“W-a-l-m-a-r-t! Come on, Walmart make some noise!”
Walmart Inc.’s 48th annual shareholders week and Friday’s associates’ event at the Bud Walton Arena in Fayetteville, Ark., didn’t skimp on the entertainment. Jamie Foxx provided the star power as the host, and the retailer got its money’s worth. The actor appeared to be all in and up to the task, as opposed to previous years when the talent seemed to be phoning it in. Carly Rae Jepsen, Jason Derulo and Cassadee Pope were among the musical acts, along with Mason Ramsey, the 11-year-old yodeling kid who was discovered plying his craft at a Walmart store in Illinois.
International and delivery were among the themes of the event, which drew 14,000, including shareholders, but mostly sales associates who were seated in sections of the arena according to business division and erupted in shouts and applause when their store nameplates were mentioned by executives. Shareholders also marked the return of Sam’s Club into the fold.
There were attempts to cast Walmart as a leaner, meaner company designed for the Internet age and portray it as being tapped into the zeitgeist. Earlier in the week, the retailer revealed it had relaxed its dress code for hourly associates, allowing them to wear jeans and shirts of almost any color and pattern, as well as lifting rules about hair and tattoos. The move made for lots of photo ops of employees showing their personal styles.
Board chairman Greg Penner said, “Making bold changes is normal and expected and we’re not going to let up. We’re leading the race to build the retail model of the future.”
Marc Lore, president and ceo of Walmart U.S. e-commerce, told the audience at the arena that a 40 percent increase in e-commerce is expected in fiscal 2019.
Lore introduced a commercial for the new Jetblack text shopping service, now an invitation-only eight-month test at Manhattan doorman buildings. Jetblack, which uses bots and humans to recommend items users want, has a long waiting list. It’s the first service to launch from Walmart’s technology incubator, Store No. 8, where it was developed in stealth under the name, Code Eight.
Calling Jenny Fleiss, cofounder and ceo of Jetblack to the stage, Lore admitted he follows SNL creator Lorne Michaels’ approach of “the show doesn’t go on because it’s ready, it goes on because it’s 11:30,” adding, “Something I love about Jenny is that she’s aways thinking of new ideas. Our goal isn’t to have a perfect track record. We want to learn to adapt and push the limits of what’s possible.”
The new walmart.com site launched this week at 50 percent of the traffic capacity, with full capacity next week. “We have over 100 premium brands that weren’t previously sold on walmart.com and we think this is just the beginning. I think this idea of having a store-within-a store is really compelling,” Lore said, referring to the Lord & Taylor flagship that bowed on the new site, “and we’re certainly talking to lots of other companies at the moment and looking at doing similar types of deals.”
Walmart is looking for quality over quantity in terms of fashion. “The third-party marketplace is growing faster than first-party. While we’re focused on increasing the breadth of the assortment, our primary focus right now is on the quality of assortment. There are thousands of brands that we don’t currently carry in the top million best-selling sku’s, so we’re really focused on getting those brands and we think that will make a bigger impact.
“We’re focused on the brands that matter,” Lore continued. “That’s one of the big reasons we upgraded the look and feel of the web site — not just for customers — but also to really attract brands that previously were not wanting to be on walmart.com. So it’s the brands people want that are most often purchased and also that long tail. At the same time that we’re adding new merchants, we’re culling back merchants that haven’t been delivering an exceptional experience. We’re focused on making sure that each sku we sell and each merchant we bring on board is providing an exceptional experience.”
Executives took every opportunity to highlight the differences between Walmart and Amazon. “We’ve started to roll out same-day delivery from brick-and-mortar stores,” said Lore. “So, 100,000 products are now available for same-day delivery at some stores. Our goal is to get all the first-party sku’s to stores so we’re able to reach customers in one or two days.”
Besides the new same-day competency from Walmart units, Lore said, “We’re currently extending the number of sku’s that we offer for free two-day delivery every day. We continue to aggressively bring more sku’s to the warehouses. All the first party is in our warehouses, so we can get two-day delivery via ground in a single box. We also think there’s a big opportunity to leverage the 4,700 stores to do same-day delivery.”
A question-and-answer session with the analyst community following the shareholders meeting produced more substantive information.
Walmart president and chief executive officer Doug McMillon underscored the retailer’s appetite for big, bold moves, and acknowledged that the cost of acquisitions and time frame for recouping investment may not jibe with Wall Street’s idea of what those should be.
“We’re making some changes to reposition the company,” he said. “We’re changing the wheels on the car as we’re driving it. Balance does matter to us, but our time horizon may be a little different than what some of you [want]. We’re interested in doing a few big bets instead of a lot of little things. We want to be in places that have tremendous opportunity. That led us to Flipkart. India has 1.3 billion people. Flipkart has a strong management team that’s built out an ecosystem with complementary platforms.”
An analyst asked about what the debate with the retail giant’s board over Flipkart centered on. McMillon said, “Walmart won’t work without a very strong U.S. business. We had a debate around the contingency plan that could happen as a result of our entry [into India] and would that put pressure on our ability to win in the U.S., given the investment needed to win in India. We’ve seen Flipkart’s plan on scaling it and ultimately decided we could do both things at the same time.”
Surprisingly, analysts had few questions about the investment in wages. “We had the largest single-day private sector pay raise in history for our associates and have followed that up with another $700 million in raises since January,” McMillon said.
Highlighting individual executives, McMillon said, “John [Furner, president and ceo], you got the Sam’s Club really getting some good momentum, helped by the Sam’s we closed last year. Sam’s needed some work because we grew Sam’s from an acquisition and didn’t relocate some clubs that we should have. Sam’s is working on [digital]. It’s an incubator for the company, it’s consumer-centric.” Sam’s Club in January said it will close 63 stores in fiscal 2018.
Furner and Sam’s Club executive vice president and chief operating officer Gisel Ruiz unveiled a training program for associates. Upon completion, associates will be eligible for a 40 to 60 percent increase in pay. “You could earn over $50,000 a year,” Furner said. “The reality is, not all of these jobs will prepare us for the future.”
Furner cited Ellen, a former sales associate at Sam’s Club, who is now regional e-commerce manager. “This shows how we’re bringing associates along as the roles continue to change,” he said. “Ellen’s last three roles didn’t exist a few years ago.”
Earlier in the week, Sam’s Club introduced Bossa Nova, a robot that walks up and down store aisles to assess stock levels, pricing and labeling. Information from the Bossa Nova scanner flows into a Downstock app used by associates to maximize inventory. “When we talk about investing in our associates, we’ve also got to talk about technology,” said Furner. “Mobile tools are making it easier for our associates. They can spend [fewer] hours in the back office and more time on the sales floor.”
But for all the technology it’s deploying and innovation it’s incubating, Walmart is a bricks-and-mortar retailer working hard to understand the future of shopping.
“We’re learning new lifetime values about the customer and understanding their behavior in terms of ‘cohorts’ and CACs or customer acquisition costs,” McMillon said. “If you make this investment, and you get this behavior, then it’s a good investment. It’s tweaking the dials. It’s something e-commerce companies do here in the U.S. and Flipkart does in India.”
Speaking to analysts, McMillon added: “If you’re one of us, you’re learning these new metrics balanced with old metrics and blending them together with a customer view and an operational view.”