Walmart's World

Between its Supercenter, Neighborhood Market, Sam’s Club and traditional discount store concepts, more consumers buy groceries at a Walmart store than anywhere else.

BY RICHARD TURCSIK

Published: 9:48 PM April 30, 2017 

 

Retail is evolving—more rapidly than ever—and so is Walmart.

In the face of an unprecedented onslaught from a myriad of sources, including dollar stores, limited assortment stores, drugstores, traditional grocers and—most importantly–Amazon and other online forces, Wal-Mart Stores has stepped up to the plate.

“In the last couple of years, Walmart is sort of regaining some of its earlier momentum,” says Richard Vedder, author of The Wal-Mart Revolution and distinguished professor emeritus at Ohio University in Athens, Ohio. “That is largely because it is being forced to. It is being forced to by new technology, by new competition and the rise of internet sales,” he says, citing Amazon. “The market value of Amazon stock is almost double that of Walmart stock even though Amazon’s sales and profits are way, way below that of Walmart, but everyone says Amazon is the way of the future.”

To combat Amazon, the world’s largest retailer acquired Jet.com for $3.3 billion last year to better enable it to ramp up online grocery shopping. Marc Lore, Jet.com’s chairman, was kept on as part of the deal and has been appointed head of Walmart’s entire U.S. e-commerce operation. Walmart has also snapped up ModCloth, Moosejaw.com and other hip online sites, and now operates 16 websites in 11 countries. Walmart has seen a 107 percent growth in its global e-commerce net sales over the past four years; in the U.S., Walmart.com is the third most visited website.

The Walmart mobile app for iPhone and Android makes shopping easier than ever by enabling its customers to refill prescriptions, create shopping lists, search the location of items in their store, check weekly ads and prices, save eReceipts and shop Walmart.com, where shoppers have access to seven million items, many of which can be shipped free to any Walmart store.  

The retailer prods suppliers to reduce costs wherever possible, passing those savings on to its shoppers. It is also getting them to take a more environmentally friendly role by reducing waste, excess packaging and improving sustainability.

Walmart continues to invest in its brick-and-mortar stores and employees as well. It has embarked on a $2.7 billion investment in raising the hourly wages, education and training of its associates; is improving its in-stock position; and is remodeling and updating its physical structures while removing much of the clutter involving in-store displays.  

Just take a look at the new prototype Walmart Neighborhood Market that opened in Myrtle Beach, S.C. in late March. The 46,000 square-foot store features a broad assortment of fresh and organic produce, made-to-order pizza, in-store baked bread, gluten-free items and seasonal local produce, all housed in a snazzy environment replete with polished granite floors, low countertops in the service deli and bakery, and stylish signage throughout that rivals anything Harris Teeter or Publix can offer.

It is for these reasons and many more that Grocery Headquarters is proud to honor Wal-Mart Stores as our 2017 Chain Retailer of the Year. 

Even Walmart’s weekly circular has gone hip and contemporary. One recent Easter circular placed groceries front-and-center, and mundane things like lawn mowers and TVs in the back. Beautiful four-color stylized food photography on its cover touted Walmart’s 100% Money Back Guarantee on meat, produce, service deli and bakery items, and showed a mouth-watering Sam’s Choice private label spiral-sliced ham, along with grilled asparagus, carrots and Marketside private label Butterflake rolls.   

Officials at Walmart declined to comment for this article, but in its 2016 Annual Report, Doug McMillon, president and CEO of Wal-Mart Stores notes, “Retail is not just about putting items on the shelf anymore. It’s about fighting for our customers, cutting out the hassles and the headaches, and advocating for them on price, too. We’re moving beyond just selling products to being the brand customers rely on to make their lives simpler and more meaningful as they save money.”

That is being partly accomplished by working more closely with vendors.

“Walmart allowed their suppliers to know what their inventory levels were, and put on major suppliers the burden of keeping the stores in-stock,” says Frank Riso, principal, Frank Riso Associates, based in Murrells Inlet, S.C. “They know what was moving and how to get it to those stores or their distribution centers. There is a significant amount of cross-docking and direct drop for certain products to their stores that continues today,” he says.

“Walmart has gone back and is now looking at their vendors more as partners, which I think is a good thing,” says Dr. Richard George, professor emeritus, Food Marketing, Haub School of Business, at Saint Joseph’s University in Philadelphia.

Walmart’s suppliers say the chain strives to be on the cutting edge with new products and technology to make life easier for its customers.

Last summer, Walmart teamed with Sealed Air to test new vacuum packaging for fresh pork in one of its regions. “Walmart was very open to us doing consumer insights with them,” says Sean Brady, ready meals/case ready market development manager, Food Care, at Sealed Air, based in Duncan, S.C.  

“Walmart bases their decisions on data and consumer-driven insights,” says Linda Lauschke, vice president, sales – Walmart account at Wells Enterprises, the Le Mars, Iowa-based manufacturer of Blue Bunny brand ice cream. “They provide a wealth of information through Retail Link, and encourage us to develop initiatives utilizing this data and identifying trends to drive Blue Bunny growth. By doing this, we can ensure that our customers have their favorite products available in their Walmart stores, one store at a time.”

Like Wells Enterprises, Walmart takes a long-range approach with planning, and that leads to long-term success, Lauschke says.

“Walmart’s focus is on the consumer, and adapting to his/her changing needs,” Lauschke says. “While it may appear simple, their strategy is based on insights and has stayed consistent with their priorities being everyday low pricing (EDLP) and customer satisfaction, whether they are buying products in the store, online or on their hand-held device.

“While they are a national retailer, they are able to localize assortment all the way down to the store level to ensure they are meeting consumers’ demands. For a chain of Walmart’s size, it’s impressive how they’re able to do this,” Lauschke adds.

High Liner Foods, the Portsmouth, N.H.-based manufacturer of Sea Cuisine and other frozen seafood brands, stocks its products in Walmart and Sam’s Club outlets.

“Walmart is a great partner of ours and I think our visions are the same—how do you get more people to eat seafood at a great value,” says Jeff Tahnk, vice president retail marketing at High Liner Foods.

“Walmart is a leader in sustainability,” Tahnk says. “I don’t think they get enough credit for the work they’ve done around sustainability, which is great.”

Willow Tree Farm, a 60-year-old Attleboro, Mass.-based manufacturer of poultry potpies and chicken salad, has seen its business grow substantially since being stocked in Walmart. “Walmart has been an important partner in helping Willow Tree consistently deliver to our customers who are looking for the best quality and value in the deli and freezer aisles,” says Walter Cekala, president of Willow Tree.

Third Empire

Ken Harris, managing partner at Cadent Consulting Group, based in Chicago, compares Walmart’s growth to French history. He sees the chain’s growth under founder Sam Walton as its first empire, the supercenter period under former CEO David Glass as the second empire, and the online push under McMillon as the beginning of its third empire.

“The reality is that Walmart’s relentless desire to push their supply chain, their ability to make a purchase like Jet.com and to start to curate their online offering, and their ability to get control of their stores and get back to what people traditionally knew as the ‘Walmart way’—clean stores, no over the top thrills, great prices and good merchandising with friendly store personnel—has really been the call of the day,” Harris says.

“Walmart is spending billions of dollars to try and figure out online and to catch up with Amazon, but they still have to focus on the in-store experience,” says Ty Bennet, president, Jacent Strategic Merchandising, a Pleasanton, Calif.-based firm that specializes in cross-merchandising strategy and solutions.

“They’ve done a lot better in terms of assortment, and finding and moving and shifting more toward the natural profile—a massive theme at retail driven by the Millennials,” Bennett says, noting the natural and organic trend spearheaded by Whole Foods is rapidly moving into mainstream retail. “It has moved to Walmart and they are catching up to that. They are still way behind, but they are catching up and doing better. They are finding a way to do [organic] at the right price. That has always been the barrier to entry.

“Walmart is making this transformation, a huge transformation, into natural and they are doing better at helping create those buying opportunities to the consumer, which leads to a higher basket size,” he adds.

 According to Bennett, Walmart is placing a new emphasis on cross-merchandising in its stores as a way to increase sales of high-margin nonfoods items in the traditional grocery aisles and at the front end, like selling pizza cutters from a clipstrip hanging from the frozen pizza door, for example.

“Walmart has been looking to see if there is a way to change how they go to market so they can execute better and solution sell for the consumer better, because the consumer is not walking down those housewares aisles so much anymore because it is just not their path to purchase,” Bennett says.

One way the chain has picked up ancillary sales is by putting As Seen On TV displays near its front end.

“Walmart does a great job with that category. They are moving it closer to the front end. They have found a way to execute that category better than any retailer, so they are doing As Seen On TV very well,” Bennett says.  “Walmart is also starting to incorporate more healthy snack items at the front end and less candy. That’s an important shift because the supply chain can’t always absorb the demand.”  

Kroger war

“Walmart’s sheer scale, size and square footage is what makes them so great,” says Dr. David Rogers, president of DSR Marketing Systems, based in Northbrook, Ill. “Even so, they are a maturing retailer and are pursuing a variety of strategies to prepare for the future. Their current leadership is certainly showing greater innovation than previous leadership.”

In addition to technology, that includes things like good, old-fashioned price wars, Rogers says.

“Walmart is pursuing selective pricing strategies against Kroger and they are making life rather uncomfortable for Kroger,” he says, noting that Walmart’s pricing strategies across the country are not uniform.

“They are trying out localized strategies to combat the inroads made by Kroger,” Rogers says. “And as always, when two major retailers like that struggle, it is the small guy who gets hurt when the price wars start. That is exactly what is happening in those markets.”

In an ironic twist, Rogers says that across the pond in England, it is Walmart’s Asda subsidiary being hurt by stepped up competition, primarily from two German limited assortment chains, and the revived native Tesco and Morrison’s.

“Asda used to be one of the most successful Walmart divisions,” Rogers says. “Asda is a wounded lion and they’ve really been hurt by Aldi and Lidl. I think that is one of the things that caused Walmart to wake up to the arrival of Lidl in the U.S.”

Rogers says he believes Lidl’s threat to the U.S. marketplace is overblown.

“I think Lidl’s threat is being overstated by some observers because they want to whip up interest, but I do think Lidl is here to stay. Walmart recognizes that and they are doing the right things in terms of fine tuning their formats to deal with Lidl,” Rogers says, citing the Myrtle Beach Walmart Neighborhood Market prototype.

Walmart has been striving to improve its in-store shopping experience, observers say.     

“Walmart’s commitment to EDLP, the clean store, and just their efficiency and effectiveness at which they are merchandising show how they have really improved,” says James Lamberti, CMO at a San Francisco-based firm specializing in using software and data solutions to help brands improve their merchandising execution in-store.

“Walmart has done a very good job at what I would term ‘everyday executions,’ the best measure of which is on-shelf availability rates,” Lamberti says. Walmart had a 96 percent on-shelf availability for 50 brands measured by Quri last summer, compared to 92 percent for Target. “That’s a pretty big gap,” he says. “A four-point gap when you are talking about on-shelf availability is actually very meaningful to the shopper experience and to sales.”

Walmart has also improved its customer service rankings, Lamberti says. Part of that is because of a shift of personnel from the backroom to the selling floor and because of a “clean store” merchandising focus drastically reducing in-aisle displays.

“According to our 2016 data, 72 percent of Walmart’s secondary displays are either on an end cap or a pallet,” Lamberti says. “That is far less diversified than they were historically and far less diversified than other retailers, but it results in a highly efficient mode of operation for them, and a very clean look to the store.”

Going into the Amazon

Walmart is not only working on rebuilding its in-store experience, but is establishing a major online presence as well.

“Walmart is racing to get the Jet.com product to where it needs to be and to be a fair alternative to Amazon, which I think they can do,” says Harris.

“Walmart is clearly the only player that in a sizeable way can compete with Amazon Grocery,” says Matt Sargent, senior vice president of retail at Frank N. Magid Associates, based in Minneapolis. “What’s most impressive is they are willing to try things that a lot of other retailers just aren’t,” he says, citing checkout kiosks and in-store pick-up.

It is interesting to note that the Walmart shopper by and large is not as upscale or tech-savvy as a Target or Costco shopper, Sargent notes. “That means that Walmart is ahead of the game,” he says. “For whatever reason, many Walmart customers don’t go online and don’t use Amazon presently. That makes Walmart’s desire to increase its digital presence even more impressive,” he says. 

“Walmart has the capability, resources and the know-how with Jet.com to be the first really pure omnichannel retailer,” says George. “Walmart has the ability for people to go online, click-and-collect and buy lots of high-margin items. Everybody has struggled with this, but Walmart can force Amazon to have to get into the big box business, and if they do that, Walmart should win.”

“Walmart has a much better chance of challenging Amazon than does Target, for example,” says Vedder. “Even in groceries, Walmart is starting to think that maybe they can marry these two concepts. They have stores all over the country and more real estate than anyone else. Amazon doesn’t own any real estate,” he says.

Vedder recently participated in a “Long Live Walmart” debate sponsored by Intelligence Squared U.S. The debate was held in New York, which interestingly does not have a Walmart store, before an audience of about 400 people and aired nationally on NPR radio.

“They took a poll afterward and more people were convinced by the pro Walmart side, and the pro Walmart team, which I was a part of, were declared the winners by a vote of 19 to 12,” Vedder says.

In the never-ending, recently ramped up retail battles, Walmart is also poised to be a winner.

“Take a look at Walmart’s scan-and-go, in-store ordering, price comparison tests, Endless Aisles, Jet.com, Store No. 8, their pharmacy and money services app,” says George. “They are doing a lot of different things to try and reinvent themselves. This is their next chapter. This is the renaissance for Walmart and how they reinvent themselves. They’ve gotten here because they’ve been resilient.”

Walmart is like the U.S. Postal Service in terms of its national footprint, Vedder says.

“Groceries are the most important thing that we buy. There is only one company that is ubiquitous and almost everywhere, and that is Walmart,” Vedder says. “That alone makes them special and worthy of being Retailer of the Year.”