Walmart & the future of omnichannel retail

October 6, 2014 

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BMC POV

Want to see how omnichannel retailing is evolving? Look to Northwest Arkansas where Walmart has introduced its newest retail format: a drive-thru pickup center for online grocery orders. A series of flat same-store sales reports in the US has increased pressure on the world’s largest retailer to reignite topline growth.

The outline of their strategy is clear: Build and optimize the performance of a store network that captures a larger share of spending from a geographic market by satisfying a broader range of shopping occasions for a large part of the population. The new store also includes convenience-oriented formats like Walmart Express and Walmart To Go; these two have the potential to satisfy shopper needs for immediacy for both product purchases and prepared foods.

Walmart’s ecommerce business is growing fast, with sales of at least $13 billion in 2014 and a third dedicated fulfillment center opening in Indiana. It now looks like Walmart has most of the capabilities needed for omnichannel success, but they still need to decide how to close the fulfillment gap. They’re poised to follow the crowd towards a blended brick & click strategy, but the pickup center and delivery still need to be ruled either in and out of bounds. 

One has to wonder if they’ll make the right call, since they don't appear to have reconciled/integrated store and ecommerce sales yet.

The Bigger Picture 

What makes Walmart’s activity in Northwest Arkansas worth careful study is that they are developing a range of store sizes into a comprehensive network complete with an ecommerce overlay. When a retailer builds a comprehensive network like this, they’ve made the decision to compete aggressively with themselves. It’s quite a long view – if anyone’s going to take sales from our existing stores, it’s going to be us. 

Such tolerance for cannibalizing your own business is progressive, but to succeed they’ll need to do two additional things that aren’t always easy.

• Determine the number and location of stores needed to serve the market so they can avoid under- or over-investing in specific formats.

• Incent managers, at multiple levels, to compete with other stores/channels within the company. This may mean relinquishing sales at some point, which can be a real challenge.