Wal-Mart announced a slight reduction in capital expenditure plans for the U.S. while increasing capital expenditures overseas. Earlier it had announced an intention to purchase all the shares of Japanese chain Seiyu Ltd. that it does not already own.
Scaling back on growth in the U.S. may be a good idea — if — and it is a big if — the slowdown is sufficient to allow the chain to focus on execution at store level.
When we returned from PMA, we wrote our piece, High Lettuce Prices Strain Supplier Relations With Wal-Mart, which followed up on our piece, Wal-Mart’s ‘Opportunity Buy’ Policy Reveals Much About The Company, from a few months ago.
Several vendors, though, called to say that the real problem right now at Wal-Mart, at least as far as produce goes, is that they are focused on what is easy to control, rather than what is important.
Apparently Wal-Mart is really emphasizing good quality and freshness, having tightened up on its specs for many items.
The problem with this, of course, is that Wal-Mart has never bought bad stuff. Bruce Peterson’s original design for the department relied heavily on the borrowed equity of well known produce brands, so it always bought decent quality. We would even say that its early reliance on RPCs led it to get quality above what it was entitled to, as nobody wanted a rejection in a container others weren’t using.
Wal-Mart has quality issues but the quality issues have to do with inconsistent store level execution, not with the quality being purchased.
We don’t know who is driving this, but it smacks of a corporate initiative to raise quality. The produce executives in Bentonville have total control over procurement and almost no control over store level hiring, staffing levels and training. So if top executives lean on produce to get better quality, they wind up pushing the procurement button, but it’s the store level execution button that needs a work-out.