ecommerce

The Leverage Advantage: Insights from Walmart’s Matt Kistler

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.

Mat Kistler,  SVP of Dry Grocery, Walmart U.S.

Mat Kistler, SVP of Dry Grocery, Walmart U.S.

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.

Suppliers

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.

RECOMMENDED: Insights on how retailers and brands are evolving mobile strategies

photo credit: Walmart

photo credit: Walmart

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.

Small Formats

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.

RECOMMENDED: In-depth insights on Walmart's merchandising team changes, small format initiatives, on-shelf availability goals, and revised supplier on-boarding. 

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.

 Walmart Neighborhood Market   photo credit: Walmart

Walmart Neighborhood Market

photo credit: Walmart

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.

Data

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

Walmart Express, River North     photo credit: Walmart

Walmart Express, River North

photo credit: Walmart

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.

Want to learn how you can gain leverage with retailers? Check out Carol's one-day Retail Reset Boot Camps. 

Inspiration Point (of sale): Dan Coe on Tumblr's Retail Trajectory

Voices of retailNXT is our series of one-on-one interviews that introduce our readers to the thought leaders who are defining the future of retail across categories, tiers, borders and touch points.

In Carol's last retailNXT interview, she explored how Sony is bringing new levels of customer engagement and inspiration to the retail environment.

What if someone figured out a way to layer retail onto an existing inspiration hub? Digital agency, Coexist is doing just that with its recently-launched Tumblr Commerce platform for retailers and brands. Check everything you thought you knew about e-commerce at the door.

Read the full interview.

Clicks to Bricks: Retailers Building Scale by Changing Channels

E-commerce is clearly still in its infancy as a volume-driving “channel,” but the establishment of digital flagships, often in lieu of physical ones, is driving a host of additional benefits for retailers. The “bricks-to-clicks” model of the past is beginning to be turned on its head, and a new wave of retail competition is transforming the landscape without laying a single brick.

Global Gateways

Japan-based, fast-basics retailer Uniqlo has set its sights on generating $10 billion in the U.S., with 20% of that originating online. This may seem like an ambitious goal, given that its U.S. presence is currently limited to three stores in New York and its next physical flagship opening, in San Francisco, isn’t due until October. In the meantime, the company is said to be on the hunt for an agency that will build out a U.S. digital flagship for its brand. Uniqlo’s e-commerce platform will definitely get its volume engine cranking, but it will also prime the pump in markets slated for future stores, while driving global brand awareness in a way that its spotty physical footprint can’t just yet. Uniqlo’s agency RFP included a stipulation that the e-commerce infrastructure “provide a universal foundation for future expansion in other global markets.”

Virtual Virtuosity

Often referred to as its country’s equivalent to Nike, and marketed in the U.S. as “the biggest brand you’ve never heard of,” Chinese challenger brand Li-Ning is also determined to make its mark in the U.S., but its first lob over the fence wasn’t to open a Manhattan mega-store or even a couple of pop-ups. In fact, while the $1.23 billion company expects the U.S. to account for 10% of its international sales by 2018, it has no imminent plans to hang anything but virtual shingles here. With the premise of enabling consumers to “feel the personality of the brand” as if they were in a physical store, Digital Li-Ning debuted in March and has garnered a 425 percent increase in unique monthly web visitors. The brand has since created a robust virtual ecosystem that incorporates Facebook, Twitter, Pandora, YouTube, and the blogosphere into its digital mix. Clearly, Amazon isn’t the only e-commerce pure player intent on shaking things up.

Digital Default

Although Burberry’s bleeding edge drives into digital stand out as an impressive exception, the rest of the luxury market has largely resisted the rush to e-commerce, and instead relied heavily on carefully-curated physical flagships situated in major markets. Amazon’s just-announced foray into fashion will provide a much-needed margin boost to its portfolio but its determination to sign on brands such as Michael Kors, Vivienne Westwood, and others also portends of it transforming into the digital flagship of choice for many luxury brands.

Store-less and Stellar

Watching Walmart television ads while in Manhattan has always felt dissonant to me. After all, getting to a Walmart from Manhattan requires a tedious trek off-the-island to Secaucus, NJ. Did they flunk hyper-localization 101 or is something else at work? Thanks to the magic of its endless online aisles, Walmart actually counts Manhattan as a top market, and one that isn’t reliant on New York bargain hunters making hikes to neighboring states or succumbing to its ongoing store-building overtures. Any future ribbon-cuttings in the Big Apple are bound to grab headlines, but for Walmart, they will signify the achievement of a multi-channel milestone.

Retail Wire picked up this article. Check out the discussion.

This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) site.