Why Walmart? The Company in the Headlines
Walmart dominated the business news headlines over the past 12 months. Here’s a few of the stories we reported that influenced our selection of PG’s Retailer of the Year:
At McMillon’s side leading this success is Greg Foran, president and CEO of Walmart U.S. He is responsible for the strategic direction and performance of Walmart’s 4,600 U.S. stores and more than 1 million associates. Since taking the lead 2014, Foran’s team has led a transformation of the U.S. business, executing a strategy around Every Day Low Costs and Every Day Low Price. The result: multiple consecutive quarters of comp sales growth over the past several years. (Since this story was first published, Foran announced his departure from Walmart, to be succeeded by the former head of Sam's Club, John Furner.)
“Customers are responding to the improvements we’re making, the productivity loop is working, and we’re gaining market share,” McMillon said during the August earnings call, when EVP and CFO Brett Briggs observed, “Comp sales growth reflects strength in grocery, including strong growth in private brands. We’ve been pleased with the consistently strong performance in food and consumables.”
Walmart ended Q2 with more than 2,700 grocery pickup locations and more than 1,100 delivery locations, the unveiling of Walmart InHome Delivery, having NextDay delivery service from Walmart.com cover about 75% of the U.S. population, the launch of same-day pickup nationwide at Sam’s Club, a collaboration with other major companies as part of the FDA’s program to evaluate the use of blockchain to protect pharmaceutical product integrity, an agreement with U.S. Solar for 36 community solar gardens, and the completion with Electrify America of 120-plus car-charging stations at Walmart stores across the country, with plans for expansion.
Walmart’s great quarterly performance is no fluke, according to Eli Finkelshteyn, CEO and co-founder of Constructor.io, a San Francisco-based cloud-based search-as-a-service provider, who believes that the mega-retailer’s strong results are due to its successful digital initiatives and solid online grocery options that enable it to beat Seattle-based ecommerce behemoth Amazon at its own game.
Finkelshteyn said of Walmart: “As they continue to focus on the quickly growing online grocery business in Middle America, where their brand is powerful and they have many locations, their strong ecommerce growth will continue.”
To be sure, ecommerce investment is a priority for Walmart. But physical stores are still an integral part of the retailer’s expanding omnichannel experience, from automated pickup towers in stores to back-of-house robotic fulfillment systems.
“They check in through the application automatically, and then as the driver pulls in to pick the order up, the team will consolidate those fresh and frozen areas. About 20 minutes is our average delivery time right now, so from the moment it leaves the freezer to the moment it gets to somebody’s front door, that’s about 20 minutes on average, so it’s actually a really, really good way to maintain high quality.”
Walmart considers delivery just an extension of its pickup service. “We always say delivery’s built on a pickup engine,” Ward says. “We have 2,800-plus stores running pickup right now -- obviously, we’re opening those at a pretty aggressive rate. The muscle inside the store picks multiple orders at once. So the personal shoppers that we have that’s out there on the sales floor, they’re picking up to eight different orders at a time to maximize productivity. But they don’t actually know if they’re picking a delivery order or a pickup order. They’re just picking an order.
‘DOING WHAT IS RIGHT’
Heaping huge praise on Walmart overall, and McMillon in particular, is Burt Flickinger, managing director of New York-based consumer industry consultancy Strategic Resource Group.
As what Flickinger calls the “Retail Ice Age” approaches for 20th-century legacy retailers, including department and specialty stores and grocery and drug retailers, the retailers best positioned to win “have the best leaders who invest in innovation to lower prices to raise shoppers’ standards of living.”
For Flickinger, Walmart leads the winners list, scoring points for leadership, innovation, sustainability, and commitment to lower costs and prices. “Walmart has younger, dynamic transformational leadership” in McMillon, “the last of the handpicked young leaders chosen by Mr. Sam [Walton, founder of Walmart],” the longtime grocery industry observer says.
Flickinger calls McMillon “a humble, dynamic leader,” as well as the first to successfully change the company from a family-controlled and -managed business to “a professionally led company focusing on raising shoppers’ standard of living worldwide, through lower prices with good quality, and profitably increasing sales growth for Walmart and its suppliers.”
He continues: “Doug McMillon consistently works with dedication combined with great determination and effectiveness … based on his strong personal and professional beliefs in what he reinforces to do what is right.”
This includes raising wages and benefits, leading other mass retailers to follow suit, increasing store staffing and service, strong community and consumer commitments, hiring veterans and disabled workers, and accelerating leadership in solar and sustainable energy.
Flickinger places great weight on this last initiative, citing research that shows a growing number of consumers plan to switch their shopping dollars to retailers dedicated to sustainable energy.
“In the retail ‘War of the Worlds’ versus Amazon, Doug McMillon has worked exceptionally with [Walmart Ecommerce U.S. President and CEO] Marc Lore on Walmart.com to ‘checkmate’ Amazon and have Walmart.com deliveries available to 90% of the U.S. population within the next year,” Flickinger says.
With strong financial returns, Walmart is “brilliantly reinvesting those savings into the best advertising, marketing and merchandising, as well as higher wages and levels of store staffing and shopper service,” he asserts.
“While most of food, drug, and department and specialty store retail chains are getting crushed with higher costs, Walmart is very entrepreneurial and innovative in every important area for consumers, from solar power and sustainable energy to sourcing goods and services locally as much as possible,” Flickinger continues. “Walmart is winning by ‘doing what is right,’ realizing record market shares and shopper satisfaction scores.”
The service aims to leverage the proliferation of in-home voice-assist devices among consumers, although Ward admits that shopping this way “hasn’t really taken off that broadly” – yet.
“We think the reason it’s pretty hard to shop through a device on voice [is] because you need to see the item that you’re looking for. So what we did with our online grocery project is, when customers sign up for Google Home, we already know what it is that they buy. … Rather than having a conversation with the voice unit … it asks you the one we’re pretty sure you want, from the first time. We’ve seen this has been a true time-saving convenience play. It’s less about doing shopping, because cell phones and laptops and so on are perfectly designed for those kinds of occasions.
“This is more about when you’re in the kitchen and you realize you’ve run out of something — hands are full and the kids are playing — you can say, ‘OK, Google, talk to Walmart, add Pepsi,’ and it will add it to your cart. We’re really excited about what we’re seeing in this space, and we think that it’s the right balance of convenience and technology that suits customers’ needs right now.”
Yet with all of the technology innovations aimed at making it easier for folks to shop from home, Walmart remains committed to its stores, announcing an extensive capital expenditures program earlier this year.
“I think the store is absolutely critical to the omnichannel experience,” Ward says. “Physical traffic continues to grow. The biggest areas customers tell us they want us to invest in are our fresh areas, where you can see considerable reinvention.”
Enhanced fresh areas, including produce and prepared foods, were indeed in evidence during PG’s visit to Walmart’s flagship store in Rogers, Ark., near its corporate headquarters. The store is a test site for many new initiatives.
“We see that translate online through the omnichannel,” Ward says. “We have a really high fresh penetration in our baskets. That’s across the board, from produce to meat and seafood to bakery. And then the checkout experience – we continue to transform our front end. We go through constant iterations of, how do we continue to take more and more friction out of that area for customers?
“That means they can walk into the store, they can find what they’re looking for really easily. They can use tools within our app, like Item Finder and maps that allow them to navigate their shopping route really efficiently. When they find the items they want, they just want to go to the checkout and get out.”
Meanwhile, Walmart continues to aggressively expand pickup and delivery, with about 3,200 stores expected to be activated with online grocery by year’s end.
“I think we get to about 78% of all U.S. households covered by My Grocery Pickup by the end of this year, and 50% delivery, around 1,400 stores for that,” Ward notes. “We’re really excited about the scale that we’re going to be able to reach and the access that that’s going to provide to customers.”
Walmart’s tech incubator is helping feed all of these initiatives. ”Within my organization, we have a lab down here on 8th Street [in Bentonville] where we test all kinds of technology,” Ward explains. “Anywhere we can take cost out of our business or drive efficiency, that means we can pass that back onto the business and allow it to invest in price, and more convenience through the remodels and the capital program.”
The lab tests everything from autonomous vehicles, to autonomous picking cars that are piloted tested at a number of locations right now, “to the less flashy stuff that’s even more exciting,” Ward says, such as the algorithms that allow stores to pick orders more efficiently and, for example, make better substitution choices.
“Once we learn that about our customers, we can make much more seamless decisions that help them just get on with their day and put more trust into the online grocery business, which is all driven through the experimentation and testing that we do within the teams,” he says.
Being a Positive Force
Walmart’s ability to thrive in the future, McMillon said last June, “comes down to one thing: our ability to solve problems together well enough and fast enough.”