Walmart has pressed hard on the selection growth lever, packing upwards of 150,000 individual items in each of its supercenters. Its ideal is getting you in the door for that one thing you want, and loading you up with a shopping cart full of stuff you didn’t know you needed…until you came through the doors.
And that’s priority number one for Walmart: get shoppers through those doors.
Castro-Wright’s Folly or Walmart Hits the Limits of the Pareto Principle
Eduardo Castro-Wright, former CEO of U.S. Stores, perpetrated a great folly by reducing Walmart’s selection in an attempt to improve the aesthetic experience for the shopper and thereby compete with Target for upscale discount customers.
His strategy made sense in theory. I’m sure his analysts poured through the data and saw clear patterns demonstrating some derivative of the Pareto Principle, something that pointed to 20 percent of the inventory generating 80 percent of the sales. You can fiddle with the ratios however you please – perhaps it was 40 percent of the inventory driving 90 percent of sales or 60 percent of the items responsible for 75 percent – the point is that the data highlighted a glut of slow-moving items. If you could just reduce the low-demand inventory you could simultaneously make the stores more spacious and stock shelves with items that sell quickly.
And there’s a strategy an MBA could love!