As Walmart’s business model evolves, a focus on omnichannel strategy is the thread tying together its e-commerce business, fulfillment services, advertising and more, Walmart President and CEO Doug McMillon said at Morgan Stanley‘s Global Consumer & Retail Conference in December.
High-tech supply chain
Doug McMillon said his confidence in Walmart growing its top-and bottom-line growth is partly driven by the chance to improve productivity through automation, particularly with its supply chain.
“There’s more in front of us to do with the supply chain in particular and we’re very excited about automation.” Doug McMillon said.
He continued: “Specifically, what we’re seeing is — after a number of years of work — there are opportunities to use automated storage and retrieval systems in ambient distribution centers, food distribution centers, e-commerce fulfillment centers and eventually market fulfillment centers next to stores.”
McMillon said Walmart is working with four different partners on the four types of fulfillment centers. As Walmart has layered on those different types of fulfillment centers, starting with ambient and then adding food and e-commerce with different operating systems, the retailer has worked to sync them together and optimize inventory. Data and algorithm improvements and robotics with its supply chain are allowing for better demand forecasting, allowing for new ways to reduce costs, McMillon said.
This fall, the retailer bought MFC developer Alert Innovation, following work on a multi-year pilot of the company’s robotic grocery order-fulfillment technology, known as Alphabot. Walmart Chief Financial Officer John David Rainey told investors during its third-quarter earnings call that the retailer is expanding its buildout of MFCs that are attached to or inside its supercenters.
Evolving business model
The multi-year investment in revamping its supply chain is happening in tandem with changes to the retailer’s business model to focus more on omnichannel strategy, McMillon said.
Walmart has long focused on its stores. But as the retailer built up its e-commerce business, in-store and online shopping felt siloed as recently as last year, McMillon said. Through organizational structure changes, the retailer has achieved a more seamless shopping experience by doing away with channels, McMillon said.
Ultimately, Walmart can “see all the pieces” of the technologies it’s leveraging adding up to a profitable model, McMillon said.
So far, the work appears to be paying off: For its U.S. business, Walmart recorded e-commerce sales growth of 16% and 12% in its third and second quarters of fiscal year 2023, respectively — a jump from the 1% increase it recorded in its first quarter.