Shaping and Responding: Gisel Ruiz on Walmart’s Artful Balancing Act
Our between-the-lines take on the latest Walmart executive presentation in the Bentonville/Bella Vista Chamber’s WalStreet speaker series.
“If I had asked people what they wanted, they would have said faster horses.”
Henry Ford’s famous adage is often trotted out (pardon the pun) in creative sessions, to make the case for getting ahead of change rather than simply responding to current consumer desires. It was said to be Steve Jobs’ favorite quote, and was invoked by Gisel Ruiz, Walmart U.S. EVP and COO, in her recent presentation to the WalStreet supplier group. Walmart has famously positioned the customer at the center of every facet of its business and continues to message this artfully, even as its business reaches an unprecedented level of physical and digital complexity. However, it would be a mistake to confuse Walmart’s customer-centricity with reactionary strategy. Ms. Ruiz’ channeling of Mr. Ford called attention to the subtle distinction between the common perception of Walmart’s premise and the reality of the company’s mission. Walmart isn’t just responding to its customers’ whims; it’s shaping how they will shop in the future.
If It Ain’t Broke, Break it
Early in her presentation, Ms. Ruiz provided a quick overview of Walmart’s physical format timeline, from its early beginnings as a hometown store, to its evolution into master of the one-stop-shop through its supercenter model, and on to the addition of its new brand banners, formats, and digital-forward forays. Walmart’s supercenters are often portrayed as the culmination of its strategy, as though anything that has come after them has been a variance from its core capability. In fact, the company’s post-supercenter initiatives are poised to become the real game-changers, for Walmart and, potentially, for the entire retail industry. Ms. Ruiz put a fine point on this when she asked, rhetorically, why Walmart would evolve away from something that was working really well. Why not stop at supercenters and call it a day? Her answer to the question, not surprisingly, was “the customer” but she capped it off by making it clear that Walmart is not only in the business of understanding what customers need today, but of “creating what they don’t know they need yet.” She went on to explain that the company is releasing rigid expectations that customers will buy products in exactly the same way, year after year.
Walmart’s acceleration of its small format roll-out embodies this ongoing balancing act. Its Walmart Express stores were initially created to encourage fill-in shopping trips that are not easily addressed by its supercenters. By “literally getting closer to the customer,” Express stores challenge dollar stores on their own turf, and ensure that they will no longer be the only game in select rural markets. While Walmart was focusing on convenience, however, its customers got other ideas. Ruiz cited its first “fully tethered” Walmart Express store “in the middle of nowhere” in Oriental, North Carolina, as an example of this direction. Two top-selling items, a Huffy Beach Cruiser and a Google phone, aren’t stocked in the store, but a large number of customers have been ordering them online and picking them up on location, fulfilling the ultimate promise of Walmart’s small format acceleration: turning its sizeable physical footprint into its greatest omni-channel asset. If Walmart pulls off its master plan, the millions of unique items on Walmart.com, potentially including those sold by its Marketplace partners, will eventually be able to find their way to physical Walmart locations, be they supercenters, small formats, or click-and-collect locations. As Ruiz noted, Walmart has over 4,000 points of distribution in its physical retail fleet.
Tethered yet Boundless
Walmart’s tethering model is one of the more ingenious ways that it is harnessing its physical presence, even as dollar stores and other super-sized competitors risk committing a major scale fail by dragging their feet on digital/physical integration. At a recent investor conference, Bill Simon, CEO and President of Walmart U.S., called the concept “the digital thinking of physical retail.” This approach promises to usher in a new phase of supply chain prowess for the retailer that set the previous gold standard.
As Ruiz noted, it isn’t a disconnect to talk about small stores, the Internet, and mobile in the same breath, and tethered stores are the ultimate example. Whether satisfying store-level demand or fulfilling orders placed online or from a mobile device, tethered stores can pull inventory from a nearby supercenter and tap into those stores’ back-office resources and even store personnel, obviating the need for dedicated resources. Through this model, supercenter store associates will also be able to decide whether to sign up for alternating shifts at a small format Walmart store closer to home.
Options and Opportunism
It’s getting increasingly difficult to track the dizzying array of shipping and delivery options that retailers are offering shoppers, with selection constantly growing and no two retailers following the same strategy. Walmart is no exception, and is actually taking a more aggressive stance than most as it adds drive-through locations, inventory-less click-and-collect depots, and other concepts to its arsenal of convenience choices.
When asked if home delivery is realistic for Walmart to pursue, Ruiz explained that some urban markets, such as the Bay Area, Chicago, and New York, have already been primed for it, and shoppers in those markets have demonstrated a willingness to pay more for the service. Walmart is taking a more measured approach, in order to ensure that home delivery aligns with its EDLP perspective, just as it did with its recent launch of low-cost organic food items. Walmart is currently testing demand, but is predicting that “pick up will go faster than delivery,” in terms of customer-driven convenience options, particularly since we are living in an “automobile society.” Inevitably, the customer will make the decision for Walmart, but the company won’t stop there. As Steve Jobs once said, “You can’t ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”
Want to future-proof your retail strategy? Learn more about Carol Spieckerman's one-day Retail-ize workshops.