Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (91093)	12/17/2004 10:53:30 AM
From: LindyBill	Respond to of 793807

Wal-Mart learns the lesson of asking the right question By Mariko Sanchanta Financial Times At aSeiyu/Wal-Mart staff meeting, Masakazu Hattori, a senior merchandising director holds up an 80cm Christmas tree - the perfect size for space-constrained Japanese households. According to the company's "Smart System" tracking software, the tree is selling fast at only three of Seiyu's 406 stores. At the others, not a single tree has been sold. Mr Hattori excuses himself from the meeting and rings some stores. It turns out that at those where the tree has been selling well, it has been displayed decorated with lights and ornaments. At shops where none has been sold, it has stood unadorned and puzzled consumers have simply bypassed the strange-looking plastic plant. The Christmas tree incident underlines an important point, says Jeff McAllister, chief operating officer of Wal-Mart Japan. Powerful as its IT systems are, they serve only as a preliminary step in uncovering the causes of problems. "[These systems] will guide you to make more intelligent decisions. But you have to ask more questions," he says. "You can't take [the data] and say, 'Well, there's the answer.'" Since taking a 6 per cent stake in supermarket operator Seiyu more than two years ago, Wal-Mart has overhauled both the Japanese chain's cost structure and its IT systems. Now, with Wal-Mart's stake at more than 37 per cent, its store information management technology has been installed at more than 200 Seiyu shops. More than 600 of Seiyu's suppliers have adopted Walmart's Retail Link supply chain system, allowing them to track sales of their items in each Seiyu store. Meanwhile, Wal-Mart and Seiyu have raised the ratio of directly procured processed food and merchandise to just under 50 per cent. The retailer is continuing discussions with suppliers to increase this ratio to streamline operations. Analysts say it will take a few years for Seiyu's structural reforms to bear fruit. Seiyu was forced to boost its capital by Y4.5bn ($43m) recently through a share issue to offset operating losses and replenish consolidated shareholders' equity. The retailer expects a loss this year of Y4bn after lacklustre sales. "The key question for Wal-Mart is - how quickly can it move to create the scale in Japan that it needs," says David Marra, retail analyst at AT Kearney in Tokyo. Observers agree that the only feasible way would be via another acquisition. But executives say the main priority is to reduce the cost structure. "While our competitors are opening large stores one after the other, Seiyu today cannot afford to do that," says Mr Kiuchi. "Raising the profitability of our stores is our priority." Over the next couple years, Wal-Mart is planning to import new technologies to further pinpoint what its customers are buying and what factors are influencing their decisions. "Today, since the majority of customers walk or take their bike [to our stores], if it rains, it has at least a 10-15 per cent impact on sales," says Mr McAllister. "[Predictive technology] will give us critical information, based on historical data, when it rains, here is what the customer buys and then ensure we get the product to the store in advance." Many critics have been sceptical of Wal-Mart's "Everyday Low Prices" strategy in Japan because consumers have long equated high quality with high prices. Mr McAllister admits this mentality will take time to change. "When we offer a fleece jacket for Y997, that thing should fly off the shelves. But I think the customer looks at it and says: 'Well, what did they do to it?'" says Mr McAllister. "It is going to take time to educate our customers that our value is better." Find this article at: news.ft.com