New and remodeled stores will reflect Walmart's Store of the Future concept, featuring improved layouts, expanded product selections and innovative technology.
Assortment Quality and Convenience
Walmart U.S., which operated 4,717 stores and had annual sales of $420 billion in 2023, reported more than $247 billion in grocery sales last year, making it the No. 1 U.S. food retailer by a wide margin. The retailer’s fourth-quarter report, released in February, beat estimates and showed mid-single-digit comp growth in grocery, resulting in strong share gains (it already holds 25% of market share in U.S. grocery) in consumables, especially among higher-income households. Walmart’s customer value prop in grocery is just getting stronger with a growing cohort of value-seeking households, and the volatile macro environment is a big tailwind for the retailer.
Watkins, who was elevated to chief merchant last year after decades of service with the company, notes that the retailer is winning at grocery because its assortment strategy is focused on quality and convenience. Walmart’s assortment is curated with the goal of providing customers with quality products at an unexpected value, she adds. The retailer is also constantly improving and expanding its grocery assortment to satisfy consumer demand for national-brand and private-brand products with more flavor, variety and natural ingredients.
“We also think about lifestyle, so we build our assortment to enable customers to personalize their choices,” says Watkins. “This might include healthy options like gluten-free or plant-based products. … We want to be locally relevant, so we tailor assortment to the community. This might mean culturally specific baked goods, spices or other ingredients that uniquely reflect a community.”
Talking about the state of the (frugal) shopper, Watkins observes that the U.S. consumer continues to be stressed and is being careful when it comes to spend.
“It’s an interesting situation right now,” she admits. “On the one hand, the economy is doing really well, unemployment is low, and wages are growing. But our customers are telling us they’re feeling financially stretched. They’re concerned about inflation. We know this is true in grocery, because inflation has had a big impact on food prices over the past few years. Even though that’s easing a bit, customers are paying very close attention to how they spend. They’re making careful choices aimed at maximizing savings and value. We like to say we’re taking inflation out of the equation for our customers.”
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During the holiday season, Walmart offered a Thanksgiving meal for a price lower than last year, effectively removing inflation on a holiday meal for eight to 10 people. According to Watkins, Walmart is doing it again for Easter this year.
But, believe it or not, value isn’t everything to today’s shopper, Watkins asserts. “Customers definitely want convenience,” she says, adding that because convenience is a priority, the retailer is doubling down on stocking meal solutions that offer busy families healthy, flavorful and easy-to-prepare options.
There’s yet another angle to Walmart’s focus on convenience for grocery shoppers.
“We enable that convenience with an omni shopping experience — giving customers the ability to shop however, wherever and whenever they want to,” notes Watkins, “and we’re continually giving them more and more options by expanding delivery with early-morning options starting at 6 a.m., late-night up to 10 p.m., or express delivery in three hours or less.”
Since 2000, when Walmart first created walmart.com and samsclub.com, the company’s e-commerce capabilities have exploded. In its most recent fiscal quarter, the retailer topped $100 billion in e-comm sales for the first time as large numbers of shoppers used curbside pickup and placed grocery delivery orders. The company’s digital strategy has focused on improving customer-facing initiatives in stores and clubs and creating a seamless omni experience for customers. As such, the company has allocated more capital to supply chain, omni initiatives, technology and store remodels, and less to new store and club openings. This investment includes the creation of a Walmart Global Tech division, which employs more than 28,000 associates globally and includes businesses such as Walmart Luminate, GoLocal and Walmart Data Ventures.
Today, Walmart U.S. has more than 4,600 pickup locations and more than 3,900 same-day delivery locations (plus 34 e-commerce fulfillment centers). Its Walmart+ membership offering provides enhanced omnichannel benefits, including unlimited free shipping on eligible items with no order minimum, unlimited delivery from a store, fuel discounts, access to the Paramount+ streaming service, and mobile scan and go for a streamlined in-store shopping experience.
Since Walmart has heavily invested in omnichannel and e-commerce innovation, Watkins explains how AI, generative AI and AR innovations will supercharge the retailer’s grocery strategy further.
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“We’re enhancing the digital shopping experience by using technology to create greater personalization and remove friction,” she says. “One great example of how we’re doing this is the AI-powered Walmart Shopping Assistant we’re currently testing that will bring a new level of simplicity and accuracy to the digital search experience for customers.” Gen AI search capabilities can work in cases where customers are shopping for an occasion versus shopping for items, she adds.
At CES, held in Las Vegas this past January, Walmart CEO Doug McMillon discussed how Walmart’s Shopping Assistant tool might support a customer looking to host a Super Bowl party.
“Instead of searching for chips, then dip, then drinks, paper plates or napkins, a customer might say, ‘Show me everything I need to host a Super Bowl party,’” he said. “That search will then generate suggestions for a range of food and general merchandise options for the customer to consider. It might also include items they hadn’t thought of. Once they place the order, they can decide if they want to pick it up or have it delivered.”
Speaking of grocery delivery, Walmart is expanding its InHome program, which delivers orders straight to a shopper’s kitchen, garage or doorstep. Tips are included, and no delivery fees or item markups are included. InHome will now feature replenishment, an AI-powered offering that aims to automatically order groceries when the customer needs them, and deliver them, too.
“It’s a feature we’re building using AI to get a personalized replenishment algorithm,” said Whitney Pegden, VP and GM, Walmart InHome, at CES. “It learns the customer’s purchase patterns to determine the perfect cadence to restock their essentials. So, the long list of things you purchase frequently, whether it’s the ones you need every week, or the things you need every 17 days, they’ll be there the moment you open the fridge or pantry. And you don’t have to lift a finger.”
Pegden made sure to emphasize that the new Walmart service isn’t a subscription (like Amazon’s Subscribe & Save program, for instance).
“For example, I know in my house, we consume a lot of yogurt, waffles, milk, some other things, but how much? And what exactly are those other things? Our replenishment service solves that. It’s personalized and adjusts based on your changing needs. Not only are we going to get you what you need, we’re going to get it to you when you need it, and even where you need it, right to your refrigerator,” she said.
The service even allows for vacations.
“You can adjust for that if, say, you know you’ll be away for vacation, and you don’t want more milk showing up,” observed Pegden. “That’s all in your control. Bottom line, the entire shopping experience is automated, from filling the basket to delivery to your refrigerator, whether that’s in your kitchen or your garage.”