Tuesday, January 28, 2014

Why is Walmart going where no retailer has gone before?

After reading the article, " The Trouble Lurking on Walmart's shelves" I was quite surprised by their strategy of neglecting the On Shelf Availability or (OSA) of their on sale products. The main reason being was that it goes against the basic fundamentals of Modern Trade that I was taught while I was working for Unilever as a Key Account Manager. Modern Trade is a term used by consumer goods companies for large retail outlets such as Walmart, Target, Costco etc. Such large outlets demand their own dedicated distribution channels and have been separated from the distribution channels dedicated to local "mom & pop" general stores which normally constitutes General Trade. While working for Unilever Pakistan I was the  Account Manager for 2 METRO Cash & Carry stores. METRO is one of the largest wholesale retailers (similar to Costco) in Europe with a presence in 29 countries and over 21 million customers. Throughout my role with METRO their biggest grievance would be if they did not have enough stock to fill their shelves. The global METRO brand "prides itself in providing unique one-stop shopping experience" for customers and has undertaken numerous initiatives with global giants such as Nestle to try and improve their OSA.  Incidentally, OSA was also a very big priority for Unilever as if their product was not on the shelf how was it going to be sold?

Unilever prioritized OSA to such an extent that it became part of each Modern Trade employee's PDP or Personal Development Plan in the form of  a deliverable known as a "Perfect Store". A store was deemed perfect it contained all the important SKU's located at the most visible locations within the store. The exact science behind achieving a perfect store can be help explained by this video. As the video will explain "availability" is the number one criteria for achieving a Perfect Store. Also, just to emphasize how important this concept was to Unilever it should be noted that Unilever in 2012 wanted to expand from its existing 5 million stores to 20 million stores in 75 different markets within the next year. I used to personally conduct a physical in store OSA check every 2 weeks and would be quick to highlight any shortages in availability so as to make sure I would not be blamed for a lack of ordering or vigilance. In fact, the only metric that both I and the METRO store managers were quizzed on during any "store visit" by company executives was OSA, as it used to be the most visible problem. All this and more make me wonder how Walmart is challenging the status quo so radically and more importantly why as even the numbers do not seem to be backing them up just as yet.

On another note, I was very impressed with the Inventory Strategy Metrics as explained by the report  on Managing Inventor. In my interaction with METRO store managers I used to see their concerns fluctuate across all three points of the triangle especially as the store worked on a monthly cycle. During the start of the month there would be heavy ordering so as to make sure that OSA did not suffer and the metric of "Customer Service" was satisfied. Throughout the month the Floor Manager used to clash with the Stock Manager as the former wanted to optimize "Operational Performance" which he thought was hindered by handling excessive stock whereas the stock manager always wanted to be on the safe side. However, as the end of the month arrived both would join forces and want to get rid of all excess stock and would ask for discounts from Unilever so as to not be holding on to large amounts of unsold stock and thus reduce their "Inventory Related Costs".

My question for this week is: " As potential consumers, what does the class feel is the most important service for a store to have? For example do they value availability over customer service or vice versa?

I feel I might be biased as I have experience in this very field but it would be interesting to note how the average consumer would feel with the assumption of course that the class provides an accurate sample to gauge the "average consumer".

Links Included:
5. http://www.unilever.com/sustainable-living/customers-suppliers/customers/

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