Shoppers are moving towards smaller stores: Walmart Int’l CEO
David Cheesewright (center) was in India last week to review the global retail giant’s operations in the country.
David Cheesewright, president and CEO of Walmart International, a fast-growing segment of Walmart's overall operations with more than 6,400 stores in 26 countries outside the United States, was in India last week to review the global retail giant's operations in the country. He spoke to TOI about the business here and global trends. Excerpts...
With the onslaught of e-commerce and sluggish consumer spending, how is retail business changing across the world?
Two things are changing faster than ever. One is the economic condition. The days of sales growth being significantly higher than cost growth have changed. Now, we find costs growing in line with our sales. That's quite a different environment to operate in. Second, shopping habits of people are changing. We are seeing a move towards smaller stores in most countries. The impact of technology on customers is also significant. Increasingly, they are walking around stores with smartphones, checking the best prices available in the market. Historically, behaviour was driven by reputation that you would build over a period of time. Nowadays, it's driven by truth.
That's good news for kirana stores here. What does it mean for hypermarkets?
Hypermarkets still have a big role to play. In the next 10 years, there will be growth of around $350 billion in hypermarket sales globally. But convenience is becoming more important, especially in developed markets. As markets mature, they will support smaller specialists. For instance, discounters and smaller top-end specialists are growing very fast in certain markets while hypermarkets are struggling with low traffic. But, generally hypermarkets are becoming less important in global growth. As the basket becomes more fresh, products-oriented, people want to shop more frequently for fresh products. Earlier, they would go to the big stores every 10 days to top up. But now they shop closer to home for the essentials. Five years ago, the quality in small shops wasn't that good. But now, they have upped that as well.
Will you be looking for a new JV partner to make deeper inroads into the Indian retail market? Also, there are talks of opening the country's B2C e-commerce space. Does that excite you?
I have no interest in policies. As far as India is concerned, we have more than enough opportunities and challenges in the business we are in. That's where our focus is going to be. We have time to watch the market and serve small businesses. And when it comes to Walmart, pretty much every opportunity and problem around the globe, if it presents itself, we've already got businesses doing it pretty well. So, if B2C wants to come up, we have got a very capable technology-based platform in the US, which is being deployed in other countries at present. We don't need a JV partner right now.
Hyperlocal tech grocery startups are the new darlings of investors here. Do you think they will disrupt the way big retailers do business?
Startups are cropping up in this space everywhere across the world. However, I think national players will have a big role to play because technology is fairly generic. There will be a few global players who will dominate. Amazon will be one; there will be Alibaba and us. Ultimately, supply chains will consolidate. As markets mature, food quality and safety standards will become more stringent. And players with big centralized supply chains will come into play in every single market. The difference between the grocery business and delivering electronics is that your understanding of operations and products needs to be really high. In the e-commerce business at the moment, it's very easy to get funding, advertise and create a startup. But it's tough to scale up. There will be a lot of failures along the way.
What are your total revenues from online sales?
We would be doing around $5 billion from online sales, which is a very small part of our total business of around $140 billion. But you got to be careful about those numbers and not let them mislead you. In the UK for instance, online grocery is about 4-5% of the total sales. You might think it's small. But it's 100% of the total growth from UK; all the growth is coming online.
What should brick-and-mortar retailers do to compete with e-tailing companies?
Companies operating in both offline and online businesses will have a distinct advantage in the future. They would be able to track customer behaviour across formats. The traditional retail business has great wisdom and knowledge about things such as merchandizing, about what makes customers tick and experiential information. The online business is fantastic at drawing algorithms. You put the two together and you have a great combination. Successful retailers in any market are the ones who are passionate about understanding their customers and are focused on delivering the solutions they want. And the second you think you are comfortable and have got that cracked, someone else will do better. So, you better be the innovator who keeps finding ways to satisfy customers or someone else will innovate for you.
With the onslaught of e-commerce and sluggish consumer spending, how is retail business changing across the world?
Two things are changing faster than ever. One is the economic condition. The days of sales growth being significantly higher than cost growth have changed. Now, we find costs growing in line with our sales. That's quite a different environment to operate in. Second, shopping habits of people are changing. We are seeing a move towards smaller stores in most countries. The impact of technology on customers is also significant. Increasingly, they are walking around stores with smartphones, checking the best prices available in the market. Historically, behaviour was driven by reputation that you would build over a period of time. Nowadays, it's driven by truth.
That's good news for kirana stores here. What does it mean for hypermarkets?
Hypermarkets still have a big role to play. In the next 10 years, there will be growth of around $350 billion in hypermarket sales globally. But convenience is becoming more important, especially in developed markets. As markets mature, they will support smaller specialists. For instance, discounters and smaller top-end specialists are growing very fast in certain markets while hypermarkets are struggling with low traffic. But, generally hypermarkets are becoming less important in global growth. As the basket becomes more fresh, products-oriented, people want to shop more frequently for fresh products. Earlier, they would go to the big stores every 10 days to top up. But now they shop closer to home for the essentials. Five years ago, the quality in small shops wasn't that good. But now, they have upped that as well.
Will you be looking for a new JV partner to make deeper inroads into the Indian retail market? Also, there are talks of opening the country's B2C e-commerce space. Does that excite you?
I have no interest in policies. As far as India is concerned, we have more than enough opportunities and challenges in the business we are in. That's where our focus is going to be. We have time to watch the market and serve small businesses. And when it comes to Walmart, pretty much every opportunity and problem around the globe, if it presents itself, we've already got businesses doing it pretty well. So, if B2C wants to come up, we have got a very capable technology-based platform in the US, which is being deployed in other countries at present. We don't need a JV partner right now.
Hyperlocal tech grocery startups are the new darlings of investors here. Do you think they will disrupt the way big retailers do business?
Startups are cropping up in this space everywhere across the world. However, I think national players will have a big role to play because technology is fairly generic. There will be a few global players who will dominate. Amazon will be one; there will be Alibaba and us. Ultimately, supply chains will consolidate. As markets mature, food quality and safety standards will become more stringent. And players with big centralized supply chains will come into play in every single market. The difference between the grocery business and delivering electronics is that your understanding of operations and products needs to be really high. In the e-commerce business at the moment, it's very easy to get funding, advertise and create a startup. But it's tough to scale up. There will be a lot of failures along the way.
What are your total revenues from online sales?
We would be doing around $5 billion from online sales, which is a very small part of our total business of around $140 billion. But you got to be careful about those numbers and not let them mislead you. In the UK for instance, online grocery is about 4-5% of the total sales. You might think it's small. But it's 100% of the total growth from UK; all the growth is coming online.
What should brick-and-mortar retailers do to compete with e-tailing companies?
Companies operating in both offline and online businesses will have a distinct advantage in the future. They would be able to track customer behaviour across formats. The traditional retail business has great wisdom and knowledge about things such as merchandizing, about what makes customers tick and experiential information. The online business is fantastic at drawing algorithms. You put the two together and you have a great combination. Successful retailers in any market are the ones who are passionate about understanding their customers and are focused on delivering the solutions they want. And the second you think you are comfortable and have got that cracked, someone else will do better. So, you better be the innovator who keeps finding ways to satisfy customers or someone else will innovate for you.
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