US Insights

6 Takeaways From Walmart's Investor Day

Tim Campbell

Senior Analyst

Retail 10.17.2018 / 15:00

WalmartStoreFront

Walmart suggested that its current investment phase would never truly be over

“Necessary boldness” was the unspoken theme that emerged during Walmart’s 2018 Investor Day meeting. Company executives outlined investments in numerous projects, yet also conceded these changes were necessary to keep up with an ever more demanding shopper and competitive landscape. In a telling moment, Walmart suggested that its current investment phase would never truly be over, as profits from older, more realized investments would be recycled to continually fund new rounds of innovation in store, online, and everywhere in between. Walmart is thus both upbeat and a little uncertain -- upbeat because of its strong performance and outlook, and uncertain because it can’t know exactly how its many initiatives will pan out in the future. Yet the company’s leadership knows that it must continue to innovate on behalf of its customer or risk losing its market leadership.

Nevertheless, Walmart has good reason to feel upbeat. It confirmed expectations to have over 2,000 Online Grocery Pickup locations and 700 pickup tower locations by the end of the year. Guidance for FY 2019 was revised upward with comps for both Walmart US and Sam’s Club now expected to be around 3%. Walmart has leveraged expenses while still investing in its shopping experience. Customer experience scores are improving both online and in store. eCommerce comps for FY 2020 are projected to grow at 35% and total capital expenditures for that same year are planned at $11 billion with the lion’s share going to eCommerce, technology, and store remodels.

Here are our key takeaways from the day’s presentations.

Walmart is a technology company.

Walmart has made it clear it is serious about developing and scaling new technologies to improve virtually every part of its business. Advancements in AI, robotics, proprietary algorithms, and the user interface are informing improvements in employee productivity, omnichannel fulfillment, assortment relevance, and conversation-based eCommerce. Entire Investor Day presentations this year could almost be interpreted as a laundry list of one new technology initiative after another. Some of Walmart’s riskier bets will enable new eCommerce and in-store platforms while others, such as the Fast Unloader, Autobot, and Bossanova robots, have already yielded cost savings for existing operations. Improving eCommerce profitability is still an important and outstanding issue, though Walmart is optimistic about its current eCommerce trajectory.

Same-day delivery is an important part of the company’s future.

In addition to mastering the fundamentals of eCommerce, Walmart wants to go on the offense. The company forecasts that only about 10% of its FY 2020 capital expenditures will be spent on new store openings and that its existing store footprint must bear the brunt of much of the company’s future growth. One way that Walmart US plans to improve the utility of its existing Supercenters is to start using them for same-day delivery, an option Marc Lore believes shoppers will soon expect to be the default national standard. Converting Walmart’s store base into same-day fulfillment centers (in addition to also being Supercenters) is a low-cost means of maximizing shopper convenience that maintains profitability.

Investing in associates is crucial to the business.

Every on-stage presenter during Walmart’s Investor Day referenced how the company was investing in its associates. The list of improvements is significant. Starting wages have been raised to $11 an hour; key departments have increased staff and training levels; the company now provides near-free college tuition for relevant degrees; and associates now have access to an army of apps with which to tackle the operational problems of in-store Pickup, inventory management, and returns, among many others functions. External pressure had an acknowledged role in hastening some of these investments in associates. Importantly, Walmart is seeing returns in the form of cost savings and increased productivity. Continued investments are likely.

Walmart plans to offer something for everyone.

As Doug McMillon and Janey Whiteside stated, Walmart’s future growth depends on being able to retain core customers while drawing new shopper demographics into the fold. To this end, developing different eCommerce platforms that prioritize convenience, value, and quality can help appeal to a diverse variety of shoppers. In addition, acquisitions such as ModCloth, Jet, and Moosejaw extend Walmart’s reach without risking the widespread appeal of its Supercenters. Walmart’s many acquisitions can both help propel its margins and lift its relevance with new shoppers. These retailers’ unique offerings can further help insulate Walmart from its competition.

Sam’s Club is rebounding faster than expected.

John Furner’s efforts to adhere more strictly to the club model are paying off. Buyer tenure and expertise are improving and investments in fresh and private label quality have yielded strong results with Sam’s Club’s upscale target member. In the wake of 63 closures earlier this year, Sam’s Club has recouped more sales volume than expected as many affected members simply switched to shopping Sam’s other locations. As a result, the club is on track to have almost as many members as it had before the closures by year end. Like the rest of Walmart, Sam’s Club is investing in people and technology, though it did not give more detail about its new corporate office and digitally enabled, supermarket-style format in Dallas.

Walmart International is doubling down on key growth markets and platforms.

After shedding majority stakes in its Brazil and U.K. businesses and rebannering an array of stores in South America, Walmart international is ready to refocus its capital expenditures in high-opportunity markets such as China, Mexico, Canada, and Flipkart in India. Judith McKenna is intent on leveraging Flipkart’s deep knowledge of the nuanced Indian market as well as its diverse array of services and platforms such as PhonePe (a mobile payment service), ekart (a logistics network), and Myntra (a fashion specialty site) that extend far beyond a basic eCommerce marketplace. We expect to see learnings from Flipkart’s technological expertise make their way to other markets over time.

If you are interested in more Walmart insights, join us in Bentonville, Ark., on Nov. 14-15 for our Walmart and Sam’s Club workshop. There, you’ll hear our full analysis of the company’s brick-and-mortar and online initiatives, its changing shoppers, its projected performance, and how you can align for its future.

Source: Kantar Consulting

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