Walmart’s Best Defense Is A Stronger Offense

In nominating HomeWorld’s 2017 Retailer of the Year (see the May 22 issue) after a shaky end to 2016 and beginning to this year for many operators, one particularly intriguing example of resilience was hard to ignore: Walmart U.S.

Unlikely Underdog

It seems odd to cast Walmart in an underdog’s role. It once seemed indomitable as a disruptive force that barreled over so many longstanding stores and forced myriad consumer product industries into radical overhauls of manufacturing, marketing and distribution capabilities.

But even the mighty Walmart proved it wasn’t immune from misjudgments often made under the blanket of such dominance. And, despite the operational precision that so determinedly drove its growth, perhaps it had reached a massive scale ill-suited for swift internal adjustment and ill-prepared for Amazon’s assault on brick-and-mortar convention.

The solution? Walmart acquired it, as it has so often to speed up assimilation.

With other traditional retailers buckling against the weight of Amazon, Walmart U.S. is muscling up again under CEO Doug McMillon. It is riding the positive momentum of stronger-than-expected store sales supported by an e-commerce platform taking off after its mid-2016 acquisition of Jet.com.

Jet fuels Walmart U.S. with high-octane digital talent and capabilities, spearheaded by Marc Lore, Jet.com founder and the architect of Walmart’s reimagined U.S. e-commerce business.

Jet Takes Flight

New, upscale merchandise categories served up by Jet.com and the subsequent acquisitions of such niche brands as MooseJaw and ModCloth shuttle in a growing base of next-generation shoppers poised to become a major factor in how Walmart positions its stores as key pivot points for long-term physical and digital growth.

Walmart.com’s adaptation of Jet.com’s buy-more-pay-less Smart Cart e-commerce pricing model is already showing dividends. Expected to be even more advantageous is the new discount pricing incentive for in-store pickups of online orders, a program that leverages how much cheaper it is for Walmart to ships goods to its stores than the “last mile” to consumer doorsteps.

Catching Up

With 90% of the U.S. population within 10 miles of a Walmart store, the company’s 4,700 stores fed by a fleet of 6,700 trucks serve up a convenient mass retail/e-commerce fulfillment hybrid that no competitor can match. Amazon’s apparent escalation of its intent to acquire established big-box retail space is no coincidence.

The $3.3 billion Walmart paid for a fledgling, far-from-profitable Jet.com— despite Lore’s talent and reputation— left many so-called experts in such valuations scratching their heads. Don’t be surprised if it turns into Walmart’s biggest bargain ever.

Lore recently said Walmart is still playing defense when it comes to Amazon, with plenty of catching up to do. True, but it is beginning to look like the best defense for this unlikely underdog is a stronger offense.