When consumer spending dips, few companies target high-income shoppers as a potential revenue stream. But few companies can walk in Walmart’s shoes, and the retailer has both attracted more consumers and convinced them to buy bigger-ticket items.
With a fresh new logo to boot, Walmart is cleaning up in more ways than one. Its stores are assuming a leaner, sleeker look to capture consumer interest; and the company is leaning out its supply chain to reduce the number of items it stocks. In addition to streamlining SKUs, Walmart is attracting a new customer demographic.
Higher-end consumers are buying a wider range of products from Walmart instead of simply loading shopping carts with low margin food and consumable items, said Bill Simon, the company’s U.S. chief operating officer, at a recent Morgan Stanley conference.
Customer traffic in U.S. Walmart stores has increased among both higher-income and lower-income shoppers, he reported. But in a change from the past, more affluent consumers are showing a willingness to buy beyond the basics. Walmart has gained credibility with these selective shoppers by selling more name-brand electronics such as Sony, Apple, and Samsung.
While Walmart may be appealing to a wider consumer demographic during an economic slowdown, and perhaps setting its sights on post-recession ventures, demand for cheap groceries is still driving its business.
In a filing with the U.S. Securities and Exchange Commission in early April, Walmart reported that groceries accounted for 49 percent of its U.S. sales during the fiscal year that ended Jan. 31, 2009, up from 47 percent a year before.
Simon said the retailer has improved its supply chain, allowing it to get fresh produce into its stores faster to meet demand. Walmart’s efforts appear to be paying off in big dividends. The company recently reported its strongest sales in history during the fourth quarter, with $108 billion in receipts.
But not all are convinced that the company’s success reaching out to discretionary consumers is credible. Wal-Mart Watch, an independent online ombudsman, cites a survey of high-income shoppers conducted by a third-party blogger that suggests otherwise. Regardless of opinion, it’s just what the world’s largest corporation needs to stimulate the buyer’s conscience—free publicity, more or less.
U.S. Intermodal Growth Keeps Tracking
When the chips are down, intermodal delivers in spades. U.S. shippers are mixing modes to manage their supply chains more economically and statistics bear the proof. Domestic intermodal volume posted a solid 2.9-percent overall gain in 2008 (see chart), according to the latest Intermodal Market Trends & Statistics, a comprehensive intermodal volume data report published by the Intermodal Association of North America (IANA).
Although overall volumes declined slightly by 2.1 percent in the fourth quarter, domestic container performance remained healthy through the end of 2008. While its overall growth slowed to 4.4 percent—less than half of Q3’s gain—growth in 53-foot containers was an exceptionally strong 10 percent for the quarter.
On the global side, results are less positive. Intermodal volume declined in every IANA region during Q4 2008; dropping a total of 11.1 percent and continuing its steady decline for the seventh consecutive quarter. This quarterly loss contributed to the largest year-over-year drop of intermodal loadings—seven percent—since IANA began keeping quarterly records in 1998. International containers had been the main driver of intermodal growth prior to 2007 amid a soaring rise in container imports, based upon strong consumer demand.
It’s 10 p.m. Do You Know Where Your Cargo Is?
Amissing shipment is the last thing shippers want to discover while turning over stones to cut costs. A recent study by LoJack Supply Chain Integrity illustrates the challenges businesses face securing supply chains.
A total of 353 illegal and disruptive incidents were reported in 2008, according to customer data collected by the Forney, Texas-based security services firm. Cargo theft (299) was the most dominant activity.
The small sampling identified food as the most likely stolen cargo, accounting for 13 percent of reported incidents, followed by pharmaceutical/medical and building supplies (both 12 percent). The high percentage of building supplies thefts may be due to the rise in copper prices and a lack of scrap material oversight.
Also surprising is the fact that media came in at only one percent of incidents reported, suggesting shippers are doing a better job securing these goods and criminals are focusing elsewhere.
Patriot Corridor Gains Approval
One if by land. Two if by sea. Three if by rail? The Surface Transportation Board (STB) recently approved the joint control and ownership of Pan Am Southern by Norfolk Southern Railway, Pan Am Railways, and the latter’s subsidiaries, which will enhance New England’s rail transport capabilities.
Pan Am Southern will operate about 437 miles of track, including an east-west Patriot Corridor between points in New York and Massachusetts, and a north-south section between Vermont and Connecticut. Norfolk Southern plans to invest $87.5 million in the new operation for infrastructure upgrades to improve traffic flows and expand capacity.
The STB—which imposed labor-protection and environmental conditions on the deal—determined that the “end-to-end” transaction and related operational agreements would produce “substantial transportation benefits” to the New England region.
“The transaction will not result in a substantial lessening of competition, the creation of a monopoly, or a restraint of trade in freight surface transportation in any region of the United States,” STB officials said in their decision, adding that an upgraded east-west mainline route would significantly increase competition.
In May 2008, Norfolk Southern and Pan Am Railways announced plans to form joint venture Pan Am Southern and establish the Patriot Corridor, a 155-mile high-speed freight-rail route between Mechanicville and Ayer, Mass. The corridor will include 281 miles of Pan Am Railway’s secondary and branch lines.