Wal-Mart execs Foran and Lore discuss integration of e-commerce and physical stores

Two of Wal-Mart’s top executives say they don’t have a crystal ball to predict how retail will look in five years but they are committed to testing new processes and new digital applications that enhance everything from store operations to customer home delivery.

Walmart U.S. CEO Greg Foran and Walmart U.S. e-commerce CEO Marc Lore spoke to the media Thursday (June 1) during the Wal-Mart shareholders’ meeting. Reporters were not given the opportunity to ask questions but Jane Ewing, senior vice president of digital acceleration at Walmart, interviewed them for the media.

Lore said some of the mindset around the new home delivery facilitated by Wal-Mart employees came from the retailer’s mission to try to take costs of out the supply chain. He said store pick-up is the most cost-effective for the retailer, but home delivery that uses Wal-Mart trucks to bring online orders from fulfillment centers to stores has the cost built in and the stipend paid to employees is still making the best use of Wal-Mart’s resources.

He said this is different from crowd-sourced delivery like the tests with Uber and Lyft to deliver groceries in about 12 markets. These drivers go to the store and pick up the order, where the Wal-Mart employee is already at the store saving one leg on that transportation route. He said this pulls time out of the last mile and therefore reduces costs.

“This is very exciting news and another way we are leveraging our unique set of assets,” Lore said.

Lore said the 63% uptick in online sales for the first quarter was a result of more consumers ordering online and perhaps picking up in store for a discount. He said as the online inventory has increased to more than 50 million products and and more than 1 million items can be delivered in two days for free if the total order is above $35, consumers are recognizing the value.

When asked about Amazon’s recent move to lower the order total to $25 for Prime Members, Lore said it’s apple and oranges when you consider that Walmart.com does not require a membership.

“We feel good about the proposition we are offering,” Lore said.

He also said the strategy is now focused on driving the e-commerce business by delivering on what he calls the Consumer Value Index or CVI. He said there are five metrics that Walmart.com must do right to be successful with its CVI index and that involves:
• Having what the customer wants;
• Having it easy for customers to find it;
• Displaying all the information about the product customers want;
• Pricing it right; and
• Delivering it the way a customer prefers.

“If we can get all those right, we can have offer a great customer experience,” Lore said.

Ewing asked Foran to talk about the better-than-expected first quarter financial results recently reported.

“One of the metrics that sticks out to me is the improved traffic. That is the result of us putting together the right plan two years ago and executing against that plan. … But the secret sauce in all of this has been our associates and the training we have been doing with them,” Foran said.

He said the improved traffic for 10 consecutive quarters indicates the changes are working. He said the work to revamp store operations and improved training for employees are making a difference.

“It’s been an enormous challenge circa 2015 and we are about one-third of the where we want to get to. There is lots more to do. It’s hard and grinding work,” Foran said.

Ewing asked Foran to discuss how digital is impacting store operations. He said technology is facilitating some of the changes. For instance, he said apps that are accessible by store management on their smart phones or hand-held devices in stores offer employees ways to hone their skills and also measure their departments against the retailer’s one best way.

Foran said technology is playing a larger role in store operations by employees and customers. He said Scan & Go has been around for 10 to 15 years in the United Kingdom and a few years in the U.S., but it’s just now starting to gain momentum on this side of the pond.

“Today I routinely see people using their phones to check online prices and inventory against the store display while in store. This (technology) is a moving beast here and it’s happening very quickly and we see the customer putting it all together. It’s happening in just about every part of the store,” Foran said.

He said in-store pick-up that’s available in about 600 stores and being expanded all the time puts a lot of pressure on Wal-Mart because it can be a good experience or a bad one. He said it’s really hard to do “fresh” right and grocery pick-up lifts the bar for the whole store.

“If I can get in there and it’s less than a minute or two that’s fantastic and maybe I will pick up a gallon of milk and something else when I come to the store. But there’s a lot we could get wrong,” he said. “If we can perfect the pick up experience, it could be a saving grace.”

Foran said the retailer is still testing the tall tower vending machine-type dispenser in Store No. 1 in Rogers. The retailer installed a shipping container in Oklahoma City as a drive by pick-up center that Foran said is working well. He said the shopping experience will continue to be as “frictionless as possible.”

“If you asked me to write down in the next five or 10 years what retail would entail, most of it would be wrong. I am just not that smart to know what all will stick and what won’t. You need to have a few things in the hopper and then get after what works,” Foran added. “We must all keep our minds as open as we can to what the future might look like.”

Lore said the e-commerce business would continue to expand by building on its trajectory amid growing inventory on Jet.com and Walmart.com with category leadership coming out of the three recent acquisitions.

“We are pretty happy about the way things are going,” he said.

Lore added that a major reason the retailer launched Store No. 8 – the investment innovation arm of the business – was because running the day-to-day business gives little time for innovating for the future. He expects artificial intelligence and virtual reality will continue to have retail applications.