You will be redirected back to your article in seconds
Skip to main content

What Walmart Would’ve Done Differently to Weather the Pandemic

Walmart had big omnichannel plans before March, but the Covid-19 pandemic has forced the nation’s largest retailer to speed up its customer-centric strategies.

“We probably don’t know what’s going to be different and what’s going to last,” John Furner, president and CEO of Walmart U.S., said Wednesday at WWD’s Virtual Apparel and Retail Summit, addressing consumers’ rapidly changing behavior and priorities.

With consumers doing more of their shopping digitally, however, they will be “looking for more delivery options,” Furner said. “I think those are here to stay.”

Walmart was already building out a food- and consumables-focused pickup service, but when the coronavirus pandemic touched down on U.S., Furner said he reached out to colleagues in Walmart China to get an idea of what America would face. “A lot of the trends were the same,” he said. “The stock ups were basically the same. Early on in the changes, we saw a lot of out-of-stocks, [and gravitation to] stay at home categories, loungewear, home office, home improvement, hair coloring and new items for the back-to-school timeframe.”

Shelter-in-place orders spurred shoppers toward convenience-centered fulfillment options and as a result, “the pickup business stepped up,” Furner said, adding that 140,000 employees worked in this area of the business in Q3, “over double [of what we had] last year. Walmart has hired 500,000 new employees this year in a bid to better service its 160 million customers.

The mass merchant has turned to app-based technologies to quickly and efficiently train new hires so they can get up and running from day one. The Ask Sam app, named in honor of founder Sam Walton, uses machine learning to answer basic questions via voice or text. If it responds with an “I don’t know,” a team mining those questions works on finding the answers for frontline employees.

Related Stories

Furner credited Walmart’s growing third-party marketplace business for buoying e-commerce operation. “Marketplace led the e-commerce business in the last eight quarters,” he said, noting that it “led the digital commerce business up 79 percent over last year.”

Despite his experience working in China during the avian and swine flu outbreaks, Furner said those runs on supply were nothing like what Walmart experienced this year. “Hopefully, we don’t need to use this playbook again,” Furner said of how the company navigated the unprecedented circumstances.

In a statement early Wednesday, the retailer said it was doing away with the $35 minimum order requirement in its Walmart+ membership for free next-day or two-day shipping, a move seen as challenging archrival Amazon’s popular Prime program.

“We were, you know, looking for ways to reduce friction,” Walmart Inc. CEO Doug McMillon said Wednesday during Morgan Stanley’s Virtual Global Consumer and Retail Conference. [We] heard loud and clear from customers that purchased a Walmart+ membership that they didn’t expect to have a minimum for e-commerce orders and so we were pleased as we got through the month of November, that we had the outbound shipping in such a place that we felt comfortable we could remove it, and still deliver with speed between now and Christmas.”

If Walmart to do anything differently to withstand the pandemic, “[W]e would have built up an inventory,” McMillon said. “We run a really lean inventory position as we try to drive inventory turns in in-stock.” But he also said the chain now is in a “much better position than we were. As we released results last quarter, you saw that our inventory levels are back up.”

Companies really can’t plan for black swan events like global pandemics. “I don’t think our [inventory] philosophy changes. I think on the other side of the pandemic, we’ll be right back to managing and stocking turns at the same time,” he said.

And while growing share of wallet from existing customers is a priority, the discounter also has been attracting new customers too. “We saw that really start to happen when we launched pick-up and delivery, and started to scale it,” McMillon said. He also noted that more affluent customers who are focused on time are “taking advantage of some of these new things that we’re doing. And that’s [going to] enable us to continue to expand in terms of new customers, along with just our pure e-commerce business. And those customers may have a slightly higher amount of spend from a discretionary point of view.”

On the marketplace front, McMillion said that “you need volume and to get volume, you’ve got to build [a] first- party business.” Following its acquisition of Jet.com, Walmart saw both volume and traffic accelerate, which kindled third-party sellers interest in joining the platform. Walmart, he said, cares “about the quality, we care about the shipment time, we care about the customer experience.” As the marketplace has grown, Walmart also now has fulfillment capacity to put more items in one box and ship it fast, he said.

As for managing earnings, while growing the top line, McMillon said Walmart has been able to reduce losses in the e-commerce area through, in part, the combination of profits in the apparel and home categories. Also, the leverage of fixed costs achieved when sales grow as much as they did for Walmart was “like oxygen pouring into the room,” he said. “That gives us even more flexibility as we look ahead to decide what we want to go do next and what the pace should be. And sometimes the constraint is human bandwidth, do we have all the right people in the right jobs to go get it done?”

McMillon also pointed out that the “business model of Walmart is changing.”

“We drive the top line differently and we drive the bottom line differently, we start to see the company make money in advertising income, we’re building a fulfillment services business and financial services are an opportunity for us health and wellness is an opportunity for us,” he pointed out. “I think the composition if you just looked at a bar chart of revenue and profit of Walmart will look different in five years time than it looks now, and it looks different now than it did five years ago.”