Will having the same buyers for online and stores work for Walmart?
Last month, Walmart announced it was combining responsibilities for its online and store businesses under single executives in the areas of customer experience, marketing, supply chain and technology. Now comes word, not surprisingly, that the company will consolidate purchasing for its sites and stores into a single department.
Reuters, which broke the news, reported that the retailer’s vendors have been informed of the coming change. Until now, purchasing for stores and walmart.com have been handled independently.
In a memo to employees last month, Walmart CEO Doug McMillon wrote, “We were starting to see our stores and e-commerce teams solving many of the same problems and now we can remove what might’ve become more duplication in the future.”
The retailer is hoping that by combining purchasing duties it will be more successful in securing the lowest possible prices from vendors. This is seen as particularly critical if Walmart’s e-commerce businesses are going to narrow the market share gap with rival Amazon.com.
While Walmart may put the squeeze on vendors for even lower prices than before, the retailer expects its trading partners to benefit from a simplified buying process.
“The way it operated until now was extremely inefficient for us and them,” an unnamed consumer goods vendor told Reuters. “For example, they would buy 5 million cases a year for stores and 500 cases [for] online and then make us go through a different buyer for online. It was a nuisance.”
- Wal-Mart to tear down walls between store, online buying operations – sources – Reuters
- Will blending online/offline roles improve the Walmart customer experience? – RetailWire
DISCUSSION QUESTIONS: How difficult an organizational task will it be for Walmart to unify purchasing for its stores and e-commerce sites? What do you think will be the ultimate benefits, if any, for Walmart and its suppliers?
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20 Comments on "Will having the same buyers for online and stores work for Walmart?"
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President, b2b Solutions, LLC
The process of combining the two buying groups should not be overly difficult. The basic job function is the same and the buyers have all been trained in the Walmart way.
Walmart’s vendors will like the simplification of the sales process, but not the reduction in costs they will be expected to provide. Once any potential kinks have been worked out I would expect Walmart to seek a reduction in the number of buyers it employs.
President, founder and CEO Interactive Edge
We talk omnichannel and now we have to walk omnichannel. It’s about shopper experience, remember? I am surprised they didn’t try to implement this earlier. The concern is, how do suppliers react to this? Not from a logistical standpoint but to the pressure that will be put on them for even lower prices. When is too low, too low?
Managing Partner, Deeb MacDonald & Associates, L.L.C.
This should be an easy transition with all of the technology available for making purchases. Consolidation should be more efficient for Walmart but maybe not so much for the vendors. If Walmart can or will issue one PO for distribution centers on products available in both channels this works for all.
Vice President of Marketing, OrderDynamics
Organizationally, this makes sense. It is surprising that Walmart would have had two separate teams purchasing for the two different channels. Given that Walmart is running full speed into omnichannel retail, store and online merchandise should be very similar. Yes, there are the long-tail items like the off-season clothing that you will primarily host online (kept at one of the DCs) … but most of the primary items should be common.
From an efficiency and margins perspective, it makes sense for Walmart. For customers, it is in keeping with a unified brand experience across stores and e-commerce. Best of luck to Walmart!
Founder & CEO, Hubba
We are seeing this happen more and more with retailers. It is a good thing. Retailers have enough challenges. Managing two different groups, then trying to reconcile or trying to get alignment to build economies of scale is an obstacle they don’t need. To best grow, having a cohesive buying team is important. That said, buying for the online world is definitely different than buying for brick-and-mortar. At the end of the day, it is still all about collecting data and understanding your customers whether online or IRL and the sooner retailers can pull teams together and get streamline their technology and processes, the better.
President, Max Goldberg & Associates
Walmart is smart to wring costs out of its systems. Consolidating buyers is one positive step in that process. Consumers want a seamless omnichannel experience. Walmart needs to adapt or see sales go to competitors (Amazon immediately comes to mind).
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
From an organizational point of view, this is no big deal. One wonders why it was ever different.
Too often we have read and heard about “omnichannel” retailers that looked like two separate stores, one brick-and-mortar and the other online. What could be more frustrating for the customer? The face of the retailer must be the same no matter what the channel of distribution is. The customer doesn’t think in silos and neither should the retailer.
Strategy Architect – Digital Place-based Media
Because a unified approach to supply chain delivers economies, it is easy to imagine Walmart and other retailers insisting that suppliers provide better content, such as marketing materials. Information-enabled shopping is the foundation of value analysis by consumers and is the next big stride forward in retail’s success. Where omnichannel makes transactions possible, product information in the consumer experience will make them successful.
Principal, Your Retail Authority, LLC
When I read about this the other day, I must say I was shocked. It did not occur to me that they would still be buying separately. Of course this is a smart move and will help them reduce costs and better streamline the process.
Duh, for my 2 cents.
Senior Vice President, Dechert-Hampe (retired)
I’ll just second Lee’s “duh.” Of course this makes sense and there’s simply not much more to say about it.
Principal, Cassarco Strategy & Analytic Consultants
I see mostly upside here, for the reasons espoused by my esteemed fellow BrainTrusters. There is risk, though, that a buying group charged with responsibility for buying for both brick-and-mortar and online may look at the .com buy as an afterthought. Will they harass their supplier partners for direct-to-consumer friendly packaging in a category where online represents just 1 percent of the buy? Or will they force store-friendly packaging on .com because of the cost efficiencies. Walmart needs to remember that price isn’t everything when it comes to optimizing online assortment.
President, Global Collaborations, Inc.
If the buyers can keep the right product assortment in mind for customers across countries, regions of a country, neighborhoods in cities and online shoppers across these locations then there can be efficiency. The devil is in the details.
sales management consultant
Like many companies of any size, the executives at Walmart might not have an effective command of putting purchasing, planning and allocation in the same direction with proper oversight. Redundancy is not the problem here. The company does not have a reporting process from the floor up that can demonstrate the needs of staple merchandise. Another loss is found in slow turn, needed add on and relative impulse items that are all to often not found and/or out of stock.
Hiring people with proficiency in the speedy use of information systems to pound out large amounts of purchase orders to even more numerous vendors simply isn’t working. A look at where these issues are created and perpetuated always takes us to the top floors in the executive suites. A good followup investigation might be to look into what companies are getting from a declining education system. But we may be a little too politically sensitive to that urgent need.
Strategy & Operations Transformation Leader
The merging, consolidation of the online and brick and mortar business has been an ongoing transformation in the retail industry for years. As recently as 5 years ago, these were commonly distinct businesses, with distinct strategies and mindsets. Having run strategy and design sessions in retailers, we as a practice used to have separate review sessions for the brick and mortar and online channels. Those days are over.
What Walmart and other retailers are now facing, is a shopping universe, where the customer is king, and regardless which channel they choose to shop, they want and demand a seamless, frictionless experience. In the long term, retailers will no longer look at this as an “omnichannel” strategy, rather simply as “commerce.”
There will be plenty of synergies and commonalities between the online and in-store business nuances. While there may be some organizational and change management considerations, Walmart will reap the benefits of combining these units.
CEO, The Customer Service Rainmaker, Rainmaker Solutions
I am confused here? I just this morning read an article in Chain Store Age saying Walmart will not be using the same purchasing resources for its store and e-commerce sites.
Founder, CEO, Black Monk Consulting
There are clearly differences in digital and physical fulfillment, but fewer in the buying function itself. If you really believe you need to be channel agnostic, why not have a single buying contact?
Independent Board Member, Investor and Startup Advisor
I believe the latest coming out of Walmart is that the two buying teams will remain independent of each other; however, any item that is sold in stores will be available online through the same buyer. There will continue to be online-only products that are the purview of the online buying team.
For the vendors, it’ll be logistically easier to deal with a single buyer regardless of the sales channel. For Walmart, expectations are for lower cost of goods and greater visibility for the buyer on product performance across stores and web.
In this post Jet.com merger world for Walmart, what we’re witnessing at the world’s largest retailer are the early signs of the type of process changes necessary to bring the internal organizational setup in sync with how consumers shop today.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
When it comes to centralizing its buying function, I suspect Walmart’s motivations are less about purchasing leverage (can’t get much higher) and more about perfecting its inventory awareness.
The name of the game in unified commerce is knowing where all your stuff is at all times. I’m not shocked that the Great Wal hasn’t unified buying already, but I do agree that it’s high time (as Zel said) to walk the talk.
Vice President - Industry sectors , Capgemini
I personally do not believe we are ready for a completely unified buying experience except in some specific sub-sectors, like premium fashion (a.k.a the Burberry’s of the world). There still exist a lot of price differences between the online and the brick-and-mortar avatars of the same entity (and we have the ubiquitous “online only” products as well).
Considering where we are in terms of omnichannel maturity, it makes sense for Walmart (and I also have read that Walmart is planning the same) to have the buying functions, online and brick-and-mortar, exist with at least some level of independence. What James is saying makes a lot sense; I too suspect that Walmart wants to be more “inventory aware.” In addition, I also do think Walmart is trying to achieve logistics nirvana (they are already pretty close, what with most of their shelves being vendor-managed).
Just my (more than) 2 cents.
Retail Transformation Thought Leader, Advisor, & Strategist
Ultimately, this will be a win-win for Walmart, its suppliers, and consumers. Even with the latest announcements that they won’t be totally unified, there will be common buyers from the suppliers point of view and that will greatly simplify a process that should result in lower costs for all. I would not expect online-only items to fade away, and there still could be store exclusives, but at least there will exist new possibilities for suppliers even if they end up lowering their prices. This is a smart move for Walmart.