July 27, 2015
Walmart cuts back hours at some 24/7 stores
Walmart is reducing hours at about 40 of its supercenters as part of a pilot program designed to evaluate customer shopping habits.
"Based on a recent review of our customers’ shopping patterns, we have made the decision to adjust hours at some of our stores," spokesman Brian Nick told Bloomberg. "This is the kind of decision we make on a store-by-store basis and will allow us the ability to reallocate resources to serve our customers during peak shopping hours."
The designated locations will close at midnight and reopen at 6:00 a.m. About two-dozen 24-hour locations reduced their hours in the spring and more cutbacks are expected to come later this year, Mr. Nick said.
The Bloomberg article inferred that the move was partly made to improve late-night restocking given the complaints over the last few years of empty shelves. But saving money was another motivation.
Walmart is investing in improving customer service, including raising hourly pay for associates and making commitments to staff cash registers during peak hours. At the same time, the retailer is looking to better position itself as the low-price leader amid competition from dollar stores, Costco and others.
Photo: Walmart
"They have world-class supply chains and systems, but at their size there is probably always an opportunity here and there to cut costs," Edward Jones analyst Brian Yarbrough told the Arkansas Democrat-Gazette. He feels this pilot may lead to a nationwide pullback of hours.
The Wall Street Journal reported last August that Walmart keeps 70 percent of its U.S. stores open 24 hours a day.
A USA Today article in 2011 similarly explored how Walmart was closing some supercenters from midnight to 6 a.m. While also noting the inefficiencies around opening all night, the article noted that 24-hour openings helped brand Walmart as a place for convenience.
Richard Feinberg, a Purdue University professor, told USA Today at the time. "Even if it is not cost-effective for those overnight hours, it builds loyalty, which feeds the profitability of the other hours."
Among its closest competitors, Target doesn’t have any 24-hour stores although last year it extended hours at some locations until midnight. Walmart’s late-night competitors appear to be drug stores such as Walgreen’s and CVS, which have midnight-closing and all-night hours. Meijer, which has been credited with pioneering the modern supercenter concept in 1962, proudly promotes that all its doors are open 24 hours.
- Wal-Mart ends overnight hours at some locations – Chicago Tribune/Bloomberg
- Is the clock ticking on 24-hour retail service? – USA Today
- 24-hour stores to shave 6 in tests – Arkansas Democrat-Gazette
- Target extends hours for night owls – Minneapolis Star Tribune (tiered sub.)
- Target to Keep Some Stores Open to Midnight in Push for Traffic – The Wall Street Journal (sub. requied)
Discussion Questions
Should Walmart eliminate 24-hour openings? How much should goodwill around convenience weigh into the decision to cutback late-night hours?
Poll
BrainTrust
Steve Montgomery
President, b2b Solutions, LLC
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
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Should Walmart eliminate its 24 hour openings? No, but it should evaluate them on a case-by-case basis. Overnight stocking doesn’t require the store being open and, in fact, not being open makes the stocking process more efficient as there are no customers to be concerned about. In addition, it means there doesn’t have to be cashiers who don’t have sufficient customers to service.
Walmart probably has another 10 percent or more of its locations where the cost of being open for customers 24 hours doesn’t make economic sense. The goodwill it may be gaining is likely not be sufficient to offset the loss it is taking.
Walmart should do what’s best for its bottom line and if that means discontinuing some 24-hour openings, so be it. Some shoppers will be inconvenienced and there will be complaints, but this should not be a large factor in the company’s decision.
Walmart need not eliminate 24-hour stores but they should keep the stores that have high traffic late nights open and close those stores that do not justify the cost.
Since a lot of the major Supercenters will have Neighborhood Markets nearby, keep these stores open at less cost and close the larger formats. Most if not all of their stores have night crews, so there are ways to keep the cost down using them as needed.
The Supercenters I see closing early, and often earlier than midnight, close early due to low volume or high crime. Absolutely Walmart should close early. I would say any Supercenter under $60 million per year is a prime candidate for early closing or at any store where the propensity for violent crime or the theft rates are high. Believe me, this has nothing to do with stocking the shelves. Stores with “plumbing problems” aka high shrink, union organizing, or high labor rates due to labor shortages, are candidates for early closing or closing up completely.
Walmart should listen to consumers around the Supercenter stores before and after running these tests. They’re smart enough to take these steps.
Based on the Prosper Monthly Consumer Survey, over one out of five Walmart grocery customers maintains that a 24/7 service offering is a reason that they shop Walmart MOST often for groceries. This reason is only one of over 22 reasons stated, so I’m not implying that it should be the sole influencing inflection point.
Like any other promotional tool, unhinging this offering can be either problematic or a minimal disrupter. It is important to test it around select stores and take the time to listen to the customer.
All retailers should be evaluating the benefits and costs of 24-hour openings. The amount of business done from midnight to 6 a.m. has to be small single digit percentages of total volume in most locations and most of that can be retained. The costs of having cashiers and keeping perishables going for 24 hours far outweighs any profits made. Most night crews concentrate on stock only so the idea of improving in-stock conditions is not tied to the store being open. It is related to warehousing, ordering and scheduling issues that are an entirely different set of problems.
Why is this even a discussion? Walmart is cutting hours on stores that don’t generate the traffic during the overnight hours. What could make better sense? If there are no customers knocking on the doors to be let in, you are losing no goodwill.
Let’s look at it like Gene did. If the store is not generating enough traffic, then why stay open? The bottom line is the key driver to Walmart. Customer loyalty is a distant second.
If Walmart takes savings and invests in more cashiers to significantly ease checkout lines, I might return to shopping there. I personally avoid shopping Walmart because the lines are way too long. Why does the typical SuperCenter have close to 30 registers, fully stocked with impulse items and yet typically 6 are open? Why not have the goal of customer service be to limit checkout lines to 2 carts or less? Back in the day, when our company purchased Walmart-anchored centers in the Midwest and Southeast, I’d make site inspections and never see checkout lines.
Shorten checkout lines and no one will miss 24/7 store hours.
Walmart should definitely evaluate 24 hour service and eliminate where the customer is telling them to! Not only is it financially prudent, but a good safety and security decision. Goodwill and $1.75 will get me a cup of coffee at Starbucks.
It’s about public safety and shrink. This is a win win for Walmart, employees and customers. Fewer police calls and fewer negative stories on crime. Everyone above seems to see it’s just common sense. Target never got into the 24 hour business, but then again Target does not routinely generate $100 million a year stores.