Walmart’s McMillon says there is a ‘magic’ in being different, says online grocery business is ‘great’

Walmart President and CEO Doug McMillon said having a strong corporate culture anchored in core values established by founder Sam Walton and a timeless mission to save people time and money is the bedrock for the half-trillion-dollar company. Everything else about the massive retail business, however, is subject to change.

“If customers don’t want stores, we won’t have them,” McMillon said during an interview by Barclays analyst Karen Short on Wednesday (Dec. 4) at the brokerage firm’s “Eat, Sleep, Play – It’s Not All Discretionary” conference in New York.

McMillon said his management team is focused on saving customers time and money and providing them good experiences in-store and online. He said it hasn’t been that long ago that Walmart’s massive store footprint was viewed by some as a weight around its neck. But the stores have proven important in the retail giant’s omnichannel journey.

When asked about Walton’s business goal of swimming upstream, McMillon said Walmart is doing that with many tests underway.

“There is magic in being different and making different choices,” McMillon said. “Three years ago the idea of Walmart delivering groceries into customers’ refrigerators was unheard of. No one would use it, right? But today in the three markets, Kansas City, Vero Beach and Pittsburgh customers who use it, love it. No one who has tried it has yet to cancel the service. Some have purchased refrigerators for the garage to keep us out of their homes but they like the service.”

He envisions a time when Walmart will look more like a service to customers than a retailer. McMillon said Walmart will always be a retailer but adding a suite of service offerings that make life better for customers is also part of a winning strategy. When asked about the company’s progress to grow online, McMillon said he grossly underestimated who long it would take.

“I thought we would be further along in e-commerce though we are making real improvements in merchandise selection and sustainable delivery options,” he said. “We have work to do on the app and the site to improve user experience. We still have two apps and we need to tie these together. We are closing in on this. We are not there yet,” he said.

McMillon said the general merchandise side of the business has been harder to improve and he underestimated how many items and brands would be available.

“We have added 75,000 SKUs [items] over two years and we were largely understaffed during that process,” he said.

One bright spot is online grocery. McMillon said the business is further along than initially planned. He said while the technology for the business was modeled after Asda’s grocery delivery business in the United Kingdom, the notion of pickup made more sense in the U.S. with consumers more comfortable with a drive-thru. He said Walmart tested the pickup and over a couple of years focused on improving the picking of items, streamlined the process with greater efficiency by using technology for picking routes, smart substitutions and faster pickup times for customers.

“We thought this business would be good, but it’s been great,” McMillon said. “Now that pickup is working so well we can add on delivery options.”

Short asked McMillon about new leadership at Walmart U.S. under John Furner and the big shoes he has to fill.

“I feel fortunate and blessed to have worked with Greg (Foran) who transformed our U.S. business and made great contributions in China before that. We always knew he would go home someday and I am excited about the new opportunities in front of him,” McMillon said.

He described Furner as a “lifer,” having logged nearly 30 years with the company.

“John is well-positioned to know the details of the business and he has tremendous relationships around the business here and abroad that give him a unique perspective with which to run and grow this business,” McMillon said.

McMillon said there are tensions within the large company as it transforms into a digital enterprise. He said human nature is always at play and it’s understandable that someone running a profitable business would question why so much investment is going into businesses that are still unprofitable. He said the same tensions were at work when he was a cola and snack buyer for Walmart discount stores when the new supercenter formats were getting most of the investment. Walmart will continue to invest in digital transformation, McMillon said, but stores have an important role to play.

Short asked McMillon what he hoped to leave the company when he does step down. He jokingly asked her if she knew something he didn’t. McMillon said everyone needs to have the end in mind, whether it’s the end of parenting or running a business.

“I want us to be in a position to catch waves as they appear,” McMillon said. “I want the culture to be such that people are open to change and adaptable – leaning into change and then iterating as needed. I will continue trying to strengthen that to the point that our people are positioned to win after I am gone from this job.”