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By Burt P. Flickinger III, managing Director, Strategic Resource Group
Editor's Note: An interesting past year has given rise to some subtle yet significant changes on the latest edition of Progressive Grocer’s annual Super 50 ranking of the top grocery retailers. With this in mind, PG enlisted retail food industry expert Burt P. Flickinger III, managing director of Strategic Resource Group, to share candid observations and in-depth insights about select retail newsmakers on the annual retail leaderboard. His assessment of nine retailers – which are segmented into four parts and which draws on his personal and professional opinions and years of research, as well as from archival data contained in the 10th anniversary of PG’s Super 50 in 1975 – appears in a new PG online exclusive feature, The Flickinger Files.
Walmart – ranked No. 1 on PG's Super 50
Walmart's new leadership team of Doug McMillon, CEO Walmart Inc., and Greg Foran, CEO/President U.S., appear to be on the verge of bringing Walmart back from five tough years of problematic same-store-sales.
Their leadership will be transformational given that this is the first time in over 15 years that Walmart has had two leaders with career long success both as merchants and in store operations. Previously, Walmart’s CEO “czars” had come out of HR, finance, warehousing & transportation without sufficient operating and merchandising experience.
McMillon and Foran have proactively addressed significant problems passed along by their predecessors, which resulted in part that Consumer Reports and ASCI (American Customer Satisfaction Index) has rated Walmart the worst major food retailer in the U.S.
Prior management and Walmart's board had under invested in inventory, staffing, store "labor content" hours, and associate compensation. As a result, Walmart tended to have the worst in out-of-stocks, service, long lines, customer complaints and employee turnover.
Employee turnover was a particular problem. After Walmart's founder, Mr. Sam (Walton) acknowledged in his autobiography, My Story "....I was so chintzy, that I really didn't pay my employees very well" (in the beginning). Sam Walton went on to state that to reduce stealing/”shrink”, increase performance, etc., he put in a profit sharing plan that Walmart contributed "an average of 6 percent of wages to the plan." (Employees did not contribute to the plan.)
Even though Sam Walton stated that the profit sharing plan was the move that he "was proudest of for a number of reasons..." in 2011 – the 40th anniversary of Mr. Sam starting profit sharing –Walton's descendants, as the largest WMT shareholders, and the Walmart board, voted to eliminate the profit sharing plan for hourly workers. At that point, Walmart's problems accelerated on higher employee turnover, horrendous shoppers Walmart stores’ ratings/scores, higher shrink, and poor sales performances relative to cap-ex investments vs. more capable competitors.
Greg Foran "cut his teeth" at Woolie's competing in New Zealand vs. one of the best and most formidable worldwide food retailers, Foodstuffs retail co-op with their dynamic PAK'nSAVE group, which is a cross of the best of WinCo, Wakefern/ShopRite, and Costco stores in the U.S. McMillon has competed vs. the best of the international food, drug, and club store competition. PAK’nSAVE’s stores generate up to 200 percent more sales/per store than Walmart super center, event though PAK’nSAVE’s stores have 50 percent of the sales space of a typical Walmart super center.
It is important for both McMillon and Foran to have Walmart win in the U.S. and throughout North America, especially after Bloomberg reported Walmart lost 25 percent of its market share in China to fast growing national competitors, such as Mark Batenic’s IGA-China’s independent owner/operators hypermarket group.