From Screen to Store: How Ecommerce is Changing Walmart Stores

As ecommerce takes hold, what will happen to Walmart’s 11,500 retail locations?

It is undeniable that digital technology is transforming the retail industry. From supply chain improvements to customer tracking and data, digital technology has found its way in almost every nook of the retail value chain. Particularly poignant, however, is the way it impacts how we purchase things. Ecommerce is rapidly growing, projected to finally break a 10% share of all retail sales annually in the US this year [1]. Latest research predicts that by 2020, online sales in the US will rise by 56% topping $523 billion in sales [2].

As the largest retailer in the world with over $482 billion in revenue [3], Walmart’s business and operating model are being fundamentally altered (and threatened by players like Amazon) because of this seismic shift in retail. Walmart has invested billions into expanding its ecommerce presence [4], becoming the second largest online retailer in the US (with $12.5 billion in sales in 2015) [5], however, is still struggling against Amazon’s dominance- achieving only one sixth of its sales and experiencing slowing growth in 9 out of 10 of the last quarters [4].

The focus of this article, however, is not to discuss Walmart’s many forays into ecommerce. Rather, I want to focus on an often-overlooked topic: how the rise of digital technology in retail, particularly ecommerce, is completely transforming the role of brick and mortar stores.

Walmart Goes Omni..Channel!

Despite ecommerce being heralded as the next greatest thing, much to dismay of Amazon, brick and mortar stores are not going anywhere. A recent McKinsey report predicts that by 2025, 85% of all sales will still come through traditional stores [6] (perhaps that’s why Amazon is opening physical locations now [7]). Most experts agree, however, that the role of store will change. The physical location will go beyond transactional movement of goods and “the new mental model for retail is one of customer-centricity, digital fluency, and tremendous agility” [8]. This certainly poses a problem for established retailers as it requires a fundamental redesign of both the business model for its customers, but also of its operational model to deliver that new promise. This new system is a departure from the multichannel system (where there is a divide between the physical and the online) and it moves into the omnichannel where a customer experience and journey can freely move between the offline, online, mobile, social and… you name it! [9]

Unwilling to accept the fate of the department store, Walmart has been working diligently to transform its physical locations and provide a true omnichannel experience. Thus, Walmart has initiated multiple projects including:

  • Store as an online fulfilment center: Customers can seamlessly order goods online and pick them up the same day at any desired Walmart location.
  • Store as an extension of the Walmart App: The ecommerce platform is linked to the Walmart app and so is the physical store. All stores have a geofence, so Walmart is notified when a customer arrives and can quickly deliver the order to them [10].
  • Store as a personal concierge: With Walmart Groceries, a user can place a grocery order online and pick the up the order the same day, with the store employees even loading the customer’s car.
  • Store as an ecommerce checkout: Walmart introduced Walmart Pay, a seamless way to pay with the Walmart App in store and blur the lines between ecommerce and physical stores.

Walmart- the community hub and corner store?

With the view that the physical location is intended to build relationships with customers, the essence of the store changes as well. Academics predict that stores will take on two roles 1) the role of a hub and 2) the role of ‘click and collect’ [11]. Walmart already has significant click and collect strategies outlined above, but it’s also transforming its stores into community hubs. Firstly, Walmart is opening over 400 Walmart Neighbourhood Markets across North America that will be more tightly integrated into urban communities [12]. Secondly, many of its stores are now adding numerous services including aggressively expanding into primary healthcare [13], gourmet restaurants [14] and other services like auto repair, hair salons, employment agencies, and photo studios [15].

What’s next?

Consumers are increasingly asking for sophisticated convenience from their retailers. The line between retail, logistics, and technology is becoming increasingly blurred as companies like Amazon, Uber, Apple, and Google all start converging on their services provided. This leaves a retailer like Walmart stuck in the middle as they begin to navigate what role in the value chain they play. I think Walmart needs to seriously consider what hardware will be necessary to produce (think Echo and Amazon Dash Buttons) to enable transactions and what data on its consumers it will need to develop to automate decision making.

Word count: 800

 

CITATIONS

[1] T.D. Economics. E-commerce Disrupts Traditional Retail, But Brings Opportunities Elsewhere. October 17, 2016, p.2, https://www.td.com/document/PDF/economics/special/Ecommerce2016.pdf, accessed November 2016.

[2] Matt Linder, “Online sales will reach $523 billion by 2020 in the U.S.” Internet Retailer, January 29, 2016, https://www.internetretailer.com/2016/01/29/online-sales-will-reach-523-billion-2020-us, accessed November 2016.

[3] Walmart, 2016 Annual Report, http://s2.q4cdn.com/056532643/files/doc_financials/2016/annual/2016-Annual-Report-PDF.pdf, p. 18, accessed November 2016.

[4] Phil Wahba, “Here’s How Walmart Is Reigniting Its E-Commerce Growth.” Fortune, August 18, 2016, http://fortune.com/2016/08/18/walmart-ecommerce-2, accessed November 2016.

[5] Phil Wahba, “The Silver Lining In Walmart’s Slowing E-Commerce Growth.” Fortune, May 20, 2016, http://fortune.com/2016/05/20/the-silver-lining-in-walmarts-slowing-e-commerce-growth/, accessed November 2016.

[6] Ian MacKenzie, Chris Meyer, and Steve Noble. How retailers can keep up with consumers. McKinsey & Co. October 2013, http://www.mckinsey.com/industries/retail/our-insights/how-retailers-can-keep-up-with-consumers, accessed November 2016.

[7] Michael Schaub, “Amazon’s brick-and-mortar bookstore expansion to include Chicago.” Los Angeles Times, August 29, 2016, http://www.latimes.com/books/jacketcopy/la-et-jc-amazon-bookstore-chicago-20160829-snap-story.html, accessed November 2016.

[8] Stefan Niemeier, Andrea Zocchi, and Marco Catena. McKinsey & Co. 2013, http://www.mckinsey.com/industries/retail/our-insights/reshaping-retail, accessed November 2016.

[9] Piotrowicz, W, & Cuthbertson, R 2014, ‘Introduction to the Special Issue Information Technology in Retail: Toward Omnichannel Retailing’, International Journal Of Electronic Commerce, 18, 4, pp. 5-16, Business Source Complete, EBSCOhost, viewed 17 November 2016.

[10] Stefany Zaroban, “Wal-Mart views the omnichannel shopper as its ‘sweet spot’” Internet Retailer, November 17, 2015, https://www.internetretailer.com/2015/11/17/wal-mart-views-omnichannel-shopper-its-sweet-spot, accessed November 2016.

[11] Piotrowicz, W, & Cuthbertson, R 2014, ‘Introduction to the Special Issue Information Technology in Retail: Toward Omnichannel Retailing’, International Journal Of Electronic Commerce, 18, 4, pp. 5-16, Business Source Complete, EBSCOhost, viewed 17 November 2016.

[12] Jonathan Hipp, “The Strategy Behind Walmart Neighborhood Market Stores” Globest, June 5, 2015, http://www.globest.com/sites/globest/2015/06/05/the-strategy-behind-walmart-neighborhood-market-stores/?slreturn=20161017180918, accessed November 2016.

[13] Rachel Abrams, “In Ambitious Bid, Walmart Seeks Foothold in Primary Care Services” The New York Times, August 7, 2014, http://www.nytimes.com/2014/08/08/business/in-ambitious-bid-walmart-seeks-foothold-in-primary-care-services.html?_r=0, accessed November 2016.

[14] Clint Rainey, “Walmart Rolls Out a Whole Restaurant Modeled After the Texas State Fair” Grub STreet, September 13, 2016, http://www.grubstreet.com/2016/09/walmart-unveils-restaurant-modeled-on-texas-state-fair.html, accessed November 2016.

[15] Walmart, “Our Retail Divisions,” http://corporate.walmart.com/_news_/news-archive/2005/01/07/our-retail-divisions, accessed November 2016.

IMAGE SOURCE

http://corporate.walmart.com/galleries/neighborhood-market

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4 thoughts on “From Screen to Store: How Ecommerce is Changing Walmart Stores

  1. Thanks for sharing! Interesting read. As I was reading more about Walmart’s long-term strategy, I found it surprising that they have 6 types of stores [1]. Earlier this year, they already closed 269 stores and shut down their ‘Express’ format stores [2]. With the shift towards e-commerce, I believe Walmart will continue to close more stores and even reduce the various types of stores. Given their increased focus on digital wallets, tailored marketing emails, and digital coupons, I see them opening more Neighborhood style stores that you mentioned in your post. The drive-thru format provided by such stores would work seamlessly with the ‘click-and-pickup’ strategy.

    I’d also be curious to see if they start investing in building an operating model around deliveries and if they can make it profitable. Companies such as Uber (UberEATs) and Amazon have been trying to solve the ‘last mile’ problem but they continue to bleed cash [3].

    [1] http://247wallst.com/retail/2014/03/22/walmart-now-has-six-types-of-stores/
    [2] http://www.usatoday.com/story/money/2016/01/15/walmart-to-close-269-stores-in-us-and-abroad/78840020/
    [3] http://www.businessinsider.com/uber-is-spending-a-fortune-on-its-food-delivery-business-in-london-2016-7

  2. Interesting take on an player that is really having to re-imagine itself in the world of the online shopper.

    I think you are absolutely spot on when you talk about Walmart’s drive to build customer relationships via their stores. However quick or convenient e-commerce is for shoppers, it does take an element of control out of the process for sellers. With stores, however, there is real opportunity for shopper engagement which, when done well, can increase a customer’s affinity with the brand exponentially. On top of this, by virtue of simply having a bricks and mortar presence, brands like Walmart ensure they are always top of mind with consumers; in effect, the stores serve as advertisement platforms.

    To that end, I feel there will always be some space for the role of the physical store. However, this role is clearly coming under threat from the margin maximising rise of e-commerce. As such, it is key that Walmart continues to innovate to make its stores relevant and redefine them for the digital world.

    More generally, I have been interested to read about Walmart’s push to have an online presence via social media. With 34,000,0000+ Facebook likes, 210,000+ Twitter followers, 33,000+ followers on Pinterest and 20 bloggers called “Walmart Moms”, they have a very well defined social media strategy that many old-world retail brands could learn from.

    (Source: http://www.biznology.com/2014/08/10-lessons-walmarts-social-media-strategy/)

  3. While reading this article I kept thinking about how Walmart’s future focus on ecommerce and omnichannel hinges on acquiring millennial customers. As online retail presence balloons, we are all forming habits and becoming increasingly brand-loyal to online marketplaces. Since Walmart’s core competency is brick-and-mortar stores, it didn’t surprise me to read about the company’s recent acquisition of jet.com. As one of the fastest growing ecommerce companies in the US, their customer bases skews heavily towards urban and millennial, populations where Walmart is currently under-penetrated. With an average of 400,000 shoppers being added monthly, it seems like this will bring Walmart one step closer to realizing their vision of a new omnichannel shopping experience.

    Source: http://news.walmart.com/2016/08/08/walmart-agrees-to-acquire-jetcom-one-of-the-fastest-growing-e-commerce-companies-in-the-us

  4. Great article, thanks for sharing. I find it interesting how many different ways that Wal-Mart tries to meet the buying behavior of its customer. When it comes to competitors, convenience is in many ways the biggest factor in purchases — and that is different for each product category. For example, people are fine buying non-perishable food items online, but prefer to buy perishables at the store. Likewise, household items are easy to buy online, but most would like to physically look at electronics before purchasing. My prediction is that giants like Wal-Mart will realize that buying behaviors are more dependent on the type of product, and less dependent on the individual consumer, and then respond by primarily carrying items like perishable food and electronics in stores, rather than everything under the sun. Or maybe they will just continue selling to the customer in every which way they can think of – we will see!

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