Source: Walmart
Has the pandemic transformed Walmart into an unstoppable force?
Walmart has long been one of the retailers noted for performing at a high level when facing down natural disasters and economic tumult. The same has remained true in recent months as the coronavirus pandemic has in some way disrupted the professional and personal lives of virtually every American.
The retailer posted a 10 percent gain in U.S. same-store sales during its first fiscal quarter as consumers loaded up on food, consumables, health and wellness products and some general merchandise categories. CNBC reports that Walmart’s comp results were nearly three percent above Wall Street expectations.
Walmart also benefited from a 74 percent jump in online sales during the quarter as its grocery pickup and delivery services were in high demand. The retailer’s performance during the quarter was double its results for the same period in 2019.
“More than ever, the news this quarter is our amazing associates,” said Walmart president and CEO Doug McMillon. “They are rising to the challenge to serve our customers and our communities. I’m proud of how they’re adapting and performing. Our omnichannel strategy, enabling customers to shop in seamless, flexible ways, is built for serving the needs of customers during this crisis and in the future.”
Last month, Walmart sought to build on its omnichannel advantage with the announced launch of Express Delivery, whereby customers pay $10 to receive groceries, general merchandise, electronics and toys category purchases within two hours. The retailer is expanding the service, which began as a 100-store pilot last month, to 2,000 stores.
Walmart, which had been offering a senior shopping hour in its stores since late March, added a daily pickup hour in April so older customers, first responders and others at-risk from COVID-19 can get their grocery orders.
In some under-the-radar news, Walmart announced that it was discontinuing Jet.com. The company pointed to the strength of walmart.com for the decision while crediting the Jet acquisition as being “critical to accelerating” its omnichannel strategy.
Walmart also said it was discontinuing earnings guidance going forward in light of business uncertainties created by the coronavirus pandemic.
- Walmart Releases Q1 FY21 Earnings – Walmart
- What has made Walmart a shutdown star? – RetailWire
- Walmart earnings soar as e-commerce sales double, shoppers flock to stores – CNBC
- Will Walmart’s customers pay $10 more to get deliveries in two hours? – RetailWire
- Will Walmart’s daily pickup hour for seniors cause operational challenges? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Are you surprised at the size of Walmart’s sales increase during its first quarter? Do you think this type of year-over-year growth is likely to become the norm for Walmart while the pandemic continues and perhaps even beyond?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Ben Ball
Senior Vice President, Dechert-Hampe (retired)
With governments closing almost all of your competitors that are left, after you’ve made most consumers have to come to you because of destroyed local alternatives, plus having the resources to offer online, BOPIS, etc., and having groceries so you can be seen as essential during the pandemic, how couldn’t you have an amazing quarter? An amazing playbook.
A playbook driven as much or more by good fortune and government imposed conditions than their own doing, wouldn’t you say?
Well let’s not forget the solid execution that went into this “fortunate” event — including hiring a massive number of people and flowing a lot more product through to the stores during the mad scramble of broken supply chains. A 10 percent increase at Walmart’s volume is like adding another entire retail chain all within a month.
Agreed Peter! You can only take advantage of an opportunity if you are already prepared to do so.
Mega stores such as Walmart, Target and Costco that offer groceries plus other items such as apparel and home goods prospered during the pandemic. Walmart had been working on all the right things during the past year (improved online and omni-channel capabilities, curbside pickup, home delivery and express delivery) and they were as ready as any retailer for the pandemic. Their first quarter sales increase is not surprising and we should expect to see positive results from Target and Costco. While the new customers these stores attracted during the pandemic and increased loyalty from current customers that appreciate the value of a one-stop shopping experience will have a lasting impact on sales, the impact will soften as other “non-essential” retail stores begin to open.
Walmart has the scale and agility to capitalize on the opportunity. Besides essentials and food, Walmart and Target are the only go-to places for all non-essentials that were served by Kohl’s, J.C. Penney, indie retailers, etc.
One cannot fault Walmart for taking advantage of the situation but, the fact is, a good portion of the growth in non-essentials is at the expense of other retailers. The after effects will also be there as most of the retailers take time to find their footing again. Some customers will have permanently moved to Walmart.
I agree in general as usual, Suresh. But why all the sadness for Walmart’s share gains? Aren’t other retailers equally responsible for competing? If Walmart had committed as many predatory practices as the business press implies, we would have more Walmart CEOs in prison than Illinois governors!
🙂 Aah, the governors of Illinois.
Of course Walmart responded well and executed well. And they did so responsibly too, IMO. It is less about angst with the success of Walmart, but more about how it had to come at the expense of other retailers – big, small and local.
You are correct. All these governments who deemed retailers “essential” or “non essential” based on if they had food or not really handed a gift to Walmart. I have said it before, why was it fair Walmart could keep selling clothes but Kohl’s was forced to be closed (doesn’t the candy rack at Kohl’s count as food?).
But Walmart rose to the opportunity. They kept their stores (reasonably) well stocked despite the huge bump in volume. Customers were very happy to be able to get what they needed from Walmart. Walmart kept its pricing competitive (my local still has Eggs at .90 a dozen when many grocery stores raised the price of their eggs close to $3 a dozen). You have to hand it to them, they were handed a huge gift by these governments closing down most of their competitors, but they rose to the occasion and took care of the volume.
I don’t think it was fair to the other businesses, but that is out of my control.
I’m actually surprised that the gain wasn’t even bigger, but still congrats to Walmart. More illuminating is the fact that they have suspended guidance. When the competition opens back up and unemployment is at catastrophic levels, “business uncertainties” is the gentle way of expressing it.
No surprise at all – in fact, if they didn’t post this type of results, then I would be surprised. While a footnote, the jet.com shutdown continues to show how Walmart made strategic acquisitions to grow their e-commerce business exponentially then wound down those operations. I would not be surprised if Bonobos is divested next.
This was not an overnight phenomenon. Walmart already made the necessary and crucial investments in technology and innovation. The big-box giant essentially leveraged what they are calling “digital excellence” and has capitalized on the moment, by transforming the customer experience through innovation and utilizing the unique store, grocery, and most importantly their people assets.
Walmart was already well-positioned, with the right unified commerce operating model, to meet the needs of its customers across both physical and digital shopping channels. They have recently invested $10 billion into their digital transformation initiatives and into positioning innovative technology solutions to mitigate the last mile, and remain an agile, flexible, scalable company that’s able to dominate the market.
No surprise at all – when government-imposed conditions turn you into the only game in town, yes, you’re going to have amazing uplift in both online and in-store sales. What is really impressive is Walmart’s ability to handle this surge without issues. Whereas Amazon has struggled in many cases to fulfill online orders, Walmart doesn’t seem to have missed a beat. It is an interesting side note, worth its own discussion, that they are finally putting an end to jet.com, showing us they no longer need it to drive online sales. Perhaps the most telling bit of information is the removal of guidance for the year. Despite this quarterly surge, even the mighty Walmart is uncertain about the rest of the year!
Walmart was in the right place at the right time and was capable of taking advantage of the opportunity like no other retailer could. And good for them!
But it is a blip. We will see the numbers fall back to more realistic and historical trends post-pandemic. The gains that will not fall back are the gains that www.walmart.com has made as many new customers experienced the site and will remain with it.
Walmart’s remarkable Q1 sales increase makes sense for consumer and competitive reasons.
Consumers’ average transaction value rose as they bought an abundance of essentials to minimize their shopping frequency. After a 14-day quarantine, our family spent $700 Canadian ($500 U.S.) in a single Walmart visit.
Walmart also faced less competition, as only grocery and pharmacy channels stayed open throughout the pandemic. Meanwhile, smaller rivals across categories are becoming insolvent due to high overhead and minimal foot traffic.
Over the longer term, such huge year-over-year growth rates likely aren’t sustainable. Aggressive competition from Amazon, dollar store chains, discounters and grocers will try to erode Walmart’s impressive early gains.
Yet Walmart will prosper from soaring global demand for affordable products. Job losses, economic uncertainty and the pandemic’s ambiguous duration have made Walmart’s low cost leadership magnetic for value shoppers.
I was surprised at how good the company’s in-stock position was compared to both regional and mammoth competitors (Amazon). And so hell froze over and Walmart became my first choice when I ordered merchandise, not just in grocery, but other categories too.
I like its treatment of its employees, I like its in-stock position, I like the honesty. Good job and they’ve won me over.
Walmart’s sales increase was to be expected. It’s the biggest grocery retailer by some margin and has one of the best store networks of any retailer. As such, more customers turned to it during the crisis. What is revealing is how fast online sales rose. It underlines the change in consumer habits and shows that all the investments Walmart has put into e-commerce are paying dividends. Will Walmart emerge from this stronger? Yes, but it can’t rest: other value players are growing, Kroger is investing in online, and Amazon still has big ambitions in grocery. Walmart has to keep moving to retain its top spot!
What I see here is Walmart is executing amazingly well on online grocery via any option you want — pick up at store or ship to home. Their product mix is great and their logistics are efficient at delivering to you (in a lot of separate packages).
Kroger’s online ship to home program is a complete joke, I have tried to order so many things from it and it is out of stock on everything I have tried to order for the “ship to home” option — what few items it even carries.
Amazon seems to have a lot of big words on grocery but at the end of the day, it has not amounted to much more than a lot of scare tactics to competitors. I have tried to go to Amazon to order everything I’ve ordered from Walmart and Amazon either does not have any of what I have ordered from Walmart in the grocery/home/drug/pet categories, or the prices were way way out of range. I have a 5% back on one of my credit cards this quarter at Amazon so I was expecting to purchase there, assuming same prices as Walmart. But it was not the case at all.
Amazon has not done very well during this pandemic in my opinion on having items in stock, pricing, or fulfillment times and this will cost them. Walmart, on the other hand, seems to have really stepped up its game and executed.
Walmart was born of heartland core values and a dedicated, level-headed leader that instilled a focused, service oriented culture. It has done a better job of sticking to its core positioning than any chain with that much history. What goes less noticed is that one of those core cultural values “Mr. Sam” instilled was the willingness to try new things. Small experiments usually (“risk small — lose small”) but with winners pushed aggressively and effectively. I wish I could recall the attribution for this quote, but a leader we interviewed about innovation said (paraphrased) “Innovation is the realization of the value in an idea through execution.” Walmart excels at that and to me that is their core competency.
All things to all people all the time, wow. Decades of success, failure, success has led this behemoth to a new level of mass retail. Hats off to them for staying relevant and standing up to the 900-pound gorilla. Impressive decade and more to come.
They were fortunate and in a great position and, given that, they had a lot to lose. However Walmart rose to the occasion and executed! I believe they have now even further enshrined themselves in the consumer’s mind as the go-to store for a physical experience — and on top of that, they have great online AND BOPIS, too! You have to congratulate their hard work. (I must say the same, with a little less impact, about Target. And really the other large grocers did a fantastic job as well, it is just that Walmart offers customers almost everything!)
It shouldn’t be a surprise for any retailer in the grocery space that their sales are up in Q1. It’s not a validation of their strategy, but it’s not an invalidation of their strategy either. It’s a pandemic.
Walmart has been on a path of innovation for years and they are especially well positioned to not just post gains while the pandemic continues, but to hold on to a good portion of it from the technology and experience they’ve created (and more importantly, continue to create). Some retailers in the grocery space may be seeing gains now only to understand they’ve lost many of their core customers since habits and behaviors have changed.
Short answer is yes. Walmart has been the place where I can get what I need during the pandemic. And at prices no more than before the pandemic.
I have wanted to order things like disinfecting wipes, rubbing alcohol, hand sanitizer. You know, those items that the shelves are empty of unless you go in early in the morning and even then who knows if it will be there. Well, I have successfully ordered all of those things from Walmart in the past month, multiple times (they limit to 1 per order). It takes a little patience and some refreshing (they seem to release a few or maybe a few hundred who knows units of inventory every hour) and being quick to hit the checkout button.
I have tried to order these things from Target, Amazon, and Kroger multiple times but no luck at all; completely useless and always out of stock or in the case of Amazon, with some very long arrival window and a highly inflated price.
Walmart also has an excellent mix of staple grocery items on its website. If you want coffee, tea, cooking/baking mixes, their selection cannot be beat. Many items come in 2, 3, 4, etc. packs and the prices are very good (a little lower than in-store).
Oh, and everything I have ordered from Walmart has arrived within a few days. Compare this to Amazon where some orders I made in April still have not come or Target who routinely cancels orders due to inability to fulfill. Walmart’s logistics system is shining now. I have no clue how they are making a profit with all these shipments of small dollar/small value items, but they are taking care of the customer.
Walmart’s success stems from a structure focused on 1.) consumer needs and 2.) an omnichannel strategy.
Meeting customer needs has always been top of mind for Walmart and this, coupled with an unmatched cost position, has served them well. Take Express Delivery — it met a need, took off, and is now a growing, in-demand service.
The omnichannel focus adds to this by providing the convenience shoppers are looking for, with the added benefit of thereby winning their loyalty in an environment where macro-economic factors are instilling financial anxiety.
Given the positive trends in the face of crisis and Walmart’s extraordinary demonstrated adaptability to the market situation, we shouldn’t be surprised if the YOY gains continue beyond the pandemic.