BATAVIA, Ohio (AdAge.com) -- Reports by some suppliers and others close to Walmart that the retailer will temporarily halt rollout of its remodeled "Impact Stores" looks to be wishful thinking: The retailer's executives indicated to analysts and investors today that the program remains on track, and that elimination of in-aisle displays will even accelerate.
The remodeled stores, which will encompass about 32% of the retailer's U.S. outlets by the middle of next month, are scheduled to hit the entire chain by the end of calendar 2013. The push removes millions of square feet of merchandising space in the giant retailer's aisles by eliminating displays.
In fact, results to date indicate overall same-store sales are 1.25 to 1.5 percentage points higher in the remodeled Impact stores, which have 8% to 9% less inventory than similar un-remodeled stores, Chief Merchandising Officer John Fleming said in a presentation to analysts today. "One of the most important elements from a customer perspective is this idea of giving space back to customers," he said. "This has been highly controversial. There's been a lot of debate."
He said Walmart has rolled out the elimination of in-aisle displays to an additional 300 stores beyond those fully remodeled, and that those stores have seen 0.4 percentage points faster same-store growth than control stores with a 3% decline in inventory. "It's working well," he said. "And we're rolling it to the [entire] chain next year."
Eliminating the clutter of the in-aisle displays of Walmart's once-revered "action alleys" is getting customers to go down other aisles more often and notice sections of the store they once overlooked, he said. The old format forced customers to make a choice about which side of the aisle they walked down, which often caused them to ignore categories on the other side of the aisle. As the retailer's "Win, Play, Show" strategy shifts focus and merchandising space to faster-growing categories, the new traffic flow amounts to a net win for sales, he said.
That may not ease the pain of suppliers or even Walmart merchandisers in categories losing display space as a result of the remodels, including many health and beauty aid categories. But it's improving customer-satisfaction scores and the likelihood the retailer will hold onto more upscale customers it's attracted during the recession once things improve, Mr. Fleming said.
Realistically, suppliers increasingly shut out of "action alley" will also be more motivated to pony up for Walmart's growing number of pay-to-play in-store marketing options, including event marketing for $200 to $250 per store and end-cap displays linked to the Walmart Smart Network in-store TV program, which will also bolster Walmart's bottom line.
In its broader marketing effort, Walmart has gotten better at communicating it has lower prices without spending so much more to do so, said Chief Marketing Officer Stephen Quinn. "In a country where the majority of people are price sensitive, our price-perception scores with customers have never been higher," he said. "And there are a couple of reasons for that ... one is we have lower prices."
But he also said Walmart has gotten better at communicating those low prices, including by improving its share of voice in media without a commensurate increase in spending. "A lot of this improvement came through better media planning, through better partnerships, through better precision and focus through our marketing mix modeling," Mr. Quinn said. "We're getting a huge amount of impact based on taking a lot of best practices we've had for years through procuring our merchandise and applying those over into media."