Analyst: Walmart Sees Benefits of Being Less Insular

The annual shareholders meeting for Wal-Mart Stores Inc. is always a reminder of the grand scale on which the Bentonville-based retailer operates, and the inherent challenge of that reality is to keep the company’s size from making it unwieldly.

One way for Walmart to ensure its size works for, not against, the company is through its relationships with other companies, like its decision to team up with Uber and Lyft, retail consultant Carol Spieckerman said.

Walmart chief executive officer Doug McMillon announced during the recent shareholders conference (June 3) a partnership with the ride-sharing companies to test same-day home grocery delivery.

The company has been testing grocery delivery through Walmart trucks in a handful of markets for a few years.

In mid-June, Uber started handling Walmart deliveries for the Denver area, and Lyft kicked off grocery delivery in Phoenix, according to Walmart.

Uber and Lyft are competitors in the transportation industry and both based in San Francisco.

Pairing with companies in this way means Walmart can leverage those platforms, while remaining nimble in its strategy, Spieckerman said.

Her take is that, in the fight for market share, industry leaders must decide whether to “buy, build or bridge” when it comes to new innovations.

“That really is the essence of agility in retail right now, and it’s what will allow very large retailers like Walmart to mirror the agility of much smaller companies, some of those tech startups that they’ve started to model themselves after and in some cases acquire,” she said.

Walmart and other large companies have often employed the tried-and-true strategy of gobbling up startups in order to gain access to cutting-edge technology, but Spieckerman said that is not necessarily the best option for every scenario.

 “You can’t pursue a pure acquisition strategy, where you’re going to snatch up and buy anything out there that is cool and helpful to your business,” she said.

At the same time, it’s not always possible to single-handedly build something from the ground up. In those cases, a partnership, albeit long-term or short-term, can serve a strong purpose.

“They are not necessarily going to be permanent. They’re not necessarily going to go ride off into the sunset together,” Spieckerman said.

A bridge arrangement is open-ended. It can allow the company to abandon the innovation when it’s not working out — a process that is now fast-tracked, thanks to the mega-force that is data analytics systems — or it could lead to buying or building.

“These partnerships, when they’re not an outright acquisition, give retailers the agility to at some point decide whether they want to continue that partnership or they feel like they’ve developed the expertise in-house to take it from there,” Spieckerman said, pointing to Walmart’s relationship with El Dorado-based Murphy USA as an example. 

In February, Walmart announced a decision to control its own gas stations moving forward, so fueling locations outside new stores will be Walmart-branded and internally operated.

Murphy USA began running gas stations in Walmart parking lots in 1996.

“At the end of the day, it’s not one-size-fits-all. Where we’re heading now is, these platform partnerships are going to ebb and flow,” Spieckerman said.

It’s the reality not just at Walmart, and not just in retail, but in industries across the country.

 

Bentonville Bellwether

“I think it is very hard to ignore any type of consumer trends that are attached to Walmart and not only because of the millions and millions of shoppers go to Walmart stores and shop Walmart online every day,” Spieckerman said. “Walmart is very determined to become a true, global, omnichannel retailer, and I think with that determination they will always be moving in innovative directions and seeking out the latest and greatest partnerships in order to realize that potential.”

“It is leading, not following,” she said. “The wait-and-see approach, that old model of holding back, letting others go first or putting a test out chain-wide and making these very big bats and hoping that they work out, those days in retail are gone.”

At the shareholders meeting, Walmart executives spoke on ways the company has evolved its strategy, and one key component is a focus on convenience, whether through delivery, pre-ordered grocery pickup, a seamless omnichannel experience or expedited in-store checkout. 

“Walmart has always saved people money. Now we’re saving them time, time they can spend with their families or being more productive,” Neil Ashe, president and CEO of global e-commerce, said at the shareholders meeting, according to a Walmart press release.

At the same time, the retailer is still focused on its bread and butter — literally.

Greg Foran, president and CEO of Walmart U.S., highlighted the emphasis on improving fresh food offerings and pointed to the doubling of local produce sold in Walmart stores since 2010.

“We are proud to be the largest grocer, and we have a strong and mighty team around the world focused on winning fresh to ensure our customers are saving money so they can live and eat better,” Foran said, according to the press release.

 

All About Fresh

“Walmart really doesn’t have any choice but to get that [grocery] business right. … They are getting hit on all sides,” Spieckerman said.

“What a growing number of retailers are realizing is that, even though the grocery business is a low-margin business and very difficult to run, it also is the one business that drives frequent trips, and without those frequent trips, shoppers are also less likely to shop other categories that are higher margin and that are a more profitable proposition,” she said.

In addition to continued competition from traditional grocers — not to mention disruption from European stores like Aldi catching on in America — Walmart is now faced with dollar stores, drugstores and convenience stores all upping their fresh food offerings. 

“They have to protect that business more than anything and ensure that, day in and day out, not only are they in-stock with really fresh products, but that they have a great quality and value proposition at the same time,” Spieckerman said.

“A few bad experiences in that fresh department can permanently alienate a relationship with a customer that would normally shop other categories while they’re in the store. That business needs to be preserved and protected if Walmart wants to secure its profitability and keep its shoppers coming back to its stores,” she added.

As a publicly traded company, Walmart is continually tasked with delivering short-term results through profits, while also making investments in the long-term, and Spieckerman said Walmart has made some “pretty amazing investments” in the long-term, in terms of raising its employee’s wages and building up its e-commerce business.

McMillon expressed a similar sentiment in his pep talk to associates at the meeting.

“Our investments in education and training, store structure, wages, hour and sales floor technology are to support you and enable you to serve your customers and members,” McMillon said, according to the press release. “Every associate has a role to play. The actions of 2.3 million of you add up to something big.” 

 

Data Show 1 in 10 Walmart

Shoppers Have Used Uber, Lyft

After Wal-Mart Stores Inc.’s recent announcement to partner with Uber and Lyft for home grocery delivery, a New York City-based research firm that specializes in retail put together some data on the relationship between the retailer’s shoppers and the transportation company’s users.

According to 1010data, about 13 percent of Walmart shoppers have used Uber or Lyft. That number is higher, at about 17 percent, in the areas where the delivery service is being tested, in Denver and Phoenix.

1010data also reported the same information for Amazon and Target.

Of Amazon shoppers, about 18 percent have used Uber or Lyft nationwide, and about 21 percent of shoppers and Denver and Phoenix have used the transportation services.

That’s compared to 16 percent of Target shoppers nationwide and 20 percent in Denver and Phoenix.

The data was put together by 1010data’s Ecom Insights Panel, which utilizes a number of sources for consumer spending data, representing millions of customers to provide an accurate assessment of online and offline retail sales and market share, according to its website.