Thursday, February 03, 2005

Wal-Mart Observations in Idaho

Last week Wal-Mart opened a new supercenter in Idaho Falls, Idaho. I visited the store the day after the grand opening, so I just missed getting the chance to see Chester the Cheetah, the Pillsbury Doughboy, and the Coca Cola Polar Bear. Despite not getting the chance to see these food icons, I still found the store very interesting.

At the entrance to the new store was the Wal-Mart Fly Shop, the first of its kind in the country. No it’s not a new Fear Factor fad shop! They sell equipment and flies for fly fishing. Eastern Idaho has some of the best fly fishing streams in the world, so selling fly fishing products makes a lot of sense.

I asked Jim Evans, whose official title is merchandising supervisor but who sure looked like the general manager, how they happened to get into selling flies. He told me, “The district manager thought that it might make sense here, so they tried it.” Evans is an avid fisherman who told me that the shop is aimed at first time and intermediate fishermen.

As I wondered around the store I noticed that Wal-Mart has continued to take the cost of their buildings down. Five years ago at a NAIOP Conference a speaker talked about how Wal-Mart had found that they only stayed in their buildings for about 12 years. By putting on a 12 year roof instead of a 20 or 30 year roof and doing some other changes they were able to save several dollars/sf.

Wal-Mart’s new Idaho Falls store has been value engineered from even five years ago. They’ve taken the ceilings out of the stores and the linoleum off of the floors. I’m guessing that they’ve taken a couple more dollars per sf out of the cost of a building. And, when you’ve got almost 5,000 stores, a couple of dollars per square feet is $1.5 billion. Real money!

A new report, “Wal-Mart 2010” by Retail Forward looks at this continuous cost cutting and innovation of to predict that the behemoth retailer will continue to grow market share and share-of-wallet. They predict that its sales will top $500 billion by 2010 from $284 billion in 2004; and it will own 12% of the non-auto/non-gasoline retail sales in the USA (compared to 8% in 2004). The report says, “Wal-Mart will continue to push the boundaries of what its customers will allow it to be.”

Both the Fly Shop and the cost cutting on their buildings are great examples of what makes this world-class competitor such a powerful force. They’ve pushed decision making down the organizational chart for merchandising and continue to cut costs in whatever area they see possible and practical.

No comments: