15th January 2018
Days after it emerged Walmart is closing 63 Sam’s Club stores and a matter of weeks before the company removes the “Stores” from its legal trading name, CEO Doug McMillon talks business strategy. Ben Sillitoe reports from NRF
When Walmart announced in December that it would be changing its legal name from Wal-mart Stores Inc to Walmart Inc, the company said it was to reflect the new model of retailing across multiple channels.
A growing percentage of shoppers are purchasing from Walmart online, across its various brands and platforms such as Jet.com and Bonobos, and the old name was deemed to be one representative of a different retailing age.
Last week, it emerged that the US’s largest grocer is closing 63 of its Sam’s Club stores, as it was seemingly oversaturated in certain parts of the country. The move shows that the removal of stores is not just a matter of nomenclature.
It was against this backdrop that Walmart CEO Doug McMillon spoke to delegates at the National Retail Federation’s (NRF) Big Show in New York on Sunday. He did not reference store closures, instead focusing on how the industry is changing rapidly, and the importance of looking after staff and encouraging employees to buy into the company culture and understand the need to evolve.
“What is promising for us, [in terms of how] the customer interacts with us today and will do in the future is bringing the store experience and the e-commerce experience together,” he said.
“There’s so many ways you can help people save time and get access to merchandise by using the combination of the two.”
Walmart did officially announce a modest pay rise and new bonus structure for its staff last week, with starting wages increasing from $10 to $11 an hour, and McMillon indicated this was part of the strategy to look after its people in stores and throughout the organisation.
Stores – they are a changing
The what-to-do-with stores in an increasingly multichannel retail world question is, of course, not a dilemma faced by Walmart alone.
All retailers are going through a process of evolution to work out what mix of physical and retail is required to serve today’s shopper. There is no definite answer – success seems to lie in moving with the times or staying ahead of the times wherever possible.
As retailers with overinflated store numbers consolidate their property portfolios and online retailers such as Missguided, Blaiz and Boden continue to open stores, there will be a meeting in the middle in terms of suitable physical real estate size. Different retail sectors have different needs, too.
Debenhams and New Look in the UK and Sears and Macy's in the US are examples of retailers seriously assessing their store estates and, in the case of the latter two, reducing their shop numbers considerably to save costs.
As part of Walmart’s move to close multiple Sam’s Club locations, there is apparently a plan to change around a dozen of those properties into distribution hubs for the company’s e-commerce operation.
At NRF, McMillon said: “We’ve got brick-and-mortar stores that we can constantly be working on to make more digital, we’ve got an e-commerce business that we want to build and make big and strong.
“We’ve got a lot of work to do in e-commerce just to nail the fundamentals – we’re trying to catch up a bit.”
A rethink required?
Karl McKeever from global retail consultancy Visual Thinking says that the senior management team at Walmart need to give some serious thought to the in-store experience across the retailer’s range of stores.
“There could be scope to take a big supermarket that has served a big audience in the past and and changing its whole format,” he explains.
“Some of it could be warehouse, a proportion of it could turn into a convenience store – it’s about being smart and agile, and potentially remixing the proposition. A Walmart Express could have some value in that area alongside an online fulfilment part, which is actually doing the lion’s share in terms of the bigger shop for the community.”
McKeever called Walmart “big but not particularly beautiful”, suggesting its strength lies in range, low price and high levels of availability. Grocers such as Coles in Australia and supermarkets in Hong Kong are raising the experience in supermarket shopping, he notes.
“As a shopping experience Walmart is pretty soulless,” he adds.
“Whereas in other sectors people have realised that experiential retailing is much more important now and consumers are looking for a more elevated shopping experience, I think Walmart is yet to board that train.”
Food for thought for McMillon and his team, as he looks to put those changes into place for a new era of closely connected physical and digital shopping.
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