BATAVIA, Ohio (AdAge.com) -- Walmart is doling out hundreds of millions of dollars for "Project Impact," an ambitious five-year push to de-clutter its stores to make them more shopper-friendly. But having less merchandise on display has put a serious crimp in sales for some categories and dinged suppliers. And that's got Bentonville buzzing that the retail titan might just put the program on hold as a result.
"They solved half of the problem, which was un-cluttering the stores," said a person familiar with Walmart. "That leaves them with the other half of the problem: how to make up for the lost sales" from removing millions of square feet of prime merchandising space.
The conundrum of lost sales is real, but the "solution" to put the program on hiatus is being dismissed by some as wishful thinking on the part of suppliers. Either way, it's sure to be a hot topic when Walmart meets with investors and analysts in the retailer's hometown this week.
Walmart executives have described the Impact store remodels as a five-year plan for its 2,600-plus supercenters (out of more than 4,200 total stores), projecting conversion of 500 to 600 stores this fiscal year, which ends Jan. 31.
The revamps are extensive and run millions of dollars per store, including updated signage, new layouts with wide-open aisles, bigger and more prominent space for strategically important categories such as electronics and baby care, lower fixtures that allow for better visibility and an all-around brighter appearance.
But the process also removes those pallet-sized merchandising displays scattered throughout Walmart, stuffed with everything from $5 DVDs to health and beauty aids. And that extra elbow room for the Walmart shopper, has extracted a stiff price in merchandising space for categories like health and beauty, which derive about a third of their sales from Walmart. In fact, some industry watchers credit a combination of lost Walmart display space, along with more aggressive private-label merchandising by the chain, in part for a substantial slowdown in U.S. sales at $64 billion Johnson & Johnson (J&J declined to comment).