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Walmart Slowing Store Openings To Focus On Growing E-Commerce With Jet

Cutting capital allocation for new stores from 50% to 20% 10/11/2016 11:15:00 AM Eastern

Walmart will slow store openings in order to focus more heavily on online sales, the company revealed during its annual investors meeting last week.

The retailer will also continue its focus on “expense management,” it said, identifying its avenues of success as being “continued momentum in the U.S. business; solid growth in key international markets, including Mexico and Canada; a sharpened focus in China; and e-commerce investments.”

The strategy comes as little surprise given the chain’s recent moves. Within the last 12 months, the retailer purchased fledging online seller Jet.com for $3 billion, rolled out a $49/year two-day shipping service, debuted its own mobile payment system, trialed a digital replenishment system and began testing drones to manage inventory

According to Wal-Mart Stores president/CEO Doug McMillon, the retailer has grown its online assortment from 8 million items at the beginning of the year to over 20 million this month — and is adding a million more each month.

Said McMillon at the meeting: “This company, over time, is going to look like more of an e-commerce company. We'll still run great stores, and we know how to do that. Customers want a seamless relationship. That's in our favor. But we've got to build this e-commerce business in this country and in others to be there in the future.”

Marc Lore, Jet.com’s founder and now president/CEO of Wal-Mart e-commerce, took the stage at the meeting in a Q&A with McMillon to shed light on the recent acquisition, which the company hopes will appeal to urban millennials as a complementary brand. According to Lore, Jet receives over 500,000 new customers each month, noting: “The key to winning in e-commerce is to be able to win in logistics and supply chain.”

See: A Sneak Peek At Walmart’s Latest Electronics Department Design

Lore was named to his newly created post with the closing of the Jet acquisition on Sept. 19, and is reportedly succeeding Neil Ashe, presently Walmart’s president/CEO of global e-commerce and technology. According to CNBC, Ashe is transitioning to other roles and then leaving the company.

Walmart will double its number of large-scale warehouses to fulfill e-commerce orders by the end of the year, to 10 from five, said NBC News.

When discussing how it plans to stay competitive with Amazon, Walmart U.S. president/CEO Greg Foran said the company is changing its internal operations and how the company uses technology to work. “I  do  think  [artificial intelligence]  and  machine  learning  will  play  a  huge  role,” he said. “Marc has a real passion around virtual reality … but  this company will look even more like a tech company. And it will move faster, and it will be more customer-centric, and it will be more productive. But it is a journey, and we've got 2.3 million people to take on that journey, which means it will probably take some time and in some ways require cultural change to deliver on the other side.”

Lore also called Walmart’s Vudu streaming-video service “a critical component of the future.”

This is not to say the chain is completely leaving brick-and-mortar in the dust. In addition to its e-commerce efforts, Walmart said it will increase its investments in store remodeling; will open 200 “training academies” for store managers, up from the current 20; and will continue to invest in in-store technology like tablets and handheld devices. It will, however, reduce capital allocation toward new stores to less than 20 percent next year, down from approximately 50 percent in fiscal year 2014. 

 
Source: Walmart

“In the future, we'll also be a more digitally-oriented organization, not only in how we work, but more importantly, how we serve customers,” said Brett Biggs, Wal-Mart Stores chief financial officer and executive VP.

Foran said the chain intends to open approximately 35 new supercenters and 20 Neighborhood Markets in fiscal year 2018, and will remodel around 500 existing stores.

In August, Walmart reported total revenue of $120.9 billion for its second quarter of fiscal year 2017, a year-over-year increase of 0.5 percent. U.S. comp sales increased 1.6 percent, the eighth consecutive quarter it has grown, albeit at a pace too slow for shareholders.

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