We’re witnessing Walmart’s strategic plan shifting. In a surprising move that has sent ripples through both the retail and healthcare industries, earlier this year Walmart announced the closure of Store No. 8, more recently the shuttering of 51 Walmart Health clinics, and just this week significant layoffs among its corporate employees. This strategic shift highlights the evolving landscape of retail giants navigating post-pandemic economic realities and responding to ever-changing consumer behavior patterns. The timing is interesting as one of the major arguments for the Kroger Albertsons merger is to be able to compete with Walmart and Costco. These developments offer critical insights into broader industry trends and strategic pivots leadership believes are necessary for success.
Walmart’s decision to close Store No. 8, which opened in 2016 and served as its tech incubator dedicated to developing innovations in retail, signifies a recalibration of priorities. Store No. 8 was established to explore futuristic retail concepts, including augmented reality and artificial intelligence, aimed at enhancing customer experiences – and frankly to compete with Amazon.
Walmart’s Strategic Plan: Circle the Wagons
The Wall Street Journal reports that longtime retail leader Walmart might be under even more pressure as Amazon just reported $575 billion in total revenue for the last year — and that’s an increase of 12 percent compared to Walmart’s revenue of $638 billion which just increased 6 percent. Still, nothing shabby as Walmart’s own internal annual sales target is the growth of just 4 percent a year.
Walmart’s decision to close Store No. 8, which opened in 2016 and served as its tech incubator dedicated to developing innovations in retail, signifies a recalibration of priorities. Store No. 8 was established to explore futuristic retail concepts, including augmented reality and artificial intelligence, aimed at enhancing customer experiences – and frankly to compete with Amazon. Last year Walmart closed three tech centers in Austin, Carlsbad, California, and Portland. These closures suggest to me a strategic pivot towards immediate profitability and operational efficiency rather than long-term experimental projects. This move underscores the challenge of balancing innovation with core business operations, especially during periods of economic uncertainty.
The closure of 51 Walmart Health clinics and discontinuing its telehealth operations mark a notable retreat from the company’s ambitious foray into the healthcare sector just a few years ago. Launched with the promise of affordable and accessible healthcare services, these clinics were positioned to disrupt traditional healthcare models. However, the decision to shutter these facilities indicates a reassessment of their viability and impact. Walmart said in a statement that it was unable to generate a profit from these businesses due to rising operational costs and the challenging reimbursement environment.
Integration Complexity
Walgreens announced in early April their decision to close another 160 VillageMD clinics, following closures earlier this year in five markets including Massachusetts, Florida, and Illinois and recorded an almost $6 billion non-cash impairment charge this quarter. These moves reflect a broader industry trend where companies are re-evaluating their diversification strategies in response to market dynamics and operational challenges. Just last week, Schnucks announced the shuttering of their two Eatwell stores. Kroger Health. on the other hand, is expanding its foray with a partnership with Better Health Group to launch primary care services for seniors in Atlanta. One point of difference, which is a major plus over the Walmart model is that these clinics are located in Kroger supermarkets.
For the healthcare industry overall, Walmart’s pullback serves as a case study in the complexities of integrating retail and healthcare services, something that Kroger Health seems to have carefully studied and moved slowly to achieve. Success in this arena demands a nuanced understanding of patient needs, regulatory landscapes, and the inherent challenges of scaling healthcare operations within a retail framework and making them part of the one-stop shopping experience.
Rightsizing
Walmart just announced layoffs among hundreds of corporate employees and also asked some workers to relocate from smaller offices to larger central hub locations. “We are asking the majority of associates working remotely, and the majority of associates within our offices in Dallas, Atlanta, and our Toronto Global Tech office, to relocate,” Donna Morris, Walmart’s chief people officer wrote in a memo to its U.S. campus associates. And the lion’s share is relocating to Bentonville.
Bringing remote workers back into offices signifies a shift towards streamlining operations and improving cost-efficiency under the ruse of collaboration, team building, and career development. Modern organizations realize they have to adapt, not use the paradigms of the past as standards for the present. But is this a sign of tone deafness to life/work balance and quality of life as workers have to uproot their lives and move? Eliminating remote work is certainly not going to play well with next gens and working mothers. In the wake of the pandemic, many companies have re-evaluated their workforce structures to adjust to remote work and digital transformation. Walmart runs countertrend to hybrid models with its recent top-down edict. The cynic in us speculates a hidden agenda; most of these relocated employees will choose to take the severance package and help out their employer cut more costs, at their expense.
Back to Basics or Doomed to Fail?
These recent decisions by Walmart are indicative of a broader industry trend where companies are focusing on core competencies and operational efficiencies in response to economic pressures. For the retail industry, this might signal a shift towards more sustainable growth strategies and a cautious approach to diversification – or to a disastrous move that stifles innovation and sends the shopping experience back decades when retailers piled it high, sold it cheap and could care less about the shopping experience.
Walmart may be overly cautious and too concerned with the bottom line. One reason that Walmart has become so powerful is that they were always known for looking forward and trying new things that focused on their consumers’ needs. Not all of the ideas worked for sure (remember the Walmart C-store?), but the passion to get to the future faster led to many successes. If Walmart loses that edge and focuses on short-term operational wins, they risk not only losing sales and customers to Amazon but in the grocery space where they dominate Kroger/Albertsons… if and when the powerhouse merger is completed.
