Merchandising to the Millennial - Walmart's CX gambit to close the e-commerce gap

Stuart Lauchlan Profile picture for user slauchlan March 13, 2016
Steve Bratspies, Chief Merchandising Officer at Walmart, sees a lot opportunity ahead in e-commerce and in-store retail, but chasing the right customers is going to be key.

Steve Bratspies

We noted last month that Walmart isn’t winning the battle of retail e-commerce.

The firm reported e-commerce growth of 8% in its most recent quarter, compared with 22% in last year's fourth quarter and 30% two years ago. In contrast, rival retail giant Target saw its e-commerce business grow by 34% in the same quarter.

There’s clearly a way to go here in order for Walmart to catch-up with its competitor. On the frontline of that battle is Steve Bratspies, Chief Merchandising Officer at Walmart, five months in the role and now consciously aware of the challenge that the firm faces, as he told the Raymond James' 37th Annual Institutional Investors Conference.

Bratspies pitch began with the usual ‘rapidly evolving/changing customer needs’ that is common (mandatory?) to every retail omni-channel discussion or presentation these days:

The customer today is changing dramatically. Who they are, what they want, how they shop, where they shop, when they shop, lots of different changes that are going on all at one time. Seventy-nine million of them are millennials, and what’s great is they are moving into prime spending years. They started a little slower in household formation, [but] they are moving faster and are in that time right now.

Forty-eight percent of them are multi-cultural, which is a dramatic shift and dramatic change in the business. They are the most value-driven generation that we’ve seen in my life time, slightly ahead of Gen X but they are very, very focused to value-to-lines for Walmart. They also have a stronger infinity for Walmart than any of the generations.

To back that up, Bratspies said:

Sixty-six of Millennials have shopped at Walmart store in the past month. They are more likely than the total population to shop at a Walmart store. So it’s a very important customer to us, the one that aligns very well with our business.

They also have the omni-channel demands that Walmart needs to meet, he added:

[They are] busy customers that demand a new level of convenience, new expectations, really what they want is, they want to see more shopping experience. They want to shop Walmart, they don’t care if it’s online, they don’t care if it’s mobile, they don’t care if it’s in the store, they want it to be a seamless shopping experience for them and that’s what we are working on delivering.

What Walmart really needs to build on is the hybrid customer, said Bratspies, the ones with the highest margins:

Our best shoppers are the ones who shop with us not only in stores, but they shop online. If you think about that intersection of physical and digital, we talk a lot about as a company, plays out in how customer spend. They spend more [and] and they shop more frequently when they shop all channels.

Walmart has some hard numbers to back this up:

A Walmart store-only customer spends on average about $1,400 a year. An online customer only spends a couple of hundred dollars. The customer who shops both online and in the store spends about $2,500 with us on average in a year. So that customer in the middle of the intersection of those two circles is incredibly valuable for us and as they continue to build that behavior, we are going to continue to take advantage of it.

Focus on CX

What that means, of course, is a necessary focus on improved customer experience. Bratspies acknowledges this:

How do we think about shopping in the future and how do we change our business as we go forward? Nearly 90% of the US population lives within 10 miles of  a Walmart store. So, we have access basically to the entire US population just based on our current layout and our stores. So, we are going to continue to provide more access and more conveyance to those customers in three key ways.

The first priority is with online ordering, pick-up in store. Bratspies said:

We are really making some good meaningful progress here. Customers keep telling us how much they liked it. It’s been a real priority for us over the last year. The business spiked dramatically during the holiday time, lots of huge volume. That volume has continued on. Customers are excited about it. It provides instant easier access to the great assortment that we have in our store without them having to go do a lot of work.

Online grocery is the next big focal point:

Customers love the ability to shop online, order the groceries and come to a store and never even get out of their car. Open their trunk, we will put the groceries in their trunk for them and move right on. These customers represent a larger basket and many of them are new incremental customers to Walmart. Customer satisfaction is in the 90s of this business. Customers really like it. We’ve expanded it to over 20 markets already and we will do another 20 markets as we rollout this year and continue to build this business.

Finally there’s the Walmart App:

It’s one of the top three apps in retail. We’ve got tens of millions of customers who use it and it’s all about continuing to add new tools, new capabilities to the app. It’s pretty helpful today if you want to go shop a super-center to find the product and the aisle locator where you want that product. But recently, we added to it and we introduced Walmart Pay, which is an example of how this app gives customers a seamless experience between digital and physical.

It just takes the digital world and brings it to the store and makes the store that much more convenient that much simpler. It’s a really, really cool application. It’s unbelievably simple and we will be rolling that out through the rest of the country through the first half of this year.

Overall, Bratspies is aware of the challenge/opportunity facing Walmart and confident the firm can deliver:

Going back to that 90% within 10 miles, we can do what nobody else can really do effectively on a big scale and that’s marry e-commerce with a physical location and that’s what we are really focused on rolling out over the next couple years.

My take

A big job ahead.

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