The future of Walmart's brick-and-mortar operation

While Walmart hasn’t been forced to close a lot of physical locations like other retailers have, it also has slowed its once torrid pace of openings significantly.

In the second quarter of this year, Walmart opened just one new Supercenter and closed one Neighborhood Market for a total of zero net stores growth. It also remodeled about 150 locations, a trend the company said it expects to continue as it invests in improving the store experience and in technology to drive increased sales rather than additional square footage.

“I don’t foresee them building a lot more stores,” said Laura Kennedy, vice president of the retail, sales and shopper practice at Kantar Consulting. “In 2019, they plan to build fewer than 10 more stores in the entire United States across all of their United States banners. Unless you are a discounter like Dollar General, we do not see many retailers increasing their store footprints going forward.”

Lee Peterson, executive vice president of thought leadership and marketing at consulting firm WD Partners, described the two trends emerging for retail store development going forward as “smaller” and “better.”

“Smaller” reflects the trends toward not only smaller physical stores, but also fewer stores. And “better” reflects the need for more customer-relevant experiences within the actual stores.

Although Walmart relies on its massive Supercenters for the core of its retail operations, Peterson said he thinks the company could be looking at the opportunity to build smaller stores that focus on the “showrooming” concept, where some items would be displayed for customers to inspect, but purchases would be made digitally, either for home delivery or delivery to the store for pickup.

He cited Walmart’s 2017 acquisition of apparel retailer Bonobos as a clue to Walmart’s thinking. “They bought it to help them figure out how to do a showroom store,” Peterson said.

The ongoing growth of e-commerce will continue to reduce the need for massive physical stores, he said. And the experience within the remaining stores will need to improve, with better customer service and more attractive physical merchandising to generate excitement around product and encourage customer engagement. “Physical retail in the future is going to be half fulfillment center, half playground,” Peterson said. “Gone are the days of ‘stack it high and let it fly,’ that’s for sure.”