traffic slippage in the fourth quarter. The pricing will affect 10,000 items primarily Grocery, and it will hit stores by April 1 supported by strong media. This should impact the Easter traffic.
The SKU-Rat programs are not going away, for any of the players. In Wal-Marts case this is simply one leg of a much bigger plan which has been unfolding in bits and pieces for a couple of years. This promotion focus over the next six weeks will hammer back at the competition which will have a tough time affording to follow along.
This is just another example of a lead player willing to lead radical change in the shape of retail. As Drucker tells us: to be sure change is painful and risky and above all it requires a great deal of very hard work. In a period of rapid structural change the only ones who survive are the change leaders. A goodly proportion of those attempting to make the future will surely not succeed. But predictably, no one else will.