|Merchants are realizing that if shoppers, such as Will Sumriex and daughter Autumn in Springfield, Ill., are going to keep spending less, stores need them to come in more frequently. (Seth Perlman/ Associated Press)|
Retailers emulate Wal-Mart model
Stores adding items to shelves
NEW YORK - As Wal-Mart prepares for tomorrow's annual shareholder meeting, several large retailers are emulating the king of one-stop shopping and offering more necessities.
The stores are trying to keep registers humming, as Wal-Mart has, amid a recession that has pushed consumers to cut back spending to essentials - food, cleaning products, and other consumables.
Target, known for cheap chic clothing and home accessories, is adding fresh food and relaunching an in-store line of home and personal-care products. Toys R Us Inc., which has long carried baby formula and diapers, is rolling out a new section in 260 of its almost 600 stores with more consumables like paper towels, hand soap, and detergent.
Family Dollar Stores Inc. has rapidly expanded its food assortment, adding products like Jif peanut butter from J.M. Smucker Co. and Triscuits from Kraft Inc.'s Nabisco brand as it strives to pull in more shoppers. It added 200 new food items in May, according to spokesman Josh Braverman.
Ken Perkins, president of RetailMetrics, noted there was a good reason consumables weren't seen as a growth engine before: Profit margins are much thinner in food than apparel or home furnishings.
"It's boring, and there's not much glamour," Perkins said. "But Wal-Mart has set the gold standard and the path to follow in recessionary times."
Merchants are realizing that if shoppers are going to keep spending less, stores need them to come in more frequently. And offering a greater range of necessities will help.
Wal-Mart has been one of few bright spots in retail since the recession began in late 2007.
Necessities such as groceries and health and wellness items accounted for about 60 percent of Wal-Mart's revenue of $405.6 billion last year, bringing in about $243 billion.
Including Wal-Mart, the same-store sales index from the International Council of Shopping Centers-Goldman Sachs has averaged a 0.5 percent decline this year compared with last. Without Wal-Mart, the industry index would have fallen 4 percent. Sales at stores open at least a year are considered a key indicator of a retailer's health.
Similarly, first-quarter profits fell 12 percent this year compared with last year industrywide, and without Wal-Mart they would have dropped 17 percent - though the profit gap between Wal-Mart and the rest of the industry has narrowed as merchants increase cost-cutting.
The big issue is whether Wal-Mart will be able to retain new customers once the economy recovers. Wal-Mart's stock soared 20 percent in 2008, as investors focused on companies that benefited from the steep downturn in consumer spending. But its shares have fallen 10 percent this year as Wall Street turns to retailers that sell more discretionary goods and could benefit when the economy improves.