Reporting from Bentonville: key insights from Walmart Day Two

Date : 07 June 2013

Day two of IGD’s trip to Bentonville included a visit to a Walmart Distribution Centre, a Supercenter and meetings and Q&A with key Execs. Key highlights are as follows:

Key Insights from Day Two

1. Distribution Centre Tour

DC #6094 is a Regional DC serving 130 Walmart Supercenters, discount stores, Neighborhood Markets and Walmart Express stores in parts of Arkansas, Missouri, Oklahoma and Kansas. The DC handles mainly general merchandise, although around 20% of lines are non- perishable food items.

A great example of scale and efficiency in action, with some key stats;

  • Site covers 1.2mn sq ft and includes c 12 miles of conveyor systems
  • Receives and ships 450,000 to 550,000 cases daily
  • On a typical day it unloads 150-175 trailers and dispatches 100-150

The business also prides itself on the long service of many associates, with nearly 600 (out of the total of more than 1,000) having been with the company for more than 10 years. Safety is also key, and pride of place was given to driver Philip Null, whose vehicle proudly displays the sign "3 million safe miles"!

Philip Null

Look out for our depot visit report soon on Supply Chain Analysis.

2. Walmart Supercenter Tour

This 220,000 sq ft store showcases Walmart's latest thinking and approaches to the format, which remains hugely important to the business. Key highlights include;

  • "Made in Arkansas" used throughout the store on over 1,700 SKUs to highlight items processed or manufactured in the state
  • Huge growth in the Tablet category within consumer electronics, with Walmart's exclusive ‘Hisense’ own brand product performing well
  • Health and Wellness category catering for a full range of customer types and prices, with 88c price points, its premium pet food "Pure Balance" and a new pet prescription service key highlights
  • Greater focus and investment in self-checkouts, with the "bullpen" layout proving popular, with c 20-30% of customers now using self-checkout in the store. Scan and Go is also being tested in 200 stores with positive customer feedback
  • Micro assortment and “store specific modulars” are being used in grocery to improve local offering, e.g. store specific ranges being developed within the ice cream category

Walmart

3. Global eCommerce Overview

Neil Ashe, President and CEO, Global eCommerce led a presentation and Q&A on “the next large growth engine for Walmart”. Walmart Global eCommerce, including Walmart Labs is bringing together 2,500 colleagues worldwide “delivering a new vision for commerce”, including common technology platforms allowing rollout of solutions across markets.

Neil also highlighted how important delivering a true multi-channel offer is across, online, stores and mobile. Using Walmart’s ecommerce capability with its store network creates a unique competitive advantage and “what we are building is unique and only Walmart can do”.

Other key highlight of this session included:

  • Walmart aiming to double the assortment online in the US by end of Q2, and then again by the end of 2013
  • Site to Store” launched 2007 and growing strongly; now c 50% of online transactions are completed in store
  • Mobile is “an area we are really excited about”, with over 50% of customers now owning smartphones and one-third of traffic to Walmart.com coming from mobile devices and growing
  • Four key markets for Walmart eCommerce; the US, UK, Latin America and China. Its eCommerce business in Brazil is growing twice as fast as the market, and Walmart is looking to create a regional operation across the Latin American markets it trades in
  • Grocery delivery is being tested in the US and could be rolled out via a store-pick model, although “we will watch like everyone else does to see if the market wants it”

4. International Business Overview

Doug McMillon, President and CEO, Walmart International and Cathy Smith, CFO, Walmart International shared their thoughts through a Q&A session. Issues covered included Walmart’s focus on compliance and food safety across its international business as well as growth ahead.

In terms of future growth, Doug expects this to come through same store sales growth, new stores / formats and ecommerce. In terms of key markets, China, Brazil and Sub-Saharan Africa are expected to deliver strong growth, while the Discount Compact hypermarket format is proving popular. This has been expanded from Brazil into Argentina and Chile, and “does a fantastic job” making products more affordable in fast growth markets.

In terms of EDLP and EDLC, this is a business model and the pace of movement to EDLP has varied in different markets, for example Brazil was traditionally “high –low” but now has a price leadership position. While other markets like China are “still in the planning phase”, Doug stated “I know that [EDLP] works....I know that it’s hard and it takes discipline”. He also said that in terms of EDLP vs. high-low is about "whether you want to win a whole war or whether you want to win a battle".

5. US Business Overview

Bill Simon, President and CEO, Walmart U.S. led a session on the domestic business, which covered a wide number of issues, including store formats. There are now approximately 20 Walmart Express stores open and the business is looking to better understand and improve sales densities. Additionally, the Neighborhood Market format is performing very well, with a further 80-100 stores planned this year, with Bill Simon commenting that it “works really really well...we are now in rollout mode”.

Bill also referred to the highly competitive nature of the market, with operators such as Target and Amazon performing strongly. However, this was seen as a key positive; “competition makes us better” with both Walmart and the customer benefitting whenever it trades against strong competitors.

6. Sam’s Club Business Overview

Rosalind Brewer, President and CEO, Sam’s Club led a session on Walmart’s warehouse club business, which generates revenue of $56bn from 620 clubs and 47 mn members, with wholesale one of the fastest growing channels in the US. Performance is currently strong with profits up +7% in fiscal 2013 and ahead of plan.

With aspirations for Sam’s to become a $100bn business, future growth will come from expanding the store footprint (with 15-20 new and relocated clubs planned during FY14) as well as online (currently less than 2% of sales).

Click here for highlights from Day One.