Walmart U.S. CEO John Furner said his team recently placed online orders for various items such as food, sporting goods and hardware. He said the experience was not fluid because multiple apps were required, but the company is working to fix the issue.
The cumbersome two-app process has been a hindrance to growth and customers have asked for a more simplified shopping experience for everything on their list, he said. Walmart execs addressing Wall Street analysts in New York on Tuesday (Feb. 18) said by the end of this year the blue general merchandise app and the orange grocery app will become one.
Furner said grocery continues to be a strong traffic driver for the retailer’s online and in-store businesses. There are 3,200 stores equipped with online grocery pickup and Furner said 500 more will be added this year. Delivery is available in 500 stores but Furner said by the end of the year about half of Walmart’s 5,400 stores would offer the service.
Much of the legwork needed for delivery has been accomplished as the retail giant has 100,000 of the most-bought items already sitting in warehouses near stores. More than 75% of the population lives within 5 miles of a Walmart store. Marc Lore, CEO of Walmart U.S. eCommerce, said this has made one-day delivery easy and more affordable than traditional delivery for Walmart.com orders that took up to five days just three years ago.
Furner said having a seamless shopping experience is the goal, whether the customer is buying food and consumables or if they want higher-margin merchandise like apparel or home goods. He said combining the two apps will not only be a better shopping experience but it will increase the basket size and margin which is good for business. He said Walmart is already seen as a destination for grocery but he is trying to also become a go-to for general merchandise that will increase market share and wallet share.
Furner said Walmart U.S. will continue to focus on applying technology to improve profitability as well as enhance shopping experiences. He said robotics such as floor cleaners, Bossa Nova inventory counters and fast unloaders will be placed in more stores this year. He said Walmart will continue to test voice commerce and seek an application similar to the Ask Sam app used by Sam’s Club.
He said Walmart will continue to seek additional revenue streams by leveraging its real estate with brands like Fed-Ex, Build-A-Bear and E-Sports Gaming who lease spaces in various stores. He said there is additional potential in the financial services and health care areas where the retailer is already invested. Furner said the two full-service health clinics opened last year in Georgia are being well-received by the communities. He told analysts the retailer is learning from this investment and will slowly expand into areas with the potential to drive growth.
Furner and CEO Doug McMillon praised employees for success the retailer saw last year. Walmart posted fiscal year revenue of $523.9 billion, up 1.8% from a year ago. While net income was lower than expected, the retail giant still posted consolidated net income of $14.881 billion, up 123.1% from a year ago.
“Our associates are our advantage and we want them to grow and learn in their careers. We will continue to invest in our people,” Furner said.
Furner said Walmart experienced a softer-than-expected benefit from layaway during the recent holiday period. He said toy sales disappointed and there was a weakness in the gaming and media categories. Furner said some of that relates to the shorter holiday buying season, but some of it because there was not a single “hot toy” item this year.
Lore said the Walmart U.S. e-commerce business has nearly tripled over the last three years rising 37% last year. Sales were up 35% in the holiday quarter. Walmart.com has also added more than 7,500 new brands in the past three years thanks in part to acquisitions like shoes.com, art.com and Moosejaw. Lore said Walmart has been fulfilling third-party orders online because this gives customers better access to unique products with a delivery experience Walmart can control. He said the program is small but is working well and there are plans to expand during the year.
McMillon said executives working on the U.S. team have to be unified around the customer experience, regardless of whether the customer shops online or in-store. He said having one inventory system with single app access is needed and will happen this year. A single system will allow Walmart U.S. to build in certain voice capabilities. Also, the company is using machine learning one application is to alert customers they are running low on a product before they may know it.
Lore said Walmart U.S. is testing other ways to find efficiencies. He said the possibility of eliminating boxes for online deliveries by simply placing the item on the customer’s kitchen table, or in their garage. He said there is considerable value in placing a general merchandise order in with a person’s online grocery pickup order, which will be possible when the two systems are merged.
Lore said he believes voice commerce will eventually become the standard way to order goods. He said it might take a decade or two, but Walmart has a head start given its Jet black experiment and all the data it gleaned over the past two years about shopping preferences, occasions and frequency. He said virtual reality is also coming to select stores this year and will allow customers to design their room make-over from within the room through a partnership with Insperience.com.
Walmart executives said there is plenty of room for improvement in the U.S. business. McMillon said he will continue to pull the plug on experiments that don’t add value or can’t be scaled. He said not all of the gambles will pay off, but he is satisfied with the learning along the way. Walmart expects losses for e-commerce to be flat or lower this year. but McMillon said the company is in a sound place to invest strategically to ensure long-term growth. Furner, new to the job said, “We can do more and there is a ton of upside across this business.”
Wall Street tended to agree, with shares of Walmart (NYSE: WMT) trading higher on Tuesday, despite wide market losses on the day. Walmart shares closed at $119.63, up $1.74, while the Dow Jones Industrials tumbled more 221 points. Walmart is a component of the index.
Jan Kniffen, an analyst with J. Rogers Kniffen Worldwide, said the stock is responding well because investors see Walmart is positioning itself for long-term success in the struggling retail sector. He said there will be bumps along the way, but Walmart U.S. is a strong engine and the $50 billion the company expects in global e-commerce sales this year is now material. Kniffen said Walmart is second only to Amazon in e-commerce size and though the company has made considerable investments to get there, $50 billion in sales is a big number, even for Walmart.