Finding niches among the merchandise madness

When one enters the grocery section of a Wal-Mart Supercenter, the assortment of items can be bewildering. Wal-Mart's introduction into the grocery retailing arena back in the early 1990s made the term "Supercenter" part of the American retail lexicon. Now, more than 15 years later, grocery retailing has been immensely successful for the world's largest retailer. It brings in slim margins, sure -- but it also brings overall traffic numbers into each Wal-Mart Supercenter where a certain percentage of them will buy general merchandise. There's the basis of the success story.

But in many ways, the "big box" way of retailing may not be enough to satiate millions of fickle customers who want personal and custom choices when it comes to groceries. Sure, Wal-Mart's core group of customers buy on price. I would argue that brand becomes less important in the general Wal-Mart shopping environment, but it's still very important.

However, Wal-Mart can only grow so far with the "one-size-fits-all" strategy that has made it what it is today. Customers want custom experiences, and the proliferation of brands and sub-brands in every possible food and drink product category can make even the most hard-headed grocery shopper twitch. Too many products and not enough organization (except by overall category) could possibly mean lost sales to Wal-Mart when it comes to the "service me in a custom way" type of customer.

Splitting off into niche organization

One of the most recent and popular overall categories of food has been of the "organic" variety. Many customers -- just the type of people Wal-Mart wants to see more of in its stores -- want organic foods stocked in the grocery stores they frequent. However, Wal-Mart's plan for this has been to mix these goods in with standard, processed food items within the same category. In a normal world, this makes sense -- all products in a single category are lumped on the same shelves. But when a growing number of customers are clamoring for divisions within those product categories, more refinement is needed -- even inside age-old grocery product categories.

That is, if one wants to grow sales by catering to emerging "splinter groups" of customers who want more than the same products (re-dressed over and over, of course) they've bought for decades. For customers wanting healthier and minimally-processed food items, the good news is that Wal-Mart, from my experience, continues to increase its SKUs in those products. The downfall is that the "organic mindset" of a consumer wanting those products is not to buy a few organic products and some processed products, but mostly (or all) organic products. And here lies the dilemma -- shouldn't these organic, niche products be completely separate from general food items -- even having an entire shelf dedicated to them?

Trying to wrangle shelf space for products that don't move nearly as fast as traditional, processed food products is not only a tough sell to Wal-Mart, but any retailer. However, sometimes responding to the market and creating the market can take two different paths. Organic products not only carry higher retail prices, but higher costs. Why would Wal-Mart want to risk its current grocery business model for this? To think outside the box is one reason, and become an important organic product supplier to a whole other group of customers is another.

Problems cannot be solved by the same level of thinking that created them

That famous quote by Albert Einstein makes sense here. To create more business, more progressive thinking and risk taking may be needed by Wal-Mart -- at least in its home territory of the U.S. Although the retailer is having great success recently in its international operations, the U.S. still contributes the lion's share of business to Wal-Mart's coffers. If the retailer chooses to duplicate its success in the U.S. in the international markets where it operates, that's a wise decision. It's also wise to create more opportunities among the many splintered factions of consumers here in the U.S. who apparently want a custom shopping experience that may weigh equally or more than price alone.

Should Wal-Mart want to take a risk and begin creating "mini stores" inside its stores to cater to unique tastes, that would probably be received very well by both customers and the markets alike. It would be a risk, sure -- but then again, it could herald in a whole new set of opportunities for the retailer to take its U.S. business to a new level over a relatively short period of time.

Join me next week at this time for another edition of The Wal-Mart Weekly. Until then, have a safe week.