What Walmart has learned about omni-channel - the hard way

Stuart Lauchlan Profile picture for user slauchlan February 22, 2016
Walmart has turned in shockingly low sales, but its digital and e-commerce investment is paying off, insist senior execs.

During the 2015 holiday season in the US, Sam’s Club, part of the wider Walmart empire, made an important decision to push many of its seasonal events, such as its Holiday Savings Celebration, online.

This delivered good results, with traffic across the last quarter of the year up 7% year-on-year, conversion rates up 18% and nearly half of orders placed using mobile devices. It also saw a massive 46% rise in Club Pickup sales, where club members order online and collect at the physical store.

It’s a prime example of where omni-channel, digital investment is paying off for Walmart, reckons CEO Doug McMillon, who says:

I feel good about where we're heading. We're improving our stores, adding critical capabilities and deepening our digital relationships with customers as we work to become the first to deliver a seamless shopping experience at scale. We'll save our customers not only money but time, and shopping with us will be simple, convenient and fun.

In the technology and e-commerce space, we continue to innovate with a focus on the customer. We have developed a new platform that we can scale across the business. We have improved our fulfillment capabilities with new fulfillment centers that are helping us get orders to customers' doors faster and more efficiently. And we continue to see growth in store pickup for online orders.

We also expanded online grocery shopping to over 150 locations across more than 20 markets in the U.S. Customers are ordering online and on their phones and then picking up their groceries on our parking lots without ever leaving their cars. Customer satisfaction for those who use our free pickup service is in the high 90s.

It’s been a learning curve for Walmart, he adds:

We are learning some interesting things along the way. We've found that 8:00 p.m. to 9:00 p.m. is one of the most popular times customers order groceries online, usually once the kids go to bed. We also see a healthy number of orders in the middle of the night. These may be parents comforting or feeding infants and ordering more diapers or formula to pick up the next day. While it's been awhile since my kids were that age, I remember those days well. And I absolutely love that we're able to offer convenience and blend into our customers' lives when they need us most.

Global issues

Global e-commerce sales grew 12% in 2015 for Walmart, but it’s not all good news. Outside of the domestic US market, the story isn’t quite as positive, but Neil Ashe,  President & Chief Executive Officer, Global eCommerce and Technology at Walmart, argues that there is a solid foundation upon which to build.

Last month, Walmart announced it was bringing all of its various tech and development teams under a single Walmart Technology banner, essentially an technology company inside a retail company. This is intended to align all of the technologists with how  customers see the firm, says Ashe, as one Walmart:

In a short span, we've built an e-commerce technology company inside of Walmart. We have rolled out a new technology platform [Pangea] and we have dramatically increased our physical distribution network. And, in just the past six months, we've grown to serve over 20 markets with online grocery. During the fourth quarter, we started to get a glimpse into how these capabilities we put into place are starting to come together to deliver the seamless customer experience.

Ashe says there is a simple mission statement around e-commerce within the firm:

E-commerce at Walmart is about bringing together all of the pieces to help customers buy the items they want at Walmart prices, however and wherever they want. Our customers look at us as one Walmart, one easy experience across our app, site and store or club.

He also cites the 2015 holiday season to illustrate his point:

In the US, Walmart.com saw strong sales on the big days from Thanksgiving to Cyber Monday. What was most exciting was how our new capabilities started to deliver seamless shopping for customers. As customers shopped on Walmart.com, our new platform was powering the front and back-end shopping experience for the first time during holiday. Despite the complexity of a complete platform rebuild, Pangaea handled the intense holiday volume.

Customers could order gifts even closer to Christmas this year and they saw our best on-time delivery rates ever, thanks to our new fulfillment centers. While the centers opened just a few months before holiday, they lived up to our targets for efficiency and productivity. They showed that they can scale with our business and combine with our stores, distribution centers and transportation network to deliver speed, efficiency and better experiences for customers.

Customers could also get their online orders the same day in stores, says Ashe, and there’s greater visibility into availability and location of inventory:

One great example was on the morning of Black Friday, when we saw a Smart TV sell out online within 20 minutes. We had another TV from that supplier available in stores, so we dialed up the promotion on Walmart.com and made it available for store pickup. The item quickly sold out in stores. To customers, it was a seamless access to a gift they wanted. It was a great example of the power of combining online with stores in close proximity to customers.

App investment is also paying off, he states, with promotions being targeted at mobile users to encourage adoption. Ashe explains:

We offered early access to the Black Friday circular on the mobile app for the first time, and the app jumped to the number one spot in the Apple App Store that day. Customers also showed that they are now comfortable buying on their phone. This year, more than half of online sales were on a mobile device on Thanksgiving, which was double last year. We saw significant growth in mobile sales for the rest of the peak holiday period. With our app, customers were also able to create wish lists, check-in for store pickup and pick up item locations in stores.

The end of 2105 also saw the introduction of Walmart Pay, an Android and iOS payment offering. Ashe says:

Walmart Pay is the perfect example of how our app gives customers a seamless experience that merges digital and physical to make shopping faster and easier, and it gives customers a reason to form a digital relationship with Walmart. It was also a great example of how our teams aligned to deliver these experiences in just a few months.

The importance of the customer experience is paramount, insists Ashe. He points to online grocery, now available in 20 markets in the US, as a case in point:

We're continuing to see the strong emotional response it triggers with customers and the very personal relationship they're forming with Walmart. Customers are literally jumping out of their cars to rave about it.

One of my recent favorites was a mom with two kids in the back of her car. She told us about how much easier it has made her life because she can shop where and when it's convenient and then drive up and just get her groceries. She placed her order while she was relaxing and watching her kids play. Customers are inviting us into the fabric of their lives. In just a few months, we've dramatically increased online grocery, and look for us to continue expanding this year.

My take

It’s a powerful narrative, undermined somewhat spectacularly by Walmart turning in the worst sales performance since the 1980s. A lot of that can - and was - blamed on the strong dollar, the impact of cost of closing stores and market deceleration in the UK, Chinese and Brazilian markets.

But there’s a rather more cautionary number buried away as well. E-commerce sales slowed for the fifth consecutive quarter, to 8% in Q4. When you compare that to Amazon’s 26% growth for the same period, it tells a different story.

That said, Walmart has set itself in the right direction, albeit starting from the back foot. The key now is to build successfully on the foundations that have been laid. There are around 10 million products you can buy online from walmart.com; that needs to become tens of millions.

And while it’s great that 22 geographic markets can now benefit from online grocery click-and-collect, that needs to be ramped up in short order. We all need to eat. Walmart’s opportunity in online grocery shopping is a rich seam that needs to be mined.

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