StrategicReportOnWalMart

Time To Let Go Of Your Fears Surrounding Wal-Mart

As a retailer, you probably know that when Wal-Mart moves in, you're

likely to suffer an immediate 20-30% loss of business. Do you also know that

in many cases that loss is never recovered? That gut-wrenching you're experiencing

is probably the realization that even though your company has taken significant strides to become more operationally efficient, you still have no idea how you're going to generate sustainable sales growth.

If you're a manufacturer, your fear is based in the risk of doing too much business with one customer in this case, a customer out of Bentonville, Arkansas. Are you aware that Wal-Mart's private label line, Great Value, has exploded from 494 items to 1450 in the last two years as part of a conscious effort to double their margins? What happens when your brand is relegated to second tier status in the category, or eliminated altogether?

Those of you who are wholesalers, have surely seen the sales figures, and know the impact Wal-Mart's had on independents. It's going to get worse. Forrester Research expects the market share of independents to drop from the current level of 18% to 10% by 2010. Furthermore, using a projection of Wal-Mart's anticipated retail square footage expansion through 2007, Prime Consulting predicts 350 independent stores will go out of business over each of the next four years. With the declining sales of independents, you stand to loose your volume buying leverage.

Most supermarket executives underestimate Wal-Mart's strategic advantages.

Most current "beat Wal-Mart" tactics treat the mega-chain like any other ordinary, low price retailer, but strategically speaking, Wal-Mart isn't even a retailer. A more accurate description of Wal-Mart would be: "a world-class, logistics specialist incorporating retail formats that promote optimal execution of a clearly-defined business model." How else does one explain the phenomena where a 3,000+ chain with few unique products (national brands are everywhere) and with a largely self-service format can reach #1 in grocery sales in a short 11 years? In this case, the business model is designed so that Wal-Mart doesn't compete so much on products and services but on the basis of capabilities using an inventory replenishment process that is not only extremely cost effective, but also delivers mass customization of product to individual stores.

Instead of tactics that reinforce price competition, "Wal-Mart-proofing" demands strategic value innovation. By avoiding head-to-head competition with the world's largest retailer, "Wal-Mart-proofing" a business creates a temporary, quasi monopoly by achieving staunch customer loyalty, coupled with stiff barriers to competitor mimicry. By executing the Strategic Report, you're practically stealing pages from the Wal-Mart strategy playbook, capitalizing on their four key rules:

How well did you listen to Sam Walton?

..And even if you've listened carefully, is your organization executing his advice?

The decline of supermarket sales over the past 10 years coupled with Wal-Mart's spectacular rise to #1 in grocery sales, make it apparent that most supermarket executives have not employed Walton's counsel. Instead of vying for positions upstream, the majority of supermarket chains are surfacing downriver of Wal-Mart, the place referred to in marketing jargon as the "undifferentiated middle ground."

THE DIRTY LITTLE SECRET SAM WALTON KNEW ....

and I saw as an industry outsider...

Why would Sam Walton blatantly share his success secrets with competitors? Based on the supermarket industry's current mind-set, he knew the risk was minimal. In order to keep up with Sam Walton's broad strategic brush strokes, you have to have a sales growth mentality that's simply not embedded in most supermarkets "beat Wal-Mart" tactics.

I've been watching this trouble brew for at least 12 years. Each year the buzz at the FMI Annual Convention has intensified. Conversations hovered around the latest alternative format, as attendees share horror stories of first warehouse clubs and Boston Markets; then dollar stores and supercenters; and finally Wal-Mart siphoning off huge shares of grocery shoppers. The problem was clear to me--the success of the encroaching formats reflected the failure of supermarkets to detect and solve emerging consumer needs leaving "outsiders" the perfect opportunity to be first to conceive better solutions.

Rather than spotting unmet needs or targeting new shopper niches, supermarkets reacted to stagnant sales with their predominant profit-building focus is cost reduction. The industry-wide responses to the alternative formats which were originally aimed to reduce costs and grow sales (like ECR, category management) ended up reducing costs, lowering prices, and NOT growing sales.

Another type of response to stagnant sales has been to create new profit centers. In that vein, some retailers began to aggressively negotiate for trade promotion dollars.

While supermarkets are unquestionably more efficient today, my observation is that they are also becoming more customer irrelevant. That's strike one in the ballgame against Wal-Mart. To top it off, in comparison to chains such as Wal-Mart, Costco, Walgreen's, and Dollar General, supermarkets are becoming more vendor inefficient. Strike two!

Where does your business stand on the strike count? Do you have any idea what you'll do to prevent strike three?

Sound familiar? When I ask audiences, "How can you beat Wal-Mart?" they recite this list as if it's an industry doctrine committed to memory. While many of these tactics are necessary for curtailing Wal-Mart's momentum, utilized as isolated moves without a coherent strategic plan, they are insufficient for achieving sustainable sales growth.

More importantly, how well do these tactics square with Sam Walton's advice? Employing all of these approaches, you might still find yourself targeting a mid-to-lower income family in close store proximity desiring national brands at low prices. Combine that demographic with a claim to be the market's low-price leader, and you've just landed yourself in head-to-head competition with Wal-Mart.

These tactics do not take you upstream. They completely disregard Sam Walton's advice. Without rethinking the core elements of a strategic positiontarget customers, value proposition, and sustainable advantage--tactical changes will produce, at best, brief spurts of sales growth. The worst case scenario, of course, is the gradual and painful demise of your business.

Who better to serve as translator than someone who speaks both languages? During the past 17 years my top market as a speaker and strategic innovation consultant has been the supermarket industry. I'm intimately aware of the typical industry approaches used to solve business development issues as well as the thinking behind them. I've become well versed in the "operational efficiency" language.

Simultaneously, I've devoted the past nine months studying every piece of information on Wal-Mart that I could get my hands on. Building on my expertise as a strategic innovation catalyst, I also collaborated with a team of industry experts. Incredibly generous with their knowledge, these experts included ex-Wal-Mart executives, brokers serving a Bentonville-based account team, Fortune 500 manufacturers who are Wal-Mart category captains, and progressive retailers who are growing sales in spite of Wal-Mart's market presence. My fluency in the "language of strategic value innovation" was deepened by clients who shared reactions to my speeches, or engaged me as a consultant in developing innovative sales growth strategies.

The report includes:

Descriptions of what dozens of sales-driven retailers are doing to "Wal-Mart proof"

their stores.

The Strategic Report is not confined to theory, but describes actual examples of

winning strategies in the marketplace.

Ongoing strategic updates and a process of continuous learning.

My analysis of Wal-Mart hasn't stopped, and neither will the changes in the industry. As your translator, it's my job to keep you up-to-date on the information that has strategic implications in the "Wal-Mart proofing" game.

When you invest in the Strategic Report, you receive information and analysis on an ongoing basis. Information and analysis you can't get anywhere else. Rather than a receiving a single, finished publication that is never completely up to date by the time you get it, you become a subscriber to my bimonthly Wal-Mart Strategic Alert. When you purchase "Achieving Sales Growth When Wal-Mart Makes the Rules " you will receive periodic Breaking News Strategic Commentaries, when Wal-Mart is making news that demands an urgent strategic response.

Through these e-mail notices, I will keep you abreast of my latest insights and thinking over the next 12 months. At the end of that time, you will have the option of continuing your subscription for another year.

Customized recommendations for large chains and small independents

Rather than offering one-size-fits-all suggestions, the Strategic Report provides unique guidelines for chains who must be generalists needing to generate sales volume, and a different set for independents who have to be niche specialists focusing on increased margins.

Special Teleconference for manufacturers, sales agencies, and wholesalers

Although the Strategic Report is written specifically for retailers competing with Wal-Mart, it is a must-read for wholesalers determined to save their independent's market share and consumer products manufacturers (and their brokers) who are seeking to grow their supermarket business.

But it's not that easy, is it? Supply channel members such as yourself face a huge challenge when attempting to adapt strategic insights in support of your retailers' sales efforts. Other wholesalers and manufacturers have shared these frustrations with me:

"Most of our independents don't have a written

strategic plan and don't even see the need for it."

"Our chain contacts are confined to buyers who have a number to hit.

So our role amounts to negotiating for trade dollars and slotting fees.

We aren't being seen as strategic resources to senior managers."

"Even our top-to-top meetings are essentially progress reviews

and short-term planning efforts covering 3-6 months.

Few agenda items deal with strategic matters worthy

of the high ranking executive talent."

Sound familiar? Whether retailers are asking for your input or not, you can no longer afford to tolerate the demise of their businesses. Using the information provided in the Strategic Report you can become an integral strategic resource.

When you purchase the Strategic Report package, you are accessing my years of experience dedicated to empowering retailers to re-evaluate the importance of strategy in business development

The Strategic Report will help you conceive your own supermarket sales growth strategy that accounts for Wal-Mart's presence, and then the teleconference is your chance to delve into the issues specific to you and your supply chain members.

Prior to the teleconference call, you will receive a self-assessment tool designed to determine the strengths and limitations of your organization in relation to serving as a strategic resource to retailers. The results of your self-assessment, along with your questions generated by the Strategic Report, will become the basis of our discussion. This conversation is guaranteed to provide you with effective, and immediately implementable, action steps. Your team will also map-out several developmental steps to equip you with the necessary strategic capabilities.

Typically, clients invest $1500 to engage in this type of self-assessment and conference call, but as a quality assurance measure, I'm bundling in this service at a reduced rate for non-retailers. I want to insure that the supermarket industry understands this Strategic Report package is designed to deliver practical application and powerful results for both retailers and non-retailers alike. (NOTE: All retail chain subscribers also receive the teleconference opportunity.)

ABOUT ART TUROCK

Art Turock is President of Art Turock & Associates (Kirkland, WA), a recognized resource for supermarket retailers and consumer products manufacturers seeking to develop strategic value innovations that stimulate sales growth. He delivers thought provoking speeches to corporate and association meetings, and facilitates strategic innovation consultations for clients committed to rethinking their strategic position and their strategy process. His ideas have empowered over one hundred Fortune 500 companies (including A&P, Kroger, Publix, Procter & Gamble, Ralston Purina, HJ Heinz, Sarah Lee),and have been featured in Progressive Grocer, Supermarket News, GMA Forum, USA Today, CNN, and Bloomberg News.

As a resource, Art's unique value comes from bringing his considerable knowledge of other industries to bear on the food industry's pressing issues. His latest book, Invent Business Opportunities No One Else Can Imagine, describes the strategy and leadership practices used by trendsetting companies to achieve sustainable sales growth. He can be reached at 800-473-8997 or art@turock.com.

I wrote the Strategic Report: Achieving Sales Growth When Wal-Mart Makes the Rules to close the huge gap between Sam Walton's advice and the ability of the supermarket industry to interpret and apply the information. As I learned more about Wal-Mart's business model, I realized it was grounded in a language uncommon to the strategic logic of most supermarket chains. The supermarket industry speaks the "language of operational efficiency" quite fluently. The "swim upstream" philosophy, however, is couched in the "language of strategic value innovation." .

TABLE OF CONTENTS

Part 1: The Supermarket Death Spiral

Supermarkets Choosing to Die: How Supermarkets Became

Customer Irrelevant and Vendor Inefficient

Statistical Evidence of the Supermarket Death Spiral

Implications of the Death Spiral for Consumer Products Manufacturers

The Self-Induced Nature of the Supermarket Death Spiral: Flawed Strategic Assumptions

Finding Leverageable Conditions for Sales Growth in the Death Spiral

Part 2: Unbundling the Wal-Mart Business Model:

A Strategic Blueprint for Achieving Industry Domination

Wal-Mart Doesn't "Compete" Against Supermarkets

The Wal-Mart Juggernaut: A Statistical Picture of Massive Growth

The 800-Pound Gorilla Doesn't Share His Bananas: Six Reasons Tactical Approaches Won't Work Against the Wal-Mart Business Model

Reason #1: Wal-Mart is not a retailer. They are in the

distribution business.

Reason #2: Wal-Mart is not merely a low price retailer.

They practice mass customization.

Reason #3: Wal-Mart is fundamentally customer-driven,

not shareholder-driven.

Reason #4: Wal-Mart's business model is designed for

achieving sustainable sales

growth and industry domination.

Reason #5: Wal-Mart is the rule-maker in the supermarket channel.

Reason #6: Strategy dominates over tactical approaches.

Can Wal-Mart Be Stopped?: Thirteen Potential Achilles' Heels

Beating Wal-Mart At Their Own GameStrategic Value Innovation

Part 3: Wal-Mart Proofing the Store: Strategic Value Innovation

Four Primary Lessons of Strategic Value Innovation:

1) Compete only in markets you can win

2) Focus on the latent needs of customers

3) Don't settle for benchmarking well; introduce compelling value innovation

4) Create a value innovation that is both hard for competitors to copy and hard for

customers to walk away from.

Successful Retail Practices Against Wal-Mart for Chains and for Independents

Pricing considerations: How low must you go to compete against Wal-Mart?

Overview of the Strategic Value Innovation Process

Strategic Value Innovation: An Imperative for Sustainable Sales Growth

LINK TO ORDER: web fax mail

Wal-Mart is far from finished with its "upstream" foray into supermarket categories. "I'm not trying to be flippant," says Lee Scott, 52, Wal-Mart's CEO. "But simply put, our long-term strategy is to be where we're not." Because a requirement to triple sales in excess of $600 billion by 2011 is imbedded in Wal-Mart's stock valuation, Scott doesn't have any other choice but to engage in spectacular growth strategies. Much of that growth will take place in the next four years as Wal-Mart anticipates opening 500 more Neighborhood Markets, and doubling the number of Supercenters to 2,000.

Without question, the fears you're all experiencing are the reality of harsh competition. My guess is that an even harsher reality is in recognizing that even though your company's best minds have actively engaged in developing "beat Wal-Mart" initiatives, your sales have continued to stagnate. Like many other companies in the supermarket channel, your business is at a strategic crossroads.

Guides your own strategic thinking.

Unlike proprietary research conducted by consulting firms that often delivers information to readers with minimal translation to actionable moves, this report conveys findings that are easily applied into coherent strategy. As a result of a thorough analysis of Wal-Mart's business model, the Strategic Report provides the essential, strategic thinking tasks that will help you and your team conceive value innovations that move you upstream away from the fray of competitive price wars.

Dedicated manufacturer account teams seeking to grow their business with wholesalers or chains.

Corporate sales and marketing teams who recognize the value of rethinking their role and expanding their capabilities to hold strategic conversations with senior level chain and wholesaler executives.

Senior management teams ready to rethink the future strategic position of the organization in Wal-Mart's presence.

Wholesaler teams who want to expand their thinking as they work with their retailers and manufacturers

GO FORWARD WITH CONFIDENCE, CONVICTION,

AND A COHERENT STRATEGY

When the value is clear, the decision is easy. Given what's at stake for your business, how much would it be worth to know exactly how to compete with Wal-Mart? $10,000, $100,000? More?

What is the value you place on gaining continuing access to a flow of strategic insights that capitalize on the success of retailers who are using Sam Walton's advice to combat Wal-Mart's presence?

You face vital, strategic decisions that will influence the destiny of your store, chain, or enterprise. This Strategic Report package, will provide you with the essential knowledge required to make those decisions with confidence and conviction. I welcome your aligning with me as your translator and preferred resource in the "Wal-Mart proofing" journey.

ORDERING INFORMATION FOR THE STRATEGIC REPORT PACKAGE

Be among the first in the supermarket industry to receive this vital information and take advantage of charter subscriber rates! Begin your subscription today by clicking here to order on the web or clicking here and printing and completing the form. Mail the form with your check or fax the form with your credit card information.

The convergence of operational efficiency strategies is causing supermarkets to become customer irrelevant and vendor inefficient. Multi-channel shoppers are leaving the undifferentiated supermarkets for the clear value propositions offered by "alternative formats." Simultaneously, supermarkets are becoming less attractive as product distributors for CPG manufacturers who want to do business with more efficient operators.