Bloomberg has a story about how, while “Walmart’s U.S. online business has grown, becoming a viable second fiddle to Amazon after the division’s revenue expanded 40% last year,” it continues be be mired in red ink, “with losses expected this year of about $1.7 billion, up from $1.4 billion last year, according to Morgan Stanley estimates.”
At the same time, Walmart CEO Doug McMillon recently told a technology conference about the changes the retailer is making to adapt to new consumer realities, MarketWatch reports.
“Obviously bricks-and-mortar stores are one thing. E-commerce in some ways started out feeling like an independent channel or an independent business,” McMillon said. “Yeah, we fell behind and have been playing catch up and have been doing a number of things to accelerate that progress and learning along the way and getting better as it relates to the customer experience … today we’re very focused on creating a seamless experience for the Walmart brand, bringing the stores and e-commerce together.
“Stores have some advantages and we’re trying to make the most of those. And then catch up in e-commerce and get better with the customer experience and put them together in a way that’s unique and customers will find not only saves them money and time, but creates the optimal experience.”
MarketWatch writes that “one of the ways that McMillon demonstrated the differences between Walmart and Amazon are its bricks-and-mortar locations and supply chain. Walmart has more than 100 distribution and fulfillment centers, but, McMillon said, they serve various functions. There are about 20 ‘e-commerce-dedicated’ fulfillment centers.
“According to the Amazon website, it has more than 75 fulfillment centers.
“But McMillon said Walmart stores operate as ‘dual store and pick centers,’ particularly for perishable items, like food, which have to be sold in a short amount of time or discarded. Walmart has beefed up its options for getting items into customers’ hands, with in-store pickup gaining popularity.”
Still, Walmart has to find ways to stanch the tide of red ink. Bloomberg writes that “to help streamline things, Walmart brought Jet fully under its umbrella last month. It has also encouraged consumers to pick up their online orders at the store, saving Walmart money on home-delivery costs. More recently, it has rolled out a next-day delivery service that’s now in 28 states, according to data tracker Marketplace Pulse,” which Marc Lore, who run’s Walmart online business in the US, “claims is less expensive to operate as orders typically come in one box from a nearby warehouse.”
Which also explains why, as Bloomberg reports, Walmart “is conducting its second U.S. restructuring in as many months to better integrate its money-losing online business with its 4,700 physical stores.”
According to an internal memo obtained by Bloomberg, Walmart “will merge the logistics and finance teams for its e-commerce unit and stores … The company’s merchandising operation, which makes critical decisions on what products to carry, when to carry them and at what price, will maintain separate teams ‘to enable focus and speed’.”
The story says that “the decision to keep merchandising separate -- for now at least -- illustrates the primacy of Walmart’s in-store merchants, who for decades have wielded vast power inside Walmart’s sprawling corporate bureaucracy. It also shows the increasing complexity of managing an online business that sells about 75 million products, many from small third-party sellers, and now promises next-day delivery in many states to battle rival Amazon.”
Meanwhile, according to a story from Vox, losses have “forced Lore to reevaluate some of his division’s non-core, money-losing businesses. As a result, Walmart will likely sell at least one of the three digital fashion brands the company has bought under Lore.”
Since Lore joined Walmart, the company has spent hundreds of millions of dollars to acquire several brands that would seem to appeal to non-core Walmart shoppers, such as Bonobos, Moosejaw, ModCloth and Eloquii. The theory was that spreading its bets around would give Walmart the ability to expand its appeal and, potentially, its economic foundation. However, profitability has been difficult to achieve, and Walmart has been reported to be considering a sale of one or more of the brands.
At the same time, Walmart CEO Doug McMillon recently told a technology conference about the changes the retailer is making to adapt to new consumer realities, MarketWatch reports.
“Obviously bricks-and-mortar stores are one thing. E-commerce in some ways started out feeling like an independent channel or an independent business,” McMillon said. “Yeah, we fell behind and have been playing catch up and have been doing a number of things to accelerate that progress and learning along the way and getting better as it relates to the customer experience … today we’re very focused on creating a seamless experience for the Walmart brand, bringing the stores and e-commerce together.
“Stores have some advantages and we’re trying to make the most of those. And then catch up in e-commerce and get better with the customer experience and put them together in a way that’s unique and customers will find not only saves them money and time, but creates the optimal experience.”
MarketWatch writes that “one of the ways that McMillon demonstrated the differences between Walmart and Amazon are its bricks-and-mortar locations and supply chain. Walmart has more than 100 distribution and fulfillment centers, but, McMillon said, they serve various functions. There are about 20 ‘e-commerce-dedicated’ fulfillment centers.
“According to the Amazon website, it has more than 75 fulfillment centers.
“But McMillon said Walmart stores operate as ‘dual store and pick centers,’ particularly for perishable items, like food, which have to be sold in a short amount of time or discarded. Walmart has beefed up its options for getting items into customers’ hands, with in-store pickup gaining popularity.”
Still, Walmart has to find ways to stanch the tide of red ink. Bloomberg writes that “to help streamline things, Walmart brought Jet fully under its umbrella last month. It has also encouraged consumers to pick up their online orders at the store, saving Walmart money on home-delivery costs. More recently, it has rolled out a next-day delivery service that’s now in 28 states, according to data tracker Marketplace Pulse,” which Marc Lore, who run’s Walmart online business in the US, “claims is less expensive to operate as orders typically come in one box from a nearby warehouse.”
Which also explains why, as Bloomberg reports, Walmart “is conducting its second U.S. restructuring in as many months to better integrate its money-losing online business with its 4,700 physical stores.”
According to an internal memo obtained by Bloomberg, Walmart “will merge the logistics and finance teams for its e-commerce unit and stores … The company’s merchandising operation, which makes critical decisions on what products to carry, when to carry them and at what price, will maintain separate teams ‘to enable focus and speed’.”
The story says that “the decision to keep merchandising separate -- for now at least -- illustrates the primacy of Walmart’s in-store merchants, who for decades have wielded vast power inside Walmart’s sprawling corporate bureaucracy. It also shows the increasing complexity of managing an online business that sells about 75 million products, many from small third-party sellers, and now promises next-day delivery in many states to battle rival Amazon.”
Meanwhile, according to a story from Vox, losses have “forced Lore to reevaluate some of his division’s non-core, money-losing businesses. As a result, Walmart will likely sell at least one of the three digital fashion brands the company has bought under Lore.”
Since Lore joined Walmart, the company has spent hundreds of millions of dollars to acquire several brands that would seem to appeal to non-core Walmart shoppers, such as Bonobos, Moosejaw, ModCloth and Eloquii. The theory was that spreading its bets around would give Walmart the ability to expand its appeal and, potentially, its economic foundation. However, profitability has been difficult to achieve, and Walmart has been reported to be considering a sale of one or more of the brands.
- KC's View:
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Doug McMillon has been very clear that doing business these days requires the willingness to make mistakes and have a greater degree of flexibility than in the past. I don’t see the Bonobos-type acquisitions as anything more than Walmart being willing to try things and, if they don’t work out, moving on. This isn’t a bug in the system … it is a feature.
I guess my only concern about these organizational changes is that, bottom line, they are being done for reasons of efficiency, not effectiveness. But it seems to me that Walmart is trying to make the most of its advantages and compensate for its weaknesses. It takes a certain kind of gumption to simultaneously concede that you are playing catch-up with your biggest competitor and bet the business on a new way of doing things.
