The Supply Side: Walmart U.S. e-commerce execs explain to suppliers the retailer’s new strategy
Two Walmart.com e-commerce execs said the retailer is ready to win the e-commerce battle with a new strategy concocted by Marc Lore, CEO of Walmart eCommerce U.S., which also includes Jet.com, ShoeBuy, MooseJaw, ModCloth and Hayneedle.
Scott Hilton, chief revenue officer for Walmart eCommerce U.S., and Steve Breen, senior vice president of merchandising for Walmart.com, shared strategy insights with suppliers at the Wal-Street Speaker Series event held in Bentonville on Thursday (Mar. 31).
Breen opened the meeting saying the Jet.com acquisition has been transformational for Wal-Mart’s online business. Hilton, who joined Wal-Mart with the Jet.com acquisition, said nearly all retail categories are moving online. He said when Amazon started with books years ago it made sense when lots of other categories did not. Hilton who also worked for Quidsi, parent of Diapers.com, said gradually many more categories have shifted online.
Clothing, footwear, jewelry and watches will in the next three years see more than $30 billion in e-commerce growth in the U.S, according to Forrester Research. Even laggard categories like pets are poised to see roughly $5 billion in additional e-commerce growth by 2020. Home and garden is expected to pick up $10 billion in online revenue growth and consumer electronics could see $30 billion in incremental online revenue over the next three years.
The U.S. Census Bureau estimates U.S. e-commerce revenue will grow from just more than $400 billion this year to $600 billion by 2020. Hilton said the online revenue is a mere fraction of the $2.9 trillion offline retail market in the U.S.
The executives said it’s a mistake for suppliers to underestimate the importance mobile phones are playing in e-commerce sales. Of the $343 billion in U.S. e-commerce sales last year, one third were completed by mobile devices – a whopping $115 billion in retail sales made from a mobile device.
More importantly Hilton said customers today are just shopping and they may move between several devices looking at items online and then eventually make the purchase in a store. Breen said Walmart.com wants customers to use their mobile phones while in-store to make their shopping experience more pleasant and the retailer also wants the online experience with the mobile phone to be equally satisfying.
One major change at Walmart.com is that Lore wants category managers to know their products A to Z. He said last week at the ShopTalk Conference in Las Vegas that the recent acquisitions of Moosejaw, ShoeBuy, ModCloth and Hayneedle through the Jet.com deal gives the Walmart a major advantage in certain categories which is why he is putting those subsidiary CEOs in charge of specific categories for the entire operation.
Breen said MIke Sorabella is going to be responsible for shoes not only sold on ShoeBuy but also the entire retail shoe business on Walmart.com and Jet.com.
“Mike has a team of 220 people in Boston who really know footwear and how to sell it online because that is all they do. We would have previously had a buyer that focused half the day on shoes and the other half on say flannel shirts, which maybe a bigger category,” Breen said.
The same will be true of Hayneedle for home furnishings, Moosejaw for outdoor adventure gear and apparel, and ModCloth for trendy ladies fashion and accessories. While the subsidiary CEOs will oversee the category, Scott said there is also 28 category managers at walmart.com responsible for the entire category, regardless if the goods are sold at only Walmart.com or also Jet.com and the other online stores.
Hilton said there is no way Wal-Mart is going to collapse the recent acquisition sites and roll them under the Walmart brand. He said they will exist and flourish separately which will benefit Wal-Mart Stores in the long run. He said the new category teams are deeply focused on the items but also the user experiences regardless of which site customers are shopping.
Breen said this past year Walmart.com began growing its online inventory from around 5 million to start the year to 30 million items at year-end. He said the retailer now has about 35 million items on its website. He said having a broad assortment is just part of the retailer’s new strategy that it calls “It’s.” Lore previously mentioned the new “It’s” protocol, but Breen and HIlton gave suppliers more details around the new strategy they say will make a difference for shoppers online and in store. The “It” strategy has five components.
1. Have it
2. Find it
3. Display it
4. Price it
5. Deliver it
Breen said that the top 1 million items sold online account for roughly two-thirds of total online sales, which means Wal-Mart is focused on making sure it has those top selling items. By having the item, the products must be in the fulfillment centers.
“After we know we have physically have those items in our possession, we also also work with our market-place suppliers to ensure they have them too,” Breen said.
Hilton said it’s easy to look back and see the top selling items, but knowing what they will be in the future is “a forward-looking problem.” He said knowing the products and categories well will ensure the retailer gets the right with the help of its suppliers.
Hilton said for customers to “find it” suppliers will need to step up their participation in furnishing the specific product content to increase the searchability. He said the retailer will do its part by furnishing customers with easy re-order buttons, but for the sale to take place they must first be able to easily find what they are looking for online, regardless of what device they use.
Breen said the next step of “display it” also requires help from suppliers. He said having accurate, searchable content, high resolution photos and videos when applicable can be a difference maker in converting searches into sales. He said the retailer recently worked on content for plastic storage bags and the team spent time on specific details of the bags, such as ziplock closures, count in box, ounces each bag would hold and after supplying the deep level details, sales nearly doubled.
Hilton also implored suppliers to give the retailer all the products it makes.
“We want to see your entire product catalog, that means everything you make. Give us all the products you have because the general manager can know which products best fit the various sites available. This streamlined approach for category management means you have just one contact regardless if you sell on Walmart.com, Jet.com and perhaps Hayneedle or ShoeBuy.”
The fourth prong in the plan regarding pricing the items is self explanatory. Breen said the retailer is working to ensure the online and in-store prices match to instill consumer trust. He said the general managers will set the price, while also making sure it’s competitive with Amazon and other retailers. He said getting the lowest price from suppliers is a big help in that endeavor.
Hilton re-emphasized the importance of a low cost of goods to the retailer’s overall plan. He told suppliers that if there is some way to change the packaging that could reduce shipping costs, those plans can be worked out with the retailer.
“We want to help suppliers take costs out of the supply chain where we can do so,” Hilton said.
The fifth prong in the plan is to “deliver it” in a way that pleases the customer. Sometimes that will be picking it up on their way home. Other times it could be two-day delivery at home with a minimum $35 ticket. He said the $35 minimum order was set to encourage customers to engage in building a basket, and wasn’t totally arbitrary. He said two-day home delivery is more like “table stakes” today but said the company does it without an annual subscription fee.
When asked if there is any plans to combine SamsClub.com with the Walmart.com sites, Hilton said absolutely not. He said SamsClub.com has its own dedicated e-commerce team focused on that separate business.
When asked to quantify what the Jet.com purchase meant for the two companies Hilton said it gave Jet.com and now the other subsidiaries instant scale and financial stability.
“Retail is a scale game and Walmart gave that to Jet overnight,” Hilton said. “Each party also benefits from the experience of the other.”
Breen said Wal-Mart gained access to a team of people with much e-commerce experience. He said they are digital natives who understand the importance of mobile and curated content, while also delivering unique shopping experiences that allow them to draw a diverse fan base.
Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.