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Supply Chain News: Walmart Alters Course, to Make Supercenters Core of its Overall Strategy

 

Tired of eCommerce Losses, Walmart Says It is Not about Just Growth, but Profits

Jan 2, 2020
SCDigest Editorial Staff
     

Walmart, it appears, has evolved its thinking to place a greater focus on its giant brick and mortar Superstores, tired of giant losses through its ecommerce channel.

The company is likely to also emulate arch rival Amazon's moves to drive revenue through advertising, third-party logistics, and even IT services.

Supply Chain Digest Says...

 

Walmart plans to invest in more infrastructure and systems to offer fulfillment services for its third-party merchants that place their products on Walmart.com


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Of course, it has long been recognized that physical stores can offer advantages to some brick and mortar retailers in an ecommerce world, especially Walmart, with its thousands of retail locations across the US. Those stores can be leveraged to perform order fulfillment, provide popular "buy on-line, pick up in store (BOPIS)" services, handle returns from on-line orders and more.

But according to a recent article in the Wall Street Journal by Sarah Nassauer, internally Walmart until recently saw its stores as obviously useful to its ecommerce business, but that retail, ecommerce and other initiatives were viewed as sort of equals that could all engage and satisfy the customer.

Now, CEO Doug McMillon has told key managers that the nearly 200,000 square feet Superstores, which handle everything from tires to groceries, will serve as hubs that tie all the company's offerings together.

According to the Journal article, McMillon told executives at the meeting that the company wasn't going to win by building an unprofitable ecommerce operation or other stand-alone ventures.

Driving the shift in thinking: a renewed focus not on just achieving growth, but creating profits.

Walmart hoped to jump start its nascent ecommerce business by acquiring web retailer Jet.com in 2016, with Jet founder Marc Lore heading Walmart's ecommerce businesand many of the company's managers taking key roles.

According to the Journal, Walmart invested many millions in reducing on-line prices, advertising for its ecommerce business, offering faster shipping, and acquiring smaller ecommerce sites, including women's apparel company ModCloth, outdoor retailer Moosejaw and men's apparel brand Bonobos.

That led to high growth in percentage terms, but also lots of red ink. Walmart's ecommerce unit lost a massive $2 billion in its last fiscal year, the Journal reports. And that actual loss was much larger than the projected loss for the second year in a row.

The Journal also said that at the strategy meeting about a month ago, McMillon said the website, product selection and shipping times still need to improve, adding "I would have thought we would have been further along in ecommerce. We're not pleased. We'd like to go faster."


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A former executive in Walmart's ecommerce business the Journal that "In the beginning it was all about growth, how can you win share away from Amazon. Now it's about profit."

To that end, last year Jet's headquarters staff was merged into Walmart's overall organization. Modcloth was sold off, and Walmart has told Bonobos and Moosejaw they need to stop losing money.

But like Amazon, Walmart is also looking for related new sources of revenue. That includes plans to invest in more infrastructure and systems to offer fulfillment services for its third-party merchants that place their products on Walmart.com but now handle the fulfillment themselves. Of course, such a move would mimic Amazon's popular Fulfilled by Amazon service it provides to many of its marketplace vendors.

Walmart is also looking to drive revenue by leveraging all the data it has on customers, either from their on-line shopping history or credit card purchases, to sell advertising on-line and maybe even in store. The Journal says "Walmart isn't selling individual shopper data, instead offering advertisers a way to target their ads more precisely using anonymized data."

Amazon is already number three in the US in terms of on-line advertising revenue, trailing only Google and Facebook.

The Journal is reporting that Walmart is even considering offering installation of new wireless 5G antennas on the roofs of stores for a fee or to provide access to faster network connections – moving in a different way into the types of offerings Amazon has in its highly profitable AWS web services unit.

But in the end, the foundation of Walmart's plans are its stores, with the Supercenters the heart of a web of businesses all working together to attract shoppers and drive profits.

SCDigest says: Back to the Future?

What do you thinkof Walmart's store centric strategy? Let us know your thoughts at the Feedback section below.


 
 

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