Coronavirus (COVID-19): Walmart China’s response to the crisis and initiatives to build the future

Jiong-Jiong Yu
Senior Retail Analyst
@RetailAnalysis

Date : 06 April 2020

The Consumer Goods Forum held a special webinar and invited Walmart China’s C-level executives to share the actions they took to overcome the challenges they have faced since the outbreak of coronavirus in the country three months ago.

The in-depth discussion covered many areas of business, including retail, shopper behaviour, supply chain, customer and employee health, food production, personal care and leadership. Key learnings and highlights of the discussion are summarised below.

How has Walmart been working with suppliers through the crisis?

Walmart uses its global sourcing structure to purchase goods from around the world. The company has 24 offices in 20 countries to source goods, including general merchandise, apparel and foods.

Mr Dirk Van den Berghe, EVP, Global Sourcing and Regional CEO, Asia, shared the following are important to maintain business continuity during the crisis:

  • Know your suppliers very well, stay close to them and see them as equal partners in the ecosystem
  • Be aware of different opportunities in different countries and be prepared to diversify the countries in which your supply chain operates
  • Maintain very high standards of quality and food safety throughout the crisis
  • Communicate and be very transparent with internal users and external stakeholders
  • Be flexible

On the last point, Walmart China worked with national banks to pay venders faster, as many of them faced issues with their cash flow. It was of one of the programmes Walmart put in place to support their suppliers. 

How did Walmart China respond to COVID-19?

  • Established separate crisis management and emergency response teams with four clear priorities:
    • Protecting associates (Walmart refers to employees as associates)
    • Maintaining operations and serving the community
    • Protecting the Walmart brand
    • Managing profit and loss
  • Set up standard operation procedures (SOPs) for different areas and scenarios
  • Focused on people and communication, including health consultation and support for associates’ families
  • Focused on how to accelerate the business out of recovery
  • Adjusted ways of working as the business could no longer operate as usual

How to deal with fresh produce shortage?

The market in China has been through three phases so far:

  • The first phase was when consumers were surprised by the lockdown measures. There was a lot of panic buying that lasted about two to three days
  • The second phase was when consumers started to adjust to lockdown and dramatically shifted their category purchasing behaviour and channel usage behaviour. This phase lasted about six weeks
  • The third is the gradual recovery phase where China is in now, consumers are going back to work and trying to resume normal life

Running out of fresh produce only occurred in the first phase. Walmart used a combination of demand and supply measures to address the issue:

  • On the demand side Walmart worked closely with local governments to issue statements and used other channels, such as social media, to assure people there was enough goods to go around
  • On the supply side the company started using alternative sources, including farmers and venders they had never worked with before, without lowering standards of quality control and safety checks. The retailer also worked closely with the government to unlock transportation challenges

How to capture online growth, the key opportunity area?

Walmart’s online orders have increased four to five times during the crisis when compared to normal days. Many customers are using Walmart online services for the first time and new customers accounted for 30% to 40% of the sales. The challenge for its online business was to find capacity to meet the surging demand.

Mr Wern-Yuen Tan, President & CEO of Walmart China, shared that the company had to make a lot of adjustments to make online operations smoother to cope with the high volume:

  • Focusing on key SKUs that are in high demand and will be in stock based on supply chain information
  • Re-planned picking flow to accommodate increased basket sizes and increased order density
  • Modularised the role of pickers and hired employees from other industries, so people who did not have secure employment could come to work with Walmart on a temporary basis

How to exit the crisis in a stronger position?

To ensure new customers Walmart gained will not be lost when the crisis is over, the retailer is working on several initiatives to be in a stronger position in 2021 and 2022:

  • Simplifying its commercial model to make it easier for stores to drive greater O2O business, where customers can make online orders via its app or through the apps of Walmart’s partners and stores are used for online order fulfilment. Its offline business will also be simplified with fewer and stronger promotions, a reduced assortment and inventory activities that require labour investment and resources
  • Reinventing traditional hypermarkets: the crisis has allowed modern retailers to capture more fresh trade from traditional markets and accelerate the shift towards the online channel. There is a need to start preparing assortment and store layouts to meet future category shifts in the post crisis situation
  • Building online to offline capabilities, which encompasses several elements:
    • Integrating online and offline operations, including all steps from picking zone, assortment curation and picking routines
    • Generating a seamless shopping experience to provide a single view from shoppers’ perspective as they transition from one channel to other
  • Digitising the entire value chain by leveraging customer purchase behaviour to inform business decisions on assortment, promotion planning, CRM, inventory and supply chain
  • Building the trust by telling the brand story and connecting customers emotionally with the brand

Mr Tan commented that, “It is clear there is consumer shopping habit shifting due to the virus. Consumers are staying at home, going online for everything, not just ecommerce but also for education, yoga classes and even buying apartments. They become more health and safety conscious. This crisis could bring opportunity for modern trade retailers like Walmart and grocery sector. Category dynamic will obviously vary significantly.

Consumer will shift to modern trade with great emphasis on trust and safety. Consumers will start building habits of shopping online, especially through O2O ecommerce. Players invested early in store safety and O2O capability will be ahead of the competition to capture these opportunities when the crisis has passed recovery phase.”

 

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