Walmart Invests in Digital Innovation; New Stores, Not So Much

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Walmart 2017 digital services

Walmart is continuing a massive strategic and operational overhaul, an investment designed not only to survive in an era of e-commerce and retail transformation of Amazon’s prime competitor, but to fuel growth and attract new customers.

Walmart announced at its 2017 investor community meeting with analysts that it would deepen its cost-cutting efforts so that it can free up funds to improve the customer experience through new e-commerce and store improvements as Amazon’s prolific and effective advances keep every retailer in battlefield mode.

Walmart Mobile Pay

The long-time bricks-and-mortar leader chose the event to announce new digital moves (demonstrated in the first 10 minutes of the video below) to escalate home delivery of digitally-ordered goods and to speed up returns at its stores of goods that consumers purchase online.

Next year, Walmart foresees US revenue from online purchases growing by 40 percent, an ambitious e-commerce growth target to be sure.

At the meeting at Walmart headquarters in Bentonville, Ark., the company said it plans to keep US store openings to a minimum and lower the company’s expenses, according to the Wall Street Journal. It will open fewer than 25 new US stores in the 2019 fiscal year, instead focusing on remodeling existing ones and working on e-commerce infrastructure and services such as expanded home grocery delivery.

Walmart CEO Doug McMillon explained to analysts how the company is investing in a seamless digital and physical shopping journey to spur growth:

“We have good momentum in the business, we’re executing our strategy and moving with speed to win with the customer, who is more connected than ever and embracing tools that will save them both time and money,” said McMillon. “We’re combining the accessibility of our stores with eCommerce to provide new and exciting ways for customers to shop. I’m proud of the team we have in place, the work we have underway and how we are positioned for success in the future.”

He further explained:

To prepare for a larger transformation, we started by taking steps to strengthen our foundation. We committed that our investments in our people and in our stores would lead to a stronger positioning for the company, and we believe there’s evidence of that happening.

We’re setting our associates up for success with better information, tools and training. We’re improving the store experience. We’re lowering prices. We’re reducing excess inventory. We’re improving our e-commerce offering, and growth has accelerated. We’re setting priorities, including divesting some noncore assets. We’re building on the stronger foundation with innovation, and you can see that we’re doing it with more speed.

We’ve been aggressive with Online Grocery expansion in the U.S., building on our international experience. We’ve been experimenting with delivery in the U.S. We created a digital payment platform in the form of Walmart Pay. And we’re trying things like automated towers to speed the in-store pickup experience. We’re digitizing the checkout experience with Scan & Go. We’re making acquisitions to improve our online assortment.

We’re digitizing experiences in-store, including our pharmacy area. We’re learning how to reward customers for behavior that helps us lower costs and save them money. Picking things up at store level for a discount is one example. We’re expanding our delivery capabilities in China and other markets. We’re enabling easy reorder online, and we’re learning to partner with others in new ways. We’ve always enjoyed creating lasting win-win relationships, and that hasn’t changed.

The common thread in this innovation story is around the customer experience, especially convenience. We’ve made progress on value. Our prices are lower. On assortment, we have even more choice. And we’re focused on saving customers’ time and making it easier to shop with us.

Walmart Mobile Express Returns

Walmart said it plans next month to launch an initiative it calls Mobile Express Returns, in which online customers can use the Walmart mobile app to speed up and simplify returns to Walmart stores of goods purchased in-store and online. Walmart’s ultimate goal is to slash return time to 30 seconds from the minutes it can take now—and many minutes, if the line is long.

The company also beefed up its e-commerce chops this week by announcing the acquisition of Parcel, a Brooklyn, N.Y.-based same-day-delivery startup. “Parcel is a proven leader in e-commerce package delivery, including taking fresh, frozen and perishable food the last mile—that is, the last step in the shipping process as products make their way from a fulfillment center to your door,” Walmart said in a blog post.

Walmart in-store pickup tower 2017

Meanwhile, America’s largest grocery retailer is investing heavily in another sort of digitally-enabled convenience: pickup at one of its stores. It sees grocery pickup as a way of marrying its e-commerce business with its biggest existing advantage: its network of stores across the country. Click-and-pickup customers can also go a store’s “pickup tower” to get any items ordered online.

Many people want to streamline their food shopping but not all want home delivery. In fact, according to the New York Times, Walmart is betting on the millions of Americans in suburban and rural areas who drive everywhere, trying to make ordering groceries online and then picking them up yourself as seamless as a fast food drive-through. That requires huge investments in staffing and training employees how to fulfill these orders from the store, but going down this road is another way in which Walmart is trying to leverage the advantages it does have over Amazon.

As it gets increasingly digital, it also needs to do a better job at parsing the data it collects along its digital experiences, with McMillon giving the company a two out of 10 on its data analysis efforts.

“From 1 to 10 in our use of data, I would say we’re probably about a 2,” McMillon stated. “We use data to improve in-stock and replenishment. We don’t use data to personalize. And with our EDLP roots, we made a conscious decision not to do a lot of couponing, either in the physical world or digitally. I don’t personally believe that that builds loyalty and we want to build trust, and we want to build loyalty. Having said that, I think in this world, we need to kind of push refresh on our minds as it relates to that, not that we should do couponing, but we should be very open to personalization.”

Of course, even Walmart can use allies in taking on the Amazon juggernaut. It recently announced that it’s giving a $25 discount to users who purchase a Google voice-recognition device—call it an Alexa-fighter—at a Walmart store, place an order with the retailer and link their Walmart account to Google Express. Walmart and Google announced their voice recognition partnership in August.

“The industry has been waiting for sellers and technologists to map out a path to compete with the Amazon juggernaut and the rise of Alexa,” Jennifer Sherman, senior vice president of product and strategy at Kibo, an omnichannel commerce software company, told MarketWatch. “With this new move Walmart has unlocked voice-based commerce on devices that already enjoy greater penetration than the Echo, the smartphone” by Amazon.

 

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