Wal-Mart produce: Goodbye, fruit flies!

While Wal-Mart prides itself on selling almost everything, almost half of its revenues come from selling groceries. With this in mind, it's also worth noting that Wal-Mart's produce section has, historically, been its Achilles' heel.

When I lived in Virginia, "Squalor Mart" was my local store, and I bought most of my family's groceries there. The produce section was always a minefield: while I could generally count on the store to have great prices and a decent selection, the melons often were accompanied by swarms of flies, and I had to be very careful about picking my tomatoes. In fact, even though the nearest grocery store was several miles away, I often took special trips there just to pick up fruits and veggies.

Apparently, I wasn't the only one who noticed that Wal-Mart's produce was a little shabby. Realizing that their fresh food sections were underperforming, the chain recently launched a huge offensive to improve the quality of their merchandise. Starting last year, they began aggressively pursuing local farmers in an attempt to introduce more locally-grown and organic produce in their stores; by the end of the summer, 20% of the food in Wal-Mart stores was locally grown.
When it comes to commerce, few companies are as divisive as Wal-Mart. The behemoth from Bentonville has been accused of every retail crime imaginable, from underpaying its employees to over-investing in China to making Christmas too damned commercial. Even so, it seems to be among the few recession-proof companies in the United States. Its sales are up, its stock is doing better than most and, for many families, it appears to be one of the only things that are making the recession manageable.

But given the relatively low price of food items, it's clear that if 41% of its revenues come from groceries -- which in and of itself, this figure is impressive-- that represents most of Wal-Mart's customers. To put it bluntly, a straight comparison of the company's patrons would find that the vast majority are buying $4 boxes of cereal, not $400 televisions. Consequently, if the chain can increase the amount of money that each grocery customer spends, it could greatly boost its revenues.

The new efforts are starting to pay off. Switching to local produce not only immediately improved the quality of Wal-Mart's wares, but it also reduced the amount of fuel required to bring their goods to market. By the end of 2008, the chain estimated that it was spending $400 million on produce grown in the United States, and had increased the number of farmer/store partnerships by 50% over two years.

As Bloomberg recently noted, Wal-Mart's customers are coming back to the produce section, noting the low prices and improved quality. The company has announced a plan to heavily advertise its revitalized fresh food sections, and has already begun a quiet offensive on its website. While the idea of a green Wal-Mart may seems a little counter-intuitive, it's worth noting that the store has become successful by consistently giving its customers what they want. Now that fresh, locally-grown produce is on that list, it looks like Wal-Mart is preparing to give premium supermarkets a run for their money!
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