The Supply Side: Walmart works to redefine retail for another 60 years

by Kim Souza ([email protected]) 1,758 views 

This month, Walmart turned 60 years old, but the retail giant is not resting on its laurels.

“We might be the largest retailer, but we also want to be the best and customer’s first choice,” Walmart Chief Operating Officer Charles Redfield told the media last month during a tour of Walmart Store No. 4108 in Springdale.

He said Walmart is innovating throughout the business, from stores to supply chains and, most importantly, customers’ experiences to ensure expectations are exceeded no matter when or how they choose to shop.

He said Walmart continues to evolve, which is necessary for survival and continued growth in an ever-changing world. But no matter how much Walmart must change, Redfield said the daily commitment to low prices on fresh, high-quality food items and general merchandise is steadfast.

Walmart’s business model is far more complicated than the one Sam Walton used in 1962.

Walmart President and CEO Doug McMillon said the flywheel system introduced last year goes beyond reducing expenses to keep prices low to now adding more revenue streams with expanded services like health and wellness, pet care, in-home delivery, ad sales to suppliers, data monetization and white-label delivery services for other retailers.

Walton’s model of buying cheap and stacking it high to watch it fly off the shelves was perfect for the era in which Walmart started, but consumers can now buy everything from houses to cars to underwear online.

Walmart execs are pushing toward a more diversified business model with more opportunities to drive revenue in addition to retail sales.

Redfield said that the best place to shop sits atop the new Walmart flywheel for a reason. That includes inside stores and online with Walmart’s expanding marketplace. Walmart is no longer adding new stores but is redesigning stores to incorporate a better omnichannel experience, with shoppers being able to check online-only inventory by merely scanning a QR code at the store display. With Scan and Go, shoppers can scan the items they want and speed up the checkout process. Those who like to order online can pick it up at a store or have it delivered to their doorstep. They can have the groceries put away in the fridge and pantry for a little more money.

Redfield said that Walmart knows consumers like shopping in stores sometimes and online other times. He said customers who shop both ways spend more money than in the different ways alone. Aside from store remodels costing $220 million in Arkansas alone this year, the online shopping experience is also being improved.

“Our local stores have never been more important to the way we serve customers today and in the future,” said David Carmon, vice president and general manager of Walmart US. “Nearly 90% of the U.S. population lives within 10 miles of a Walmart, so whether someone is shopping in-store, online, through mobile or Pick Up, our brick-and-mortar stores play a role in fulfilling those orders. These investments will make it easier for our stores and associates to get customers what they want, when they want it.”

Walmart also continues to invest in e-commerce, having grown online sales by 38% over the past two years. Aside from bringing on more marketplace sellers from around the world, including the U.K. and India, Walmart also recently announced a new augmented reality (AR) feature on its app designed to make shopping easier.

“We believe the closest store to our customers is in their pocket, and we are focused on making that always-on experience as easy, engaging and personalized as possible,” said Brock McKeel, senior vice president of site experience, Walmart eCommerce.

The Walmart AR feature allows customers to view furniture and home decor in their spaces with a few swipes on their phones. Walmart said the experience would initially be available for 300 furniture and home décor items, with plans to expand to back-to-college items.

Walmart said the AR feature was also designed so people with limited sight could use it as haptic (sense of touch) feedback is given as customers maneuver 3D models around their homes. He said voice and gesture controls are now being developed for those with limited sight and dexterity constraints.

Walmart is also using AR inside stores to help customers filter through shelf clutter and find out which products are gluten-free or those that meet the criteria they are looking for. For example, customers will soon be able to scan store shelves to see which items are on rollback, clearance or part of a rewards program. Coupons are another future use case.

Services are a natural extension for Walmart to help drive revenue in a competitive retail world, and they are a growing part of the flywheel business model.

Scott Benedict, a former Walmart executive who’s now at marketing agency WhyteSpyder in Rogers, said the premise behind services for Walmart has always been about trying to meet a customer’s need. He said Walmart strives to understand customer needs, and when the company sees one that is not being met, that’s an invitation to step in.

“Take financial services, where Walmart has been doing business for decades,” he said. “The company did their research and knew there were enough unbanked customers that could benefit from financial services that were either different or cheaper than those offered in the marketplace.”

He said services also help further engage customers on a different level and build store traffic and loyalty. Walmart also added fulfillment services for online marketplace sellers who could benefit from Walmart’s economies of scale.

“This was a case of Walmart listening to suppliers and stepping up with a solution,” he said.

Benedict is not surprised to see Walmart add more services to the business model. He said Walmart is already a trusted name in health with its massive pharmacy business.

He said Sam Walton’s gumption to try something new, work hard at it and learn all he could is alive and well within the retail giant. He said not all of the ancillary services Walmart is trying may work out, but the company will learn from them. And those that may be scrapped in the long run will likely turn into something better.

“Sam’s Club was an experiment launched 40 years ago, and today it’s a $74 billion business on its own. The Hypermart was an experiment that failed but gave way to the Supercenter,” Benedict said. “Rest assured, Walmart is learning even in its failures and that try-again mentality has served the retailer very well in its first 60 years.”

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.