Facing dwindling sales trends and ever increasing competition on various fronts, especially from Amazon, Walmart is making innovation a priority. The primary focus? Establishing new store concepts and expanding its online presence.

Some of the reasons for its poor sales performance are familiar. Amazon continues to attract shoppers with expanding product selections, enabling them to order grocery and household goods online and have them delivered readily. In addition, ethical concerns, including allegations of bribery by some overseas divisions and continued questions about labor practices, remain difficult topics for Walmart, demanding substantial attention and resources to address. Moreover, even as the recent recession continues to recede, the segment of consumers that has been the slowest to recover is also the segment that represents perhaps Walmart’s most important customers, namely, lower income shoppers.

In response to such trends, the retailer’s new CEO Doug McMillon has set a new tone for the company. He assigned his top executives a reading task: review Amazon founder Jeff Bezos’s book The Everything Store to help them come up with some new ideas that traditionally might have seemed outside Walmart’s purview.

As they were reading, the executive team was overseeing the opening of more small convenience-style and grocery stores, rather than the supercenters that previously had been the heart of its growth. Averaging around 20,000 square feet, these Neighborhood Market and Walmart Express stores are about one-tenth the size of a regular supercenter.

Furthermore, Walmart invested $500 million last year in an effort to expand its e-commerce presence. The resulting website exhibits some notably non–Walmart-like traits. Rather than everyday low prices, the site relies on dynamic pricing, such that the underlying system alters prices regularly in accordance with sales data and competitors’ prices. Short-term deals of the day or hour mimic the concept of Amazon’s gold box deals. Finally, the website features items that most shoppers would be surprised to find in Walmart stores, such as expensive branded sunglasses or a wine chiller for around $2500.

Such moves—small stores and a departure from everyday low pricing—are radical for Walmart and, some say, contrary to the very foundation that enabled it to succeed as well as it has. But McMillon insists that innovation is key to continued success, even as he demands that the company continue to take care of the basics. One particular emphasis is at the store level, where he demands that store managers and employees get better about keeping shelves stocked and aisles clean. In his estimation, cleaning messy stores and better stocking procedures can translate into sales increases of 1 percent, which is significant for a company that sells as much as Walmart does.

Discussion Questions

1. What are the primary challenges that Walmart presently faces?
2. Of the initiatives described in this article, which do you believe will have the greatest effect on Walmart’s success? Which do you believe will be the most difficult to implement successfully?

 

Source: Shelly Banjo, The Wall Street Journal, July 8, 2014