Coming off a solid quarter where revenue grew by 2.1% (or $2.5 billion) and comparable-store stores sales in the United States inched up 1.3%, Wal-Mart (NYSE:WMT) CEO Doug McMillon made it clear during the post-earnings release call that its transformation has just begun.
Part of it has been its fast-moving digital overhaul. That led to another strong quarter where domestic e-commerce sales grew by 60%. The CEO noted that "customers are responding to the improvements we're making to deliver a seamless shopping experience that saves them time and money," before laying out more of its ongoing strategy.
What is Wal-Mart doing?
McMillon explained during the second-quarter earnings call that Wal-Mart's core strategy is to make every day easier for busy families. That's a vague goal, but the retailer hopes to accomplish it by further integrating its stores and digital operations. Many of these innovations are already being tested or rolled out including:
- Store staff delivery of Walmart.com orders
- Automated pickup towers in approximately 100 stores across the U.S., "where customers can pick up their orders within a matter of minutes"
- "Easy Reorder" on Walmart.com allowing customers to see in-store and online purchases they have bought most often
In addition, Wal-Mart has created a back-to-school shop on its website that offers supply lists from teachers around the country. Shoppers can find the supplies they need simply by entering their zip code and then checking for their school.
"We have tests going on with digital endless aisle shopping, robotics and image analytics to scan aisles for outs and we're using machine learning to assist our merchants with pricing," he added.
It's not just in-store
While Wal-Mart has been perhaps most vocal about its efforts to integrate the digital and physical shopping experience, it has also been improving its website. McMillon highlighted the company's expanded selection, noting that it now stocks 67 million SKUs.
"Our recent acquisitions, such as Moosejaw, Shoebuy, and Bonobos, further improved our assortment, and have provided critical category expertise in higher-margin categories like shoes and apparel," he said.
He also noted that the company recently had 500 small American businesses pitch their wares for sale online and in stores, with the company pledging to spend an "additional $250 billion in products made, sourced, or grown in the U.S. "
It's about consumers
Wal-Mart has generally used a business model where it has prized pricing and location over service. Competing with digital rivals like Amazon.com (NASDAQ:AMZN) forces it to pivot. It's no longer enough to be convenient and cheap when the online leader offers reliable two-day shipping as well as low prices.
Amazon forces Wal-Mart to focus on the major advantage it has in having a physical store withing 10 miles of approximately 90% of the U.S. That's an edge when it comes to convenience only if Wal-Mart makes it stores more pleasant and maximizes operational efficiency.
The brick-and-mortar chain has decided to be whatever consumers want when it comes to delivery. It's a store, a website, and a hybrid of the two. That does give it some advantages over Amazon and these changes -- even though some likely won't make the long-term cut -- show the company has been willing to focus on consumers while also keeping prices low and finding new ways to be convenient.
While early returns have been good, expect some bumps in the road. The company still has a supply chain largely built to supply stores, not fulfill single online orders. Changing that takes time, as will changing the in-store experience. Long term, however, Wal-Mart seems to have identified what needs to fixed and will make steady progress toward those changes.