How Walmart Has Learned That Clutter Sells

Commerce follows life. After all, what are closets for? JL

Paco Underhill reports in the New York Times:

Walmart decided it needed less cluttered-looking stores, so it cleaned out its aisles and tried to streamline its merchandise and in-store promotions. They were wrong. Sales declined, resulting in more than $1 billion in lost revenue. Stuff went back into the aisle and sales went back up. Ron Johnson, a veteran of Target and Apple, tried to streamline the stores of J. C. Penney. Sales dropped 25 percent, and Mr. Johnson was out of a job the next year.

TO the dismay of economists and retailers, the American consumer keeps holding back.

Consumer spending this fall has barely budged upward and many store chains are struggling with low sales and falling stock prices. The reluctance to spend might be a result of general skittishness or a residual fear left over from the Great Recession. Or perhaps, inspired by books like the No. 1 best seller “The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing,” Americans are striving to lead simpler, more spiritual lives, free of the stuff and clutter filling up their homes and lives.

They won’t find much Zen at the mall, where stores are cluttered with merchandise and promotions like never before.

There is a basic rule of thumb in retail: The more stuff in the aisle and the more promotional the environment, the higher the sales. Traditionally, the American consumer is very willing to put up with crowded aisles and a certain level of physical discomfort to find something at a good price, or a perceived one. The more crowded, the greater the reward for “treasure hunting” shoppers looking for an elusive bargain. Dollar Stores, TJ Maxx, some of us might even remember the original Filene’s Basement — all thrived on their customers’ sense of discovery.

In supermarkets and big-box stores, the strategic placement of goods is essential in building incremental sales. The origins of the “stack it high and watch it fly” mentality come from the way goods were originally brought into big-box stores: via forklift. As a result, the aspirational spaces we all long for in our homes — clean, uncluttered, perhaps with a few white phalaenopsis orchids sprinkled around — are completely at odds with the stores we shop in.

That chaos or in-store clutter is symptomatic of the broader questions retail is facing. After a decade of declining sales and inspired by the success of the austere Apple stores, some retailers now believe that consumers are more likely to purchase when presented with a cleaner experience and fewer options. Cluttered stores may seem more likely to hold bargains but they also appear cheaper in the minds of many consumers. Big-box stores with lots of promotional offerings are finding that customers pick something up as they move through the store and then discard it later on as they find something else they like better. So that while clutter does increase sales, it also increases labor costs as stores have to keep returning this merchandise to the right place in the store.

The question is, what is the line between a store offering stuff to be “discovered” and a plain unattractive store that just looks bad?

As it turns out, it’s hard for stores to rid themselves of clutter. It’s easier for brand stores like H&M, Apple or Bose to be organized because they have one brand to sell, rather than competing brands and displays. In general merchandise stores like Macy’s, Target or Walmart, the displays and space in the aisle are contracted out. Pepsi, Coke and Mars may have all purchased floor space in the same quarter, and the store manager has a duty to make them all successful.

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In 2009, the management of Walmart, the world’s biggest retailer by revenue, decided it needed less cluttered-looking stores, so it cleaned out its aisles, lowered its shelving, and tried to streamline its merchandise and in-store promotions. They were wrong. In the stores that tried the cleanup, sales declined, resulting in more than $1 billion in lost revenue, according to one industry estimate. Stuff went back into the aisle and sales went back up. (Undeterred, Walmart is trying again.) In 2012, Ron Johnson, a retail veteran of Target and Apple, tried to streamline the stores of J. C. Penney and to cut back on the promotional price cuts. Sales dropped 25 percent, and Mr. Johnson was out of a job the next year.

Why didn’t these efforts succeed? Consumers, as it turns out, are not so easy to figure out. If you ask customers if they think stores are too cluttered, the answer is a predictable yes. The problem is with the research methodology. Rather than just ask shoppers what they think they would like, I can follow someone through their shopping trip in a grocery or mass merchandise store like Walmart and Sam’s Club and then interview them as they load their bags into the car.

What is striking is the wide gap between what they say they did, and what I observed. I can ask them how long they spent in-store and the answer is again different from the one on the stopwatch in my pocket. I found that consumers generally reported that time spent in-store was roughly twice that on our stopwatch. One consumer reported the in-store time as approximately one hour; our stopwatch read 28 minutes. Ask them what they bought, and often the throw-ins

I saw them buy are somehow forgotten.

This holiday shopping season, those shoppers may encounter the most crowded stores ever. With temperate weather across the country, winter merchandise is still sitting on the floor. Warehouses and distribution centers are full. Manufacturers have pulled money out of print and broadcast ads and put it into in-store promotion, which might include signs and interactive displays. Department stores, in particular, crowd the aisles with promotional displays during the holidays.Here is my advice for the industry: Emulate your customers and start to cut back. First, we have too many stores. Most chains would be healthier if they closed underperforming locations, or the lowest performing 25 percent, and studied carefully their top 25 percent successful locations. Talk to the customers. Look at what they buy in-store and online, and go into their homes and listen to them. Then test.

For consumers, my advice is this: Never shop tired, never shop hungry, and keep a list of shopping objectives. And if the deal looks too good to be true, pay attention to your instincts and just step around it. Don’t buy for “someday” — if you can’t wear it or use it today, chances are it will become clutter in your home instead of in the store. The best gifts for those you’re unsure about are the disappearing gifts, such as flowers, chocolates, luxurious soap or wine.

Get rid of everything you don’t use, love or need. Donate it, shred it, trash it. Life is too short to keep clutter around. Leave that to the stores.