Wal-Mart shareholders, employees hear about ‘customer-centric’ technology

by The City Wire staff ([email protected]) 361 views 

The Wal-Mart shareholders meetings have become part late-night talk show, part church service/pep rally, part United Nations parade, with a retail Woodstock music festival sans the hippies, mushrooms and mud. And that was the case this year, to include Harry Connick Jr. in what may have been an impromptu performance of “Just a Closer Walk with Thee.”

And it may be a rare year that a change in Wal-Mart CEO is not among the more notable changes or news in the world of retail. This is one of those years. And comments about a plethora of those changes – new ways to reach the consumer, tethering stores to better serve customers, the “Savings Catcher,” new store formats – were part of Friday’s (June 6) shareholder meeting attended by an estimated 14,000.

Doug McMillon moved on Feb. 1 from his Wal-Mart International post to succeed Mike Duke as president and CEO of Wal-Mart Stores. McMillon said during the shareholders meeting, held at Bud Walton Arena on the University of Arkansas campus, that the customer remains the focus through all the new technology and new physical formats.

“Without them (customers) we don’t have jobs,” McMillon said, adding that it’s important that Wal-Mart employees work to keep the customers happy.

To reinforce that point, pop music sensation Pharrell Williams, along with his trademark hat, sang his hit song, “Happy.” His performance was followed by the stage entrance of Harry Connick Jr., who would serve as the celebrity emcee of the shareholders meeting. Other entertainers performing at the meeting included Robin Thicke, Sarah McLachlan, Aloe Blacc and Florida Georgia Line.

The year has delivered several physical changes and experiments in how the world’s largest retailer plans to boost business in what has been a flat U.S. market.

The company unveiled its new convenience store format – Walmart to Go – in March and judging by media and retail industry reaction it seemed that Wal-Mart announced it was selling dimes for 5 cents. This little (relatively speaking) 5,000-square-foot format now open in Bentonville just a short Ford pickup drive from the corporate headquarters is Wal-Mart’s effort to capture more of the $415 billion “quick-trip” market consumers make between their big grocery and shopping runs.

Bill Simon, CEO of Walmart U.S., also announced during the year that the company would invest in pick-up depots that will allow shoppers to drive through and get their online grocery order that was  placed earlier in the day. The “Walmart to Go” grocery delivery test market will also be expanded this year. It is already available in Denver, San Jose, Northern Virginia, Philadelphia and Minneapolis. Wal-Mart also plans to ship product from 50 more of its supercenter locations this year. This effort to tether supercenters to smaller formats and e-commerce fulfillment is key to Wal-Mart being able to better compete for Amazon Prime customers.

Part of Connick’s emcee work was scripted for him to talk about buying a Beignet mix online and then picking it up at his nearby Wal-Mart.

The drive-through pick-up for online orders was tested in 11 stores in the Denver area and are yielding a 90% satisfaction rating with consumers. The test in the Denver market was first announced in October. Shoppers pull into the parking lot and a loader brings the items to the car. Wal-Mart also allows order pick-up through the drive-in pharmacy line. Wal-Mart has obtained approval to build to 15,000 square-foot retail warehouse facility in Bentonville with 52 parking places — 33 for customers driving through to pick up grocery orders and 19 for employee parking.

The drive-in service is more about convenience, and those fill-in trips mid-week, an area that Wal-Mart has lost sales to in recent years from the rise of smaller format dollar stores and convenience stores. Simon said this quick-trip market is worth $415 billion annually and equals some 40% of the U.S. grocery spend. Wal-Mart’s share is just 10%, something the retailer thinks it can improve.

The company is also getting into the organic food business. Sales of organic products rose 11.5% last year to $35.1 billion, the fastest growth rate in five years, according to the Organic Trade Association. It’s anyone’s guess what that number will look like next year as Wal-Mart expands its organic products under the Wild Oats brand.

When the early portion of the entertainment wrapped up, Wal-Mart Board Chairman Rob Walton recalled the days when his father, Wal-Mart co-founder Sam Walton, presided over the shareholders meeting. Rob Walton noted that his father referred to the 1985 meeting as “a revival.” That meeting was attended by 400 associates from 20 states.

“Things have changed a bit, folks,” Rob Walton told the estimated crowd of 14,000 from 27 countries.

Rob Walton also preached a “customer-centric” focusing, saying that no matter how technology and formats change the business, the “focus remains on the customer.”

He also welcomed Doug McMillon to the role as CEO, saying that McMillon, who began has an hourly employee at a distribution center, is “truly an associate-CEO.” He added that McMillon is an example that all Wal-Mart employees “can go as far as your hard work and talent will take you.”

In ending his opening remarks, Rob Walton said Sam Walton once ended a note to shareholders with the sentence, “Let’s go for it.” He said that attitude is still needed across all Wal-Mart operations.

“Let’s go and build the Wal-Mart of the future,” Rob Walton said.

The meeting was not all rah-rah for Wal-Mart.

A representative of OUR Walmart, a union-funded group that has worked to raise wages and improve working conditions at Wal-Mart, spoke for a shareholder proposal seeking an independent Board Chairman. The representative said “serious scandals” at the company call for someone who is not a Walton family member to lead the board. The call for an independent chairman received a surprising amount of applause throughout the crowd.

Cambria Allen, representing groups who own 2.6 million Wal-Mart shares, asked shareholders to approve a “clawback” provision that would return compensation from executives who caused the company to be assessed fines for corruption or other problems.

“Wal-Mart has a clawback with no teeth,” Allen said.

The two proposals were not supported by Wal-Mart, and did not receive shareholder approval.

Presentation of the shareholders proposals critical of Wal-Mart were followed by pop star Robin Thicke singing “Blurred Lines.”

Cutting to the chase, Wal-Mart Chief Financial Officer Charles Holley told the shareholders that the company did have a difficult year in fiscal year 2013.

“It was a pretty rough year by anyone’s standards,” Holley said.

And the company’s first quarter earnings were ugly. The retailer reported per share net income for the first fiscal quarter of $1.11, below the consensus estimate of $1.15. The company earned $1.10 per share from continuing operations. Total revenue of $114.96 billion was up slightly over the $114.07 billion in first quarter of 2013 and was below the consensus estimate of $116.27 billion.

Company officials said the first quarter was hit hard by unusual winter weather in the U.S. during January.

Comp traffic for Walmart U.S. was down 1.4% in the quarter, despite a 1.3% uptick in the average shopper ticket. This marks the fifth consecutive quarter of negative to flat comparable sales, the benchmark metric used to measure retail performance.

And the second quarter may not be a big improvement. The company is predicting earnings per share in the range of $1.15 and $1.25. The company hit $1.24 per share in the second quarter of the previous fiscal year.

But Holley ended his comments with a litany of financial successes. He said the company has recorded $68 billion in sales growth in the past five years, and market value of the company has grown $50 billion in the past five years.

McMillon closed the executive comments with essentially a sermon about how Wal-Mart will do whatever it can to exceed the expectations of customers with more demanding expectations. He said the company will use a wide variety of technology to meet the customer where they want to do business.

To that point, McMillon said a majority of e-commerce traffic comes from mobile phones than desktop computers or other devices.

A unique product and service Wal-Mart may provide is 3D printing. McMillon said it’s possible, for example, that Wal-Mart can “print small replacement items,” that customers could pick up at a store.

The company will also add “collecting points” in which customers may order products and pick them at a non-store location. For example, the company is experimenting with collecting points in a subway in London and a train car in Ontario. He said someday “a school in Dallas” may be a collecting point to allow parents to pick up items as they pick up their children.

“All of these changes are a good thing for us … (and) only limited by our imaginations,” McMillon said. “We are picking up the pace of our change to better service our customers.”

He also said the company has to change in order to meet employee expectations, noting that new Wal-Mart employees never knew a world without the Internet or smart phones.

“You think they are going to expect more of Wal-Mart?” he said.