Walmart: Rx for an upgrade


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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