2019 DSN Omnichannel Retailer of the Year: Walmart

Five years or so ago, many a naysayer said that Walmart’s best days could be behind it. With increasing competition from digital retailers and a number of problems internally, industry experts predicted that the giant retailer was due for some hard times. 

Half a decade later, times and fortunes have changed dramatically. Instead of folding, Walmart’s massive store network and finely tuned logistics systems have given the company a strong foundation for the speed and efficiency needed to excel in the ominchannel shopping environment.

And, its commitment to finetuning both its online and brick-and-mortar strategies has resulted in the Bentonville, Ark.-based company’s impressive sales and profit resurgence. The result: a company that many now say is big enough, strong enough and tough enough to give the online retailers, especially Amazon, a run for their money. 

For these reasons, Walmart has been named the Drug Store News 2019 Omnichannel Retailer of the Year.

“We’re really working to build an ecosystem and have several different delivery methods that allow us to serve all customers,” Steve Bratspies, executive vice president and chief merchandising officer at Walmart U.S., said in a presentation at the Goldman Sachs Global Retailing Conference in September. “We just want customers to choose Walmart — whether you want to come to shop the store normally, you want to pick it up at the curb or we bring it to your house, we’ll do it however you want, but we just want to capture as many customers as we can and serve them as broadly as we can.”

So how is this company pulling it off?

First, Walmart has been capturing an increasing share of the estimated $19.9 billion U.S. grocery e-commerce pie, and it is well positioned to continue to gain share. U.S. grocery e-commerce sales are expected to more than double by 2023, according to June research from eMarketer. Walmart said its e-commerce sales grew 40% last year, which also includes revenues from Walmart Marketplace, the platform it hosts for third-party sellers, akin to Amazon’s vast retail portal.

The company’s physical size, with some 4,769 stores across the United States, also gives it the opportunity to use its stores as fulfillment centers for both delivery and click-and-collect services. 

“Pure scale gives them a huge advantage,” said Dave Weinand, co-founder and chief customer officer at digital consulting firm Incisiv. “Their store network alone provides the ability for Walmart to fulfill orders closer to shopper’s proximity, therefore speeding up delivery and keeping costs down.”

The growth of Walmart’s click-and-collect service, which Walmart offers at no charge to customers, has been a key driver for the company’s online sales. “Click and collect has been a really big success, and it’s one of the reasons we’re rolling it out as fast as we possibly can,” Bratspies said at the Goldman Sachs presentation. “We’ll hit 3,100 stores by the end of this year, and it continues to gain momentum. It’s proving to be highly incremental to our business, and bringing in new customers with strong repeat.”

He also said that the average basket size of a click-and-collect order is about two times what a standard grocery basket is. In addition, the mix of product also is a slightly different mix for online orders, he said, with stronger sales of organic and healthy items.

Another factor is that Walmart continues to expand its omnichannel offering beyond click and collect, with more than 1,100 stores now offering home delivery, and the recent expansion of Delivery Unlimited, an Amazon Prime-type offering that allows customers to receive free grocery delivery for a yearly fee of $98 or a monthly fee of $12.95. The program, tested in four markets earlier this year, is being rolled out to 1,400 stores in 200 markets around the country.

Earlier this year, the company began rolling out next-day delivery and is eyeing the rollout of in-home delivery by year-end to several markets, through which the company enters customers’ homes to drop off products when customers are not present.

Grocery and CPG expertise
Walmart’s strong focus on grocery and CPG retailing over the years, as opposed to the general merchandise focus at Amazon, has positioned the company well for e-commerce growth, said Laura Kennedy, vice president of the retail, sales and shopper practice at Kantar Consulting.

“I think the key for Walmart is to remember that two-thirds of its sales come from consumables,” she said. “Amazon has by some measures taken over the mantle of being America’s mass retailer, but Walmart really has become a supermarket when it comes to their revenues.”

That plays right into the increasing consumer interest in online grocery ordering, whether for home delivery or click-and-collect service. “It’s still a pretty low percentage of all food and consumable sales that are online, but it’s growing very fast,” Kennedy said. “That allows Walmart to capitalize on where it has expertise, which is food and consumables, and it capitalizes on their stores. Any long-term omnichannel strategy for Walmart really has to find a way to use the stores.”

As e-commerce has grown to become an increasingly large proportion of retail sales in the United States, many brick-and-mortar retailers have struggled to retain the sales volumes necessary to cover the overhead required for having physical locations that have become less and less relevant.

Walmart, however, has put its vast network of stores to good use as hubs for its delivery and click-and-collect operations. “All of these brick-and-mortar retailers that are still around are finding ways to get productivity out of the store asset as part of their omnichannel offer,” Kennedy said. “In Walmart’s case, it’s using the store as the depot for online grocery. That’s always, for me, the headline when it comes to Walmart’s omnichannel strategy.”