Wal-Mart is innovating at Supercenters. The massive stores aren’t an afterthought, even as the retail giant expands its online marketplace, snaps up e-commerce sites and integrates its Jet.com acquisition on the back end. Rather, to the contrary.
“We’re experimenting with different formats at Supercenters,” Doug McMillon, president and chief executive officer of Wal-Mart Stores Inc., said Tuesday at the Bank of America Merrill Lynch Consumer and Retail Technology conference. “It’s a very effective vehicle. The stores we opened recently in Lake Nona, Fla., and Woodland, Tex., represent our latest thinking on the Supercenter. We’re going to allocate remodeling capital going forward.”
Innovations at the Lake Nona unit include in the electronics department, an interactive product education table where customers swipe their hands over the table to see ads and product information. Grown, an organically-sourced Miami-based restaurant, is cooking up farm-to-table dishes and Mobile Scan and Go lets customers scan items with their mobile devices while shopping and pay instantly. The Woodland Supercenter also has Scan and Go capabilities as well as touch screens at the ends of aisles for accessing digital collections; apparel, including activewear, intimates, shoes and kids; a family salon, and national beauty brands.
Wal-Mart not only has Amazon in its sights — the Bentonville, Ark., retailer recently unveiled free two-day shipping to best Amazon’s three- to five-day Prime offer — it’s anticipating the arrival of Lidl, a German discount supermarket chain that’s expected to open 180 stores in the U.S. in 2018.
“We’ve had Aldi here for a long time,” McMillon said. “We’ve been through Lidl and Aldi growth in the U.K. What we offer starts with the assortment. We have to make sure the quality is right and the sizing of products is right so it’s easy for customers to compare with another store. Product engineering and price — we’ve been making price investments. We can’t have too much friction in a Supercenter. We’re finding ways to innovate for speed. We’re trying to take away some of the advantages discounters have and play to our strengths.”
The ceo pointed out that 90 percent of Wal-Mart’s business is transacted in stores but the retailer is improving its buy-online, pick-up in store capabilities. “We’re learning how to build a back room,” he said. “We’re putting refrigerators close to the pick-up area for groceries. Delivery times are becoming shorter. As you scale, pick up economies become favorable.”
Asked whether walmart.com and Jet.com will become more integrated, McMillon said, “They’re coming together behind the scenes now, but on the front end we want to keep them separate. Jet attracts a more affluent, more urban and younger customer. Some suppliers don’t want to sell on walmart.com, but want to sell on Jet.com. Marc’s [Lore, president and ceo of Wal-Mart global e-commerce] has got some ideas of what Jet might be in future.”
McMillon acknowledged that Wal-Mart’s recent e-commerce acquisitions have been driven by the assortments of the web sites. “It’s not very complicated, the customer wants great assortment, price and service, and we haven’t been delivering as well. [Moosejaw, Shoebuy and Hayneedle] are great, but they don’t have enough money to go market their brands and scale them. By joining Wal-Mart, they can make their products available through Wal-Mart and Jet and they can scale faster.”
Product was a topic on analysts’ minds. McMillon was asked about Marketplace, which is the third-largest GMV retailer in a developed market. “On the third-party side, your pricing looks like your 15 percent across the board, where some other marketplaces may be a little more competitive.”
“We’ll do over time what we need to do to compete,” McMillon said. “As it relates to our position in this market, we have a great opportunity. This e-commerce business is not magical, you can build it. Today we understand more about it than in the past about how to do that. In the past, we put too much pressure on short-term profits and didn’t drive the J-curve like we should have.”
McMillon defended his choices, noting that Wall Street complained at each turn. “Supercenters are a people business,” he said. “They have to have resources to be successful. That took money and a little time. You [Wall Street] said, ‘Woah, too much money and not enough return.’ We’re not running this business for one quarter. We’ve come back and said, ‘Now we’re operating from a position of strength. We have an opportunity to step on the e-commerce gas. We’re going to leave ourselves room to generate a return. As you hold us to account, you’ll see progress but we’re not going to be shortsighted. We’re going to build the capabilities we need to win.”
House of national brands versus portfolio of private labels? McMillon seemed to be leaning toward the latter. “We’ve had some big opportunities with private brands and sourcing,” he said. “We have resourced private brands. We have more talent there. We have footwear and apparel — we’re investing in that. We’ll still sell national brands for less, but we have some really big private brands and we’re starting to see them gain momentum.”