Wal-Mart Global Operations Are A Testing Lab For Walmart U.S. Stores

Wal-Mart Stores’ more than 11,000 retail locations across 27 countries provides the Walmart U.S. division a testing lab stretching across five continents, according to Walmart International CEO David Cheesewright.

Joking to the crowd gathered during a recent investor conference, Cheesewright noted that he was the third speaker of the day who has English as a foreign language. To that point, the world has become smaller and more connected via technology. Retail is at the center of that change. Changes seen in the global markets often make their way back to the Bentonville mothership, he said.

Cheesewright said several ideas tested in U.S. stores now were first tried in the retailer’s international segment, something he expects will continue. He said the lessons from trying ideas not only include formats and services, but also merchandising and product development.

Cheesewright said his international leadership team has a vast array of experience across different formats and functions and 50% of them, including himself, are in new roles. He sums up Walmart International in two words “big” and “diverse.”

“We serve about 120 million customers every week. That’s only about a third of total Wal-Mart sales. We’re about half of the customer traffic, so typically smaller basket sizes, which probably wouldn’t surprise you given some of the markets in which we operate,” Cheesewright said.

This year Cheesewright expects the International division will do around $140 billion in sales which would make it the second largest retailer in the world if it were spun off by Wal-Mart Stores Inc. The diverse segment also includes five of the world’s top 10 retail businesses in its portfolio.

SMALL FORMATS
Small formats are the going thing in the U.S, but they have been popular across the globe for years. Walmart International operates in 15 core formats — compared to three, maybe four in the U.S. Cheesewright said those formats range from a big builders chain in South Africa to small kiosks in Japan and everything in between.

“Around a third of our stores are under 25,000 square feet, so much more average size and quite a lot of small stores in our portfolio,” Cheesewright said.

He said there are benefits in diversity because it’s pretty rare to run across a business problem that someone in the portfolio hasn’t already solved. An example he shared are lessons learned from ASDA’s growth in home shopping which are being put into practice in the U.S. and other markets.

“ASDA is a very big gas business, and that’s a great traffic driver to the big stores, so that’s something I know, (and) Greg (Foran) and I have talked about that as an opportunity for traffic. We’re also developing standalone gas stations in the U.K. And a lot of the learning there and the synergy between pickup points and gas stations is very strong. They’re typically in locations where there’s a high degree of traffic. People stop a lot at gas stations to fill up and it’s very convenient for them to pick up groceries and other goods at the same time,” Cheesewright said.

He said there are 15 years of learnings from ASDA’s successful grocery business and home delivery operations that can benefit Walmart’s U.S. grocery operations, with several now being tested.

HEALTH CLINICS, PRIVATE LABEL
He said health clinics are also another driver of shopper traffic and Canada is a model for the other countries to follow as they have more than 50 in-store clinics.

Walmart U.S. first announced its self-run in-store health clinics this spring with 12 planned openings this year. That number has recently expanded to 17 as more rural stores were added.

“Private label is another area we’re strong in certain parts of the world,” Cheesewright added.

Foran also talked about his desire to have more private label brands in Walmart U.S. He said new items will be thoughtful additions where there are gaps in the present market. He does not see any friction with suppliers and did not see them pressuring the margins of major brands.

“We have a huge portfolio of private brands. The U.K. has been developing private label for a long time. They’re in the mid-40s in terms of penetration of private label (market share). … If you grow up in food, you tend to be very supportive of private label. And if you’re a business, your job is to save customer’s money and you know you can sell them the product that’s exactly the same quality or better than the brand. The quality is really, really important but save the customer around 20% in terms of that costs, why wouldn’t you do that?” Cheesewright said.

Cheesewright and Foran have worked together to improve fresh produce offerings and management in U.S. stores.

“Like Greg, I’m very passionate about fresh,” Cheesewright said.

GLOBAL LOGISTICS LESSONS
He shared that there are good systems to copy and replicate around the world like the IPL (international procurement and logistics) business in the U.K. and GFS (global food sourcing) in other parts of the world.

“They run a series of offices primarily around Europe and Africa which works in partnership with growers around that region and finds the right source of products. … In many cases, we move the work closer to the market so we get fresher products arriving in the countries and we take cost out the supply chain. IPL is now the single biggest supplier to any retailer in the U.K. It solely does ASDA and it’s there to substantially reduce the cost base,” Cheesewright said.

He said the IPL system is being deployed around the world.

“We’ve got sourcing covered through GFS in North America and IPL across the rest of the world but that choiceful approach, the way you do the conversion, is something that we can replicate in our countries and it gives us a big advantage on freshness and costs,” he added. “It’s one systematic solution, and that allows us to control (quality of products) and make sure they are aligned across the company. We see this as a big opportunity to add value to our customers around the globe.”