Wal-Mart Retools Stores With Hispanics in Mind
CINCINNATI (AdAge.com) -- Wal-mart stores accounts for 65% of Latino music sold in the U.S. -- more than double the giant retailer's market share in the general market in some of its strongest categories, such as household and personal care. Now, it wants to get even better at marketing to Hispanics-which should make other retailers nervous.
Wal-Mart's plan is simple: Extend the same formulas for winning in other categories that it already uses in music, said Simon El Hage, director-strategic marketing and business development for Lopez Negrete Communications, Houston, the independent shop that has been the retailer's Hispanic agency of record for 12 years. Execution, however, means revamping hundreds of stores during the next two years.
Mr. El Hage, who cited the data at last month's Health and Beauty America show in New York, said Hispanics are one of the six key segments Wal-Mart has targeted in its next-generation "store of the community" program. Lopez Negrete is defending the account in the multicultural phase of Wal-Mart's agency review (a decision on multicultural shops is expected in November). Lopez Negrete, the seventh-largest Hispanic agency, is leading the effort to develop Wal-Mart's 21st-century Hispanic store model, and Mr. El Hage is promising big things.
Latino Wal-Mart store
"There will be a Latino Wal-Mart store, and it will blow you away," he said. "We're going to win in many categories where today we're maybe trailing or at parity with others."
Mr. El Hage said success in Latino music has come from mining Wal-Mart's vast trove of store data and merchandising stores to match the right consumer mix.
"Seven or eight years ago, Wal-Mart didn't know the power it had to become the No. 1 player in Latin music because the store-of-the-community [concept] was at the time not very well-developed," he said. "So they were shipping [Mexican group] Los Tigres del Norte to Hialeah [Florida, which has a large Cuban population]."
In the latest music initiative, Wal-Mart did a deal with Viacom's U.S. Hispanic version of MTV, relaunching as MTV Tr3s, to create an exclusive MTV Tr3s-branded music section in 900 Wal-Marts.
Wal-Mart already is the No. 1 retailer among U.S. Hispanics. And while that may seem unremarkable, given its leadership in U.S. retailing overall, it's much more of an accomplishment considering the retailer has been largely shut out of the three biggest urban markets with heavy concentrations of Hispanics: New York, Los Angeles and Chicago.
Houston pilot store
In markets where Wal-Mart has had more access to Hispanics, such as Houston, it's a different story. But even there, when a pilot for Wal-Mart's next-generation Hispanic store opened in January 2006, it became clear the stores had potential.
Speaking at an investor conference in September, Eduardo Castro-Wright, exec VP-CEO of the Wal-Mart Stores division, said the Hispanic prototype in Houston is generating sales per square foot 7.6% above the rest of the retailer's Houston supercenters. Before the revamp, sales were around the regional average. The store's gross margin is now 1.6 percentage points above that of the regional average, and pretax profits are up by triple digits, he said.
Mr. Castro-Wright brings valuable expertise to the U.S. Hispanic market. Before moving to the U.S. in January 2005, he was president-CEO of Wal-Mart Mexico for four years. Almost two-thirds of U.S. Hispanics are of Mexican descent.
Wal-Mart increased the size of its Hispanic-oriented dry grocery in the Houston prototype and brought in an outside Hispanic operator to run its in-store bakery. Wal-Mart operates its own in-store bakeries in Mexico, said Mr. Castro-Wright, but that wasn't practical in the U.S. because of the cost.
Given its geographic distribution, which skews rural, Wal-Mart already has plenty of experience marketing to rural Hispanics, who will also become more important in the chain's rural prototype, Mr. El Hage said.
"Because the general-market population is aging, guess who's going into rural America today?" he said. "Latinos. So the new rural format for Wal-Mart will also have to accommodate the new Latino, the growing migration going on there."