The pace of change is quickening at the world’s biggest retailer. Retail watchers have been treated to a torrent of announcements from Walmart lately, with the latest wave arriving just last week.
The ripples started on Tuesday at the company’s first “media day,” held at Walmart’s e-commerce headquarters in San Bruno, CA. At the event, Neil Ashe, president and CEO of Walmart Global eCommerce shared several updates, including Walmart’s plans to test a locker system that will allow its customers to pick up online orders at Walmart locations 24 hours a day. While Amazon and, more recently, Google have gotten to the locker party a bit sooner, neither company has the benefit of leveraging its own physical locations, or of potentially driving incremental sales in the process. Roughly two-thirds of the U.S. population lives within five miles of a Walmart and, as Mr. Ashe noted, “No one else has 4,000 points of distribution within a stone’s throw of every customer in America.” In fact, the thread that connects many of the company’s recent digital experiments is Walmart’s determination to leverage its massive brick-and-mortar scale. To that end, Walmart isn’t fast-following traditional retail players, but sprinting alongside leading edge digital platforms and start-ups. After all, Google got into the locker business through its November acquisition of Bufferbox, a start-up delivery service.
Against this backdrop, it’s no wonder that leverage emerged as a key theme in a presentation given by Walmart’s U.S. SVP of Dry Grocery Matt Kistler at the Bentonville Bella Vista Chamber’s WalStreet speaker series last week. Over the past year, Walmart executives have outlined the many ways that Walmart is leveraging the ecosystem surrounding its growing portfolio of physical and digital assets. Below I frame Kistler’s updates and supplier takeaways in four leverage opportunity areas.
Whether provided by third parties or organically grown, mobile apps are top of mind for most retailers, and Walmart is no exception. Until now, its focus has been primarily on arming shoppers with tools that make shopping and saving more efficient, and for good reason. Kistler explained that 80% of walmart.com customers visit a Walmart store once a month, while 35% of store visitors currently access walmart.com from smart phones and tablets. At last month’s Year Beginning Meeting supplier event in Orlando, Walmart unveiled an app that promises to harness the fragmented army of suppliers and third-party merchandisers that constantly crawl its stores. The SPARC (Supplier Portal Allowing Retail Coverage) app gives suppliers access to back-room inventory rather than requiring them to locate and buttonhole associates wielding handheld Telxon devices. Kistler shared that he was “heavily involved” with the SPARC initiative when he was part of Walmart’s merchandising team, and that he continues to be “bullish” as it moves into the roll out stage, on the heels of a successful pilot backed by several major brands.
Joint business planning has been a recurring topic in Walmart executive presentations to the WalStreet group, and Kistler reiterated the importance of its suppliers leveraging this process to bring innovations to its shelves. “Before and after” photos of a spreadable margarine section illustrated how, by changing the shape of a container from oval to square, suppliers optimized space utilization and, in the process, reduced air flow and energy usage.
In her presentation to the WalStreet group last year, Walmart’s EVP of Merchandising Services, Pam Kohn, went into considerable detail regarding the challenges and opportunities presented by the company’s forays into small formats. She and other executives have made it clear that Walmart is quite comfortable taking a more measured approach to small-format growth, and that it has focused on getting assortments and logistics right rather than chasing dollar-store-like proliferation right out of the starting gate. Walmart’s course seems prescient, given that the world’s third largest retailer, UK-based Tesco, is in the midst of a small-format surrender in the U.S., as it seeks options for its six-year-old Fresh & Easy concept.
Last month, Bill Simon, president and CEO of Walmart U.S., signaled a shift when he spoke of “evolving (the company’s) real estate portfolio to reach more customers,” and fired the rollout starting gun by revealing plans for “a very rapid ramp-up” of its two small formats, Walmart Express and Neighborhood Market. In his WalStreet presentation, Kistler confirmed that Walmart will grow its small-format fleet by 40% in fiscal year 2014.
It’s only natural that as Walmart hits the accelerator on small formats, suppliers will want to know how to get in on the action. Kistler encouraged suppliers to seek out their core buying teams within Walmart for “advice” regarding small format merchandising initiatives since the company’s long-term goal is to integrate all buying functions. Walmart currently maintains a tight group of U.S. small-format buyers that operate similarly to its Hawaii, Alaska, and Puerto Rico buying team.
Thanks to the ongoing experiments being cooked up at its social shopping nerve center, @walmartlabs, and the efforts of its nimble e-commerce crew, Walmart is on the leading edge when it comes to pulling new data insights off of its platform and parlaying them into strategy. At the same time, it hasn’t lost sight of the benefits of revisiting and reenergizing its relationships with traditional third-party data resources. In what he called a “PSA,” Kistler implored suppliers to mine all of the syndicated data available to them, noting that even though Walmart’s contributions and access to data sources such as Nielsen, NPD, and Symphony IRI have “been back on for less than a year,” these resources have already made a tremendous impact on its ability to diagnose category issues, identify and correct unmet local opportunities, and speed up response times.
Localization is another topic that has remained a priority for Walmart, and its implications and applications continue to expand. Kistler spoke of Walmart’s ongoing efforts to optimize brand and product assortments at the store level and its commitment to buy an additional $50 billion from local suppliers over the next ten years. As a case in point, he cited a Chicago area store that enjoys a terrific lunchtime premium sandwich business due to its unique proximity. Walmart’s commitment to hire 100,000 honorably discharged veterans over the next five years has been widely publicized, and it too has a localized component. Kistler shared that Walmart is funding local event marketing in order to ensure that it is helping veterans in specific markets.
Many have predicted that Walmart’s size would be its Achilles heel, particularly as nimble digital platforms emerge as fierce competitors. However, Walmart clearly sees its growing scale as a boon rather than a burden. It's all about leverage.