Walmart can learn ‘a thing or two’ from Massmart method
Business Day - May 7th 2012, 08:50
Everyone expected all the learnings to come from Walmart. There was an expectation within the retail industry that Walmart would change how Massmart does business not only within the company itself, but for its suppliers and mostly its customers.
But a few months into implementation of the R16,5bn merger of Walmart with South Africa’s Massmart, the local outfit has taught the US giant a thing or two, according to Don Frieson, Walmart’s lead integration executive in South Africa.
For the US retail giant, Massmart represents its first foray into the DIY market with its chains such as Builders Warehouse and Builders Express.
"This format could be transferred into other markets," he says. "The concept could be taken into emerging markets such as Brazil, but could work in Canada too."
Another concept that could be used elsewhere is Dion Wired, Massmart’s electronics and speciality appliance store. "I can see stand-alone stores or store-within-a-store Dion Wired being developed for the US market," Mr Frieson says. "Going into new markets always brings new learnings."
Still, Massmart is now a Walmart-owned business and needs to learn the "Walmart way of doing things".
The US retailer budgeted about 18-36 months for the entire integration process, but from a store level not much will change, Mr Frieson says.
About 12 expats from about four different countries are looking at Massmart’s supply chain, its merchandise, sourcing capability and its culture. The latter turned out to be the easiest piece of the puzzle, he says. "Massmart had a code of ethics very similar to Walmart’s code and the companies share the same values.
"We want to assist Massmart to be more efficient and build better partnerships. Customers want brands and brands for less. We want to leverage these partnerships to bring these brands to customers," Mr Frieson says.
The company is set to introduce new merchandise to customers soon, especially in the lawn and gardening department, he says. But most importantly, it wants to have lower prices for longer, which is what it is trying to do with its price-cut promotions that last up to 90 days.
Local employees were exposed to road shows and during monthly communication meetings will sing the Walmart cheer. Introduced by founder Sam Walton, the cheer is used to build team spirit.
There will be small changes to customers’ experiences when they enter a Game or Makro store, he says. Walmart has introduced the three-metre greeting rule. It’s "aggressive hospitality", he says.
"Customers have a certain look on their face when they are looking for something. We want our staff to recognise that look. A person has taken time to enter your store. They should not have to make another trip. They need to find everything they need on that first trip."
Mr Frieson promises customers better signage in all stores, with pricing more visible. However, there will not be any Walmart-branded stores.
"Makro and Game have a great brand identity. We didn’t want Makro to look like Walmart — that may not be effective for a South African audience. Most of the changes that will occur won’t be visible to the consumer. It will be in better inventory control or in the supply chain."
The biggest surprise to Mr Frieson was the gap between different LSMs (living standards measure), and just how brand conscious South Africans are. "I thought private label (no-name branded goods) saturation would be higher, in line with other emerging markets."
The LSM gap doesn’t make a difference when it comes to price though, he says. "All consumers want to save money whether they’re wealthy or not."
When it comes to keeping distribution costs low, Walmart is king. Mr Frieson says: "It all depends on how many times a box is touched from supplier to customer. Every time someone touches it, you add costs to it. Dead inventory also costs — you can’t have stock sitting for ever on the shelf. The secret to Walmart is just-in-time retailing.
"We are not here to turn Massmart into Walmart. It’s more like Massmart powered by Walmart. We have opened cupboards and asked them to choose what they need."
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