‘Leverage’ Game Promotes Savings And Growth At Wal-Mart

Perhaps no other retailer is as laser-focused on leveraging assets as Wal-Mart Stores Inc. The mega big box chain has the scale to garner huge returns with the tiniest of improvements in store operations.

“We learned that by placing just one more item in a shopping bag, saves the company $20 million a year,” Gisel Ruiz, chief operating officer for Walmart U.S. told reporters last week in Rogers.

Leon Nicholas, senior analyst with Kantar Retail, said Wal-Mart is fixated on the idea of “leverage,” scrutinizing every detail from store operations to product and service procurement to unlock cost savings that will keep driving higher returns to its shareholders.

“When Wal-Mart talks about itself to Wall Street, shareholders and suppliers, leverage is one of three words used and it is key to the retailer delivering on its sustained returns to the Walton family, its biggest shareholder.” Nicholas said during a recent Kantar workshop in Rogers.

Last week during two and a half days of meetings with media, Wal-Mart’s executives continued their “leverage” mantra.

SCAN & GO
Ruiz also said Wal-Mart is pleased with the results it is seeing in its “Scan & Go” self- checkout lanes.

“We are finding our customers are adapting to ‘Scan & Go’ and we will continue to invest in expanding this feature throughout this year,” Ruiz said.

Pushing shoppers to scan their own items and make their payments without the help of a cashier could be a windfall for a company with Wal-Mart’s scale – 140 million customers a week. For every one second in average transaction time at the Walmart U.S. chain, the company said it spends about $12 million in cashier wages. And that doesn’t count what the retailer saves from paperless receipts when a customer pays using their mobile phone.

Wal-Mart said the move to more self-checkout lanes will not eliminate cashiers, but it does free up store workers to help in other areas.

Sam’s Club and Walmart U.S. will continue to add these bullpen style self-check-out centers to hundreds of additional stores this year.

LEADING THE PACK
Carol Spieckerman, CEO of New Market Builders, said Wal-Mart is ahead of the curve in leveraging its scale on mulitple levels.

“Leverage is a key word, a corporate reminder that they continue to make the most out of what they have … always re-evaluating each asset for better synergy. Not all that long ago, a large brick-and-mortar presence was seen as clunky and cumbersome in a world going digital,” Spieckerman said.

She remembers the “Eureka moment” when Wal-Mart began to see its 10,000 or so stores around the globe as an asset when linked together with its growing online business.

“It was a big awakening, and now you see purely online retailers looking for ways to have a physical presence with pop-up stores and warehouses,” Spieckerman said.

She said Wal-Mart investments in technology and WalmartLabs innovation in mobile applications like Scan & Go are being leveraged with the retailer’s phone subscription business – Straight Talk. In so doing, Spieckerman said Wal-Mart is ushering millions of consumers into the digital world of retail, and doing it at more affordable levels which is key to Walmart’s core customer in many of its markets.

She said the strategic partnership the retailer has made with American Express to provide financial services to the unbanked and the selective pairing with social media mogul Facebook are yet more examples of the trail Wal-Mart is blazing toward a “trans-media” entity. At the same time, Spieckerman said plenty of Wal-Mart competitors remain fixated on multi-channel retail strategies as Wal-Mart simultaneously operates in multiple mediums.

UNLOCKING VALUE
Chris Sultemeire, executive vice president of Walmart Logistics, said there is a team of 600 engineers who continually look at each process of the supply chain, from the supplier to store shelves with the goals of streamlining logistics and producing cost savings.

“This is an addition to all the efficiencies already being used within our distribution centers and in our trucking fleet,” Sultemeire said.

The company’s recent money-back guarantee for fresh produce is an efficiency play, according to Bill Simon, CEO of Walmart U.S. By combining certain suppliers, putting sourcing agents in the field and culling produce upstream, the retailer said it has found efficiencies that allow it to get product to market sooner, reducing shrinkage on the back-end.

Duncan MacNaugton, chief merchandising officer for Walmart U.S., said fresher produce is what resonates with consumers, and efficiencies within the company operations have made it possible.

SHARING SUCCESS
Part of the retailer’s leverage strategy is taking the best practices it has honed over 51 years in U.S. retail into its global markets to try and cut operating expenses where possible.

Nicholas said Wal-Mart’s growth in recent years has largely come from its international business, which is not nearly as efficient as the mature business in the U.S.  He said growth in the U.S. will be challenging so it is crucial for Wal-Mart to get its international division synchronized in terms of efficiency so that global profits will keep rising.

Conversely, Walmart U.S. has imported a number of practices from ASDA, its grocery retailer in the United Kingdom. One of the more prominent functions shared was a better system for keeping shelves stocked and the home delivery model which is successful in England.

Simon said there isn’t enough demand density for home grocery delivery to work efficiencies on a large scale in the U.S. right now, but the company is ready to roll out a program when the time comes.