Inside This Issue - News
Walmart embarks on multichannel mission for growth
May 16th, 2011
BENTONVILLE, Ark. – Walmart management has described its plans for future growth both here and abroad with great clarity over the past several months.
The strategy centers on heightened investment in growth markets overseas, the rollout of smaller store formats in the United States and the expansion and implementation of a multichannel strategy that leverages both Walmart’s domestic store base of more than 3,600 locations and Walmart.com.
The multichannel strategy and the rollout of smaller formats are particularly important in the United States, where the retailer’s flagship division has encountered unexpected difficulty in reigniting sales growth.
President and chief executive officer Mike Duke discussed recent multichannel developments during a presentation at the Barclays Capital Retail and Restaurants Conference last month. "All of this gives customers the flexibility to buy the way they want to buy, when they want to buy, and to have the transparency of pricing," he said.
The initial stage of Walmart’s multichannel strategy, launched several years ago, was a program called Site to Store, which enabled customers to order products online and then pick them up at a conveniently located store. It was supplemented last year with a program called FedEx Metro Pickup.
That program allows consumers in major metropolitan markets to order goods from Walmart.com and pick them up at urban FedEx office locations. It was piloted in Los Angeles and Boston and then expanded last fall to New York; Washington, D.C.; and Chicago.
The FedEx Metro Pickup program delivers a couple of major benefits to Walmart. First, it enables it to generate sales in major urban markets where Walmart stores may be few or absent altogether. Second, it lays a foundation for further store development in those urban markets, creating a shopper base that has experienced Walmart’s everyday-low-price value before the Walmart banner has appeared.
As Walmart increases its penetration of urban markets with its soon-to-debut small format, Walmart Express, the infrastructure of its multichannel strategy will expand as well, since the small format has been developed with that strategy in mind.
The most recent wave of the multichannel strategy is called Pick Up Today. Customers can place their orders through Walmart.com, and they are notified via e-mail or text message when their order is ready for pickup at a store later the same day. Early results of the initiative showed that the average order placed under the system was $116, which is 22% higher than the average Walmart.com order.
"The world obviously is moving more digitally, driven by technology, and retail is no exception," said Bill Simon, president and chief executive officer of Walmart U.S., during the company’s annual analysts conference last October. "Eighty-seven percent of our core customers have access to online and the Internet, and they use that to help them with their retail purchases. By leveraging our scale in our fixed assets, our stores and our distribution system, we believe it’s a unique opportunity."
The multichannel strategy, he added, combines Walmart’s store base with digital communications technology to make the retailer available to customers wherever and whenever they want to shop.
"The single-channel online business has some limitations, some barriers," Simon said. "Folks like to touch, taste or smell a product. A lot of people, increasingly the younger generations, want it now. Immediacy is a barrier that’s easy to overcome with over 8,000 points of distribution [worldwide]."
The Pick Up Today program, he continued, delivers immediacy in a way that online-only retailers cannot approach.
The multichannel approach is also an important part of the growth strategy for a number of Walmart’s international markets. In the United Kingdom and Japan, Walmart’s Asda and Seiyu subsidiaries operate grocery home delivery services, and Walmart Brazil offers a general merchandise delivery service.
In China, which boasts 457 million unique Internet users (25% of the world’s total), Walmart sees a huge e-commerce opportunity. It began its e-commerce efforts there last year by focusing on business customers on its Sam’s Club website.
Response has been very strong, according to Scott Price, president and chief executive officer of Walmart Asia. The future will see Walmart China expand its e-commerce reach to the consumer, leveraging its network of more than 300 stores.