Walmart’s omnichannel evolution in Chile

Date : 26 January 2021

Oliver Butterworth

Retail Analyst

Walmart Chile has been rebuilding after a challenging 2020, where it was impacted by political turmoil and riots. These issues were exacerbated by the arrival of the COVID-19 pandemic.

Following a surge in online demand at the start of the pandemic, the business announced it was investing US$50m into ecommerce initiatives in 2020 and 2021. Here we explore how the business is bolstering its omnichannel strategy in Chile and how this will continue to evolve in the future.

Walmart terminates alliance with Cornershop

Walmart partnered with Chilean last mile delivery business Cornershop in 2017, which enabled it to offer the rapid delivery of groceries in Chile’s larger cities.

In June 2020, Walmart announced it was terminating its alliance with Cornershop. This was a significant turnaround, as Walmart Inc. has previously tried to acquire Cornershop in 2018 but was rejected by Mexico’s antitrust authorities (COFECE) over concerns that Cornershop could potentially refuse to offer its service to Walmart’s competitors.

Walmart decided it could use its internal capabilities and develop its own ecommerce and home delivery solutions.

Strategy to make ecommerce more accessible in Chile

Whilst Cornershop offered grocery deliveries in Chile’s major cities, Walmart saw the potential to serve the whole country.

In July 2020, Eli Senerman (VP of Walmart Tech, Chile) said: “Currently, 60% of the country's population lives in a commune where we offer ecommerce services, and we continue working to democratise this service [so] more and more families can access our low prices just a click away."

In a separate interview he commented: “We are going to end [2020] with more than 100 pick up or home delivery service locations. And, in communes of socioeconomic levels [currently not being served.]"

Walmart strengthens its omnichannel proposition

At the same time Walmart terminated its partnership with Cornershop, it began bolstering its omnichannel proposition. The first step was implementing a home delivery service through its Líder app.

At a global level, Walmart is rapidly expanding its BOPIS (buy online, pick up in-store) initiatives. At the end of 2020, 179 of its stores in Chile had Pickup collection points, which was significantly up from 65 stores in July 2020. This service enables its customers to make purchases through the Líder.cl website or Líder app and arrange for in-store collection at a convenient time. For added flexibility, Walmart also offers home delivery through both platforms.

Opening omnichannel distribution centres

In September 2019, Walmart opened its El Peñón distribution centre (DC) in Chile (in the municipality of San Bernardo). Following an investment of US$180m, this was Walmart International’s first DC to be equipped with omnichannel distribution management systems. This was Walmart’s largest ever investment outside of the US and was a cornerstone of its growth plan in Chile.

Source: Walmart

Developing dark stores

To manage the increased demand for online orders seen in 2020, Walmart is developing dark store/supermarket hybrids. In December 2020, it launched its first 100% omnichannel supermarket. The store in La Reina (a commune in the capital of Santiago), serves walk-in customers, but has a separate warehouse that is used for processing and picking online orders.

Adapting the store in this way has allowed Walmart to triple its capacity of products (particularly high turnover ones), making it possible to process more than 10,000 remote orders per week.

Our view

Walmart recently exited neighbouring market Argentina, and in 2018 it sold 80% of its operations in Brazil. Despite what could be considered a divested interest in Latin America, Chile (and Mexico) remains a country of significant strategic importance to the retailer.

Walmart remains the largest grocery retailer in Chile, where it operates over 350 stores across 14 regions. In 2021, we expect to see further development of its omnichannel capabilities in stores. The business will continue to enhance technology that supports order picking and expect to see it develop more process automation to improve efficiencies.

We look at Walmart's strategic priorities as it aims to become the world's leading omnichannel retailer and build out an ecosystem that is broader than its physical and digital stores.

We take a look at Walmart Mexico's flagship store under its new Walmart Express banner.

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