Walmart Mexico (Walmex) recently reported total revenue growth of 8% for 2020 and 5.9% for Q4. Same-store-sales increased by 6.7% for the full year (4.9% in Q4). At its annual Walmex Day event, the business outlined three business priorities for the year 2021 and beyond:
- win in discount
- lead in omnichannel
- develop its ecosystems.
Ambition to become the omnichannel market leader
Walmex aims to become the leading omnichannel retailer in Mexico. In the medium-term, it wants omnichannel to reach a double-digit share by 2024.
The pandemic accelerated its digital transformation
The effects of the pandemic have radically changed shopping habits, as people are encouraged to spend more time at home. These conditions have accelerated the adoption of pick-up collection and home delivery services.
Walmex responded quickly, ramping up its digital transformation and re-focussing its investment in developing its omnichannel proposition.
“We’ve evolved significantly…from a store-based business to an omni-business, and now it is the time to optimise performance and create a winning omni-led ecosystem in Mexico”. Guilhermo Loureiro, Walmex CEO.
2020: a significant year for omnichannel development
In 2020, Walmex quickly expanded its same-day delivery service, which is offered from 586 stores (across all banners) in 70 cities. Its ecommerce sales increased from 1.5% of total revenue in 2019, to 3.8% in 2020.
A new ecommerce service was launched for Bodega Aurrera (BA) (for general merchandise purchases), with home delivery available from 100 stores. In Q4, it launched ‘Despensa a tu casa’ (pantry to your home), a grocery delivery service for BA. This was initially being trialled in 30 locations but has since expanded to over 270. The business also launched home delivery from 164 Sam’s Club stores.
To support online logistics, it opened a new fulfilment centre dedicated to ecommerce, in addition to two new omnichannel distribution centres.
Walmex upgraded its marketplace technology and extended the total number of products by eight times. This supported considerable gross merchandise value (GMV) growth of 171%.
Over 1,100 digital kiosks have been installed in stores, enabling customers to browse and order from its extended online catalogues whilst in the physical store.
Omnichannel a key strategic focus
Walmex said it is critical to continue investing in its “omni-value” proposition in order to win customers’ loyalty.
Its omnichannel strategy focuses on three pillars:
- strengthen its on-demand strategy
- accelerating its extended assortment (primarily general merchandise and Apparel)
- investing heavily in three “growth catalysts”: technology, logistics and talent.
Plans to win in discount
In Q4, BA significantly improved on previous quarterly performances, which was driven by investments in pricing and its new omnichannel proposition starting to gain traction.
Since the start of the pandemic, many consumers have become more apprehensive about their financial prospects, which is affecting their grocery spend. For some, value has become a driver of store choice, making Walmex’s BA stores more desirable.
To ‘win in discount’, Walmex said it will further expand its price leadership and significantly reinforce its price gap. It will strengthen the quality of its produce, meat, and bakery. Lastly, it will develop the assortment and raise the profile of its private label brands, which will help to grow their sales penetration.
New openings will be mostly discount stores
Walmex opened 63 stores in 2020, of which 53 were BA. Its opening programme was more subdued because of the pandemic, but in the fourth quarter this began to re-accelerate (35 openings in Q4).
In 2021, most new openings will be BA stores, predominantly the smaller BA Express and Mi Bodega banners. Walmex will continue to reach new customers by building smaller stores close to their homes.
Stepping up investment in 2021
In 2021, Walmart will invest MXN$22.2 bn (US$1.06 bn) in its operations in Mexico and Central America. It is evolving the focus of its investments to drive omnichannel growth:
- 40% will be invested in remodelling and maintaining existing stores, with a particular focus on implementing omnichannel capabilities
- 25% will be invested in new store openings
- 25% will be invested in strengthening its logistics network
- 10% will be invested in ecommerce and technology, leveraging technology used in other operating markets
Its distribution of capital has evolved from investing mostly in new and existing stores, to logistics and technology. In the next five years, it will invest most heavily in logistics and remodelling existing stores to offer an enhanced omnichannel experience. It said it will prioritise the omnichannel transformation of its Walmart and Sam’s Club store.
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