Author(s): Peter Bryer
On Wednesday, Walmart executives presented the retailer's strategy to grow the company in the coming years. The three-year growth plan centres on creating a "seamless shopping experience", and will require significant investments in personnel and training as well as store refurbishments and a digital build-out. The company said that the increased expenditure would negatively affect earnings in 2016 by 6 percent to 12 percent, and lowered its sales projections from slight growth to flat. The news drove the company's share price down 10 percent, to a level not seen in more than a decade.
It wasn't mentioned specifically in the presentation, but the new strategy is a response to Amazon. Walmart, with a long legacy of large stores, is aware of the virtual trends, and is now looking to use the concept of clicks-to-bricks given the physical advantages it has over e-commerce sites. The company said that 70 percent of Americans now live within five miles of a Walmart store, making it convenient to pop in and out to grab a package that's already bought and paid for.
Doug McMillon, Walmart's CEO, emphasized the potential of in-store pick-up as a way to save its shoppers time as well as shipping costs or Amazon Prime membership fees.
It's tempting to find parallels in other major makeovers and competitive responses. Walmart's multimodal shopping proposal, for example, sounds similar to Microsoft's Continuum, described by the software and hardware maker as a "new, adaptive user experience". Like Microsoft, Walmart is a market leader facing a series of disruptions, be that the need to provide new "form factors" or to serve digital-native generations.
It's too early to say if Walmart's adaptive user experience will be enough to change the company's image and fortune. The retail giant isn't new to e-commerce, and has reported some successful numbers. The company says its e-commerce sales have been growing up to 30 percent annually in recent years and that its mobile shopping app has 24 million active users, though its digital unit is losing money.
The rise of virtual services has been known to hit some retailers very hard. Extreme cases from the past, such as that of Blockbuster Video, provide lessons for others. Changes happen faster in the world of content, but constant connectivity is changing shopping habits for solid stuff as well. Walmart is known for competitive prices, and its scale has enabled it to pressure supplier margins. But it's unlikely that Walmart envisioned business models in which profit margins don't appear to matter much at all.
Walmart and other store-front retailers around the globe are facing a reality of virtual shopping. This isn't a fad. Shopping in the digital realm has become about usability, and Walmart hopes the trend will include a real-world crossover.