Wal-Mart Execs Remain Positive For Growth

From e-Commerce confidence to small business challenges, top executives with Wal-Mart Stores Inc. promoted an expectation for growth at the world’s larger retailer this coming year.

Wal-Mart is unfazed by Amazon’s plans to expand into the grocery business, and while it did not comment specifically about its competition the message was clear to the several dozen reporters at Thursday’s media session in Rogers ahead of Friday’s annual shareholder meeting.

Neil Ashe, CEO of Walmart Global eCommerce, said Wal-Mart knows what it takes to make grocery delivery feasible. He said market demand, population density and ability to deliver products efficiently are the three dynamics needed.

Wal-Mart has tested home delivery in San Jose and San Francisco markets for several months and says there is not enough consumer demand to warrant expanding that program to other large urban areas. He said if someone else wants to test and develop that market density, Wal-Mart is ready to roll out its own program on a grander scale.

Wal-Mart has some 4,000 stores across the nation that can serve as distribution nodes to facilitate the process of filling orders locally. It has also opened e-commerce only fulfillment centers in addition to having dedicated areas within the retailers 130 distributions centers across the country that focus on item shipping, not pallet delivery.

Ashe said this gives Wal-Mart an advantage over other competitors. He said transportation is the biggest challenge to delivery for any retailer and Wal-Mart has one of the world’s most efficient systems on its side. He said the company has also learned lessons from ASDA, its grocery business in the United Kingdom, which has already achieved a successful model for home delivery.

Ashe said Wal-Mart is reaching customers through e-Commerce in Antarctica and Easter Island, the first retailer to do so. He told the group the first order to Antarctica was filled last summer and it was an ice cream maker.

Gibu Thomas, senior vice president of mobile and digital at Walmart e-Commerce, said 50% of the transactions that start online, are finished in-store.

The pay-with-cash option for online shoppers represents between 3% and 5% of the $9 billion in annual sales last year.

INTERNATIONAL GROWTH
Doug McMillon, CEO of Walmart International, said the international market is very diverse in terms of store banners, but the growth opportunities that come with low prices are universal.

He said the company is working to perfect its low-cost price strategy in all of the markets it serves. China, he said, is planning to begin the conversion over this next year and Brazil is already in the process of implementing the “Everyday Low Price” cost model.

McMillon said he is pleased with how Wal-Mart Canada is faring against heightened competition in that market, especially since 40% of the stores are still the older discount store format.

“We are seeing growth in grocery marketshare in Canada,” McMillon said.

He also expects that to continue as these older formats are expanded to include more food.

The Massmart banner in South Africa is doing well, despite some softness in that economy.

He said the company’s international procurement and logistics business is helping to cut costs in the supply chain as they work directly with farmers to get the product to the store.

India is another bright spot for opportunity, according to Ann Bordelon, chief financial officer for the international division.

“The cash and carry format is great for India as we can be the supplier for thousands of mom-and-pop vendors there,” Bordelon said.

SMALL BUSINESS COLOR
Sam’s Club relies heavily on its small business members to drive continued sales growth year-over-year. And while Sam’s reported a strong 2013 with $56.4 billion in revenue last year, comparable sales grew just 0.2% in the recent quarter.

Sam’s Club CEO Rosalind Brewer said times are tougher for mom-and-pop restaurant operators and convenience store customers, which make up a large percentage of Sam’s Club sales. She said just as some consumers live paycheck to paycheck, some small businesses are operating meal to meal.

A recent visit with a longtime club member in Texas City, Texas, just outside of Houston, revealed that times had gotten so tough that restaurant owners were using lunch proceeds to go to Sam’s to buy product needed for that night’s business.

“I think times are tougher now for some of our club members than they were in 2008. As we see consolidation in the convenience store sectors, many of the small mom-and-pop operators are being squeezed,” Brewer said.

She said more small businesses were using Sam’s as their inventory keepers, buying only what they need for a very short period of time. It’s a trend she has seen continue in recent months.

Brewer expects to grow Sam’s revenue to $100 billion in the next few years, despite the challenges some members are facing today. She sees these as opportunities to build loyalty. The club is also expanding rapidly with 15 to 20 new clubs coming online this year. This is on the heels of nine new locations last year, following several years with just two or three additions.

McMillon said Sam’s is also a growth opportunity internationally and plans to add more clubs in the next few years on a global scale.