Walmart teaches a big lesson, earns apple

June 04, 2013

Retail giant aims for the visual heart of supermarkets—their statement produce departments—with an easy refund policy, speedier sourcing and new staff training.

The nation’s largest grocer, Walmart, achieves so much with one bold move to offer money-back guarantees on fresh produce, that it earns our kudos.

It shreds consumers’ single biggest reason for not buying more fruits and vegetables. No longer do people have to fear their produce might spoil before they get to eat all of it.

It powerfully messages a nation struggling with obesity that 3,400 of its U.S. stores can be destinations for the foods best able to help rebalance diets. The low-price operator now visibly aligns with customers on health matters—just as people aim to eat better, and just as the chain rolls out Nutrisystem 15-day jumpstart weight-loss kits to 2,000 stores, as well as separate 5-day kits to select stores’ pharmacy areas for people trying to manage their diabetes. (Expect big weight-loss ambitions from Walmart)

Practically speaking, The Lempert Report thinks most supermarkets would refund money for food people don’t like. But by establishing this refund policy, Walmart makes the process comfortable for customers. No doubting clerks, no stories necessary, just bring in your receipt and get your money back. We expect this policy to build confidence in the stores and generate more item purchases during refund trips.

This is all good for Walmart, its suppliers and its customers—as long as the chain gets its executional practices in order. The chain has taken heat recently for out of stocks—and fresh fruit and vegetable merchandising would especially suffer if the produce department were similarly afflicted.

Reuters reports that 70,000 employees—including store managers, market managers, and produce department managers—are being trained to handle produce. In our opinion, key to the training success will be display techniques that help shoppers clearly know what’s in season, what’s local—and much more to be learned by observing the excellent fresh merchandising of chains like Fresh Market, Sprouts, Fairway and Whole Foods Market. 

Wall Street liked Monday’s announcement. The stock price rose 1.14% yesterday to $75.69 per common share. And Citi Research analyst Deborah Weinswig believes Walmart’s initiatives (in sourcing, operations, training and refunds) “should help drive grocery comps in the back half of the year….” However, we caution, to keep this program fertile and successfully implement the new training on expected high volumes, Walmart will have to invest to keep ample staff on hand.