Standing firm where others have retreated - Wal-Mart - Merchandising: hardware and automotives

DSN Retailing Today, Jan 26, 2004 by Debbie Howell

Wal-Mart is often overlooked in the categories of home improvement, lawn & garden and automotive supplies as an industry trendsetter, considering the broader assortments and expertise found at specialists like Lowe's and AutoZone, Yet these segments continue to generate a steady business for the world's largest retailer.

Even if Wal-Mart doesn't delve deep into these categories, carrying primarily a convenience-driven assortment, its low prices and numerous store locations are significant advantages.

"Location and convenience are a huge factor in a lot of things. It's one of [Wal-Mart's] strengths," said George Whalin, president of Retail Management Consultants of San Marcos, Calif.

Many mass retailers in recent years have scaled back do-it-yourself categories--but not Wal-Mart. And while none of these categories has expanded dramatically, the mix continues to evolve and vary to match specific neighborhood interests.

In hardware, Wal-Mart's assortment is cherry-picked to provide the most commonly purchased or trendy items. Promotion is heavy on endcaps and in aisles to lure the impulse buyer with hot-priced feature items such as duct tape and light bulbs.

The tool department, while not a destination category as it is for home centers, keeps evolving. The retailer discontinued a Popular Mechanics private label line in recent years to emphasize a national brand strategy dominated by Stanley and Black & Decker, perhaps in a move to draw greater attention and sales. A similar transformation took place in paint, with Wal-Mart expanding into decor-related accessories and products to lure more moms into the aisle.

"More space is going into home products ... What seems to be emerging clearly is a female focus in hardware, especially pertaining to paint and decorating," said Jim Robisch, senior partner of The Farnsworth Group, a market research and consulting firm that specializes in the hardware industry. As with most departments, hardware at Wal-Mart is primarily a self-service environment, with splashy merchandising and point-of-purchase information minimal. In some categories that is changing, such as in light bulbs and paint, in order to sell shoppers on the benefits of upgraded products. Wal-Mart vendors have become more aggressive in supplying and promoting such POP material.

In lawn and garden, expansion into decor-related accessories and upscale items has been a trend, such as better grills and patio furniture sets. Meanwhile, Wal-Mart's Home Trends private label has been growing and may benefit by Kmart's downsizing and questionable sales success of Martha Stewart Everyday products.

Basic gardening supplies and chemicals such as fertilizer are some of Wal-Mart's core competencies. On the other hand, previously low-profile categories that could expand to higher-priced items include outdoor power equipment and pottery.

Automotive is one department that Wal-Mart doesn't talk much about but which experts agree the retailer does quite well. Similar to the hardware strategy, the assortment features accessories, chemicals and basic parts, ignoring the complications of stocking slow-turning specific repair parts that the auto chains excel at.

Some estimate Wal-Mart generates more sales in automotive than the leading specialist, AutoZone, which brought in $5.4 billion last year. Revenue from more than 1,700 tire & lube express centers is considered second to Jiffy Lube.

Besides lube service, tires seem to be a key focus and strong seller in automotive, given that they receive heavy promotion and display. The assortment expands beyond tires for passenger vehicles to specialty tires such as those for tractors, all-terrain vehicles and golf carts. An even broader range is available by special order from some of the six major vendors, such as high-performance sport tires.

This tire program is a good example of how Wal-Mart takes a niche and exploits it to the fullest potential. More can be expected in do-it-yourself categories going forward as the company seizes upon and expands other growth segments.