Walmart Checks Another Box that Amazon Can’t

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Amazon has wasted the past several years and billions of dollars fiddling around with testing physical stores of all types and failing (a couple of Amazon Style stores are still breathing). It also over-predicted growth following the pandemic and retreated by shedding thousands of jobs and cancelling the planning and construction of unnecessary DCs. And Walmart marches on.

But First, a Word About Visionaries

Here’s a lesson that keeps on giving: Visionary and genius entrepreneurs like Jeff Bezos can “parachute in” from some imaginary futuristic world that we common folks could not even begin to comprehend. They lay their magical “golden egg,” it hatches, and the world of finance goes wild. And if they’re lucky, they get sucked into the money funnel which quickly swirls upward, past Unicorn status, to, well, Amazon’s speed of light. But be careful, speed kills.

In the fourth quarter, the Walmart prototype store received 31.2 percent more visits than the average Walmart received during that period. And it received 66.6 percent more visits than the average Target received during that time.

The real tricky thing for these entrepreneurs is to know when the meteor they are riding on is reaching the height where it needs to be reined in before it burns out. That means being disciplined, organizationally structured, and strategically planned for long term profitable growth. Timing is everything and if the entrepreneur is smart, he or she steps aside, eases into the board or leaves. If not, the brilliant, visionary business model can flame out as fast as it scaled. And there have been so many of those in this tech era we are living through. Whether or not Mr. Bezos stepped aside soon enough remains to be seen. His successor, Andy Jassy seems to be the professional businessman Amazon needs to define a new model going forward. We will watch closely for what his physical retail vision is once he stabilizes many wobbly parts throughout the rest of the enterprise.

Walmart Scores Another Win

The “box” Walmart is checking is literally the consumer-friendly redesign of select stores throughout their massive fleet. As a reminder: Walmart has a large brick-and-mortar footprint with 3,572 Supercenters, 600 Sam’s Clubs, and more than 5,300 retail units overall in the U.S. as of late October 2022. That scale equates to a Walmart store within 10 miles of 90 percent of the U.S. population. So again, while Amazon “fiddles,” Walmart continues to blast away, increasing both the accessibility and the desirability of its integrated, omnichannel platforms.

Another Walmart edge is the fact that it already owns the number-one share of the U.S. grocery market, at about 25 percent. And in the past two quarters, about 75 percent of its market share gains in the food category have come from households that make more than $100,000 a year, according to Chief Financial Officer John David Rainey. So, the calculus among Walmart’s executives is that if those shoppers were attracted beyond the grocery space to an inviting, updated store design with exclusive brands, they may become new (and more likely), higher-paying customers.

Stores with sophisticated lighting, fashion-forward merchandising, mini-vignettes, and engaging displays of beauty products present a more compelling destination for higher end shoppers to browse and purchase higher-priced products. Being modern rejects the “pile high and let it fly” last century discount model.

“Walmart was kind of a one-trick pony,” said Scott Mushkin, a retail analyst, and CEO of R5 Capital. “They were always about price and yes, what they’re now doing is still led on price. But they’re starting to accelerate the dynamics in stores that matter to other people, along with value.”

Mushkin has been a critic of Walmart for its sloppy stores. But he said store leaders and employees are turning things around. And he said that along with featuring more attractive shelving and evocative displays, Walmart has also shown its savvy by working with well-recognized brands and developing more stylish private brands.

And according to data from Placer.ai, an analytics firm that uses anonymized data from mobile devices to estimate overall visits to locations, Walmart’s new store design is resonating with shoppers. Placer.ai data from Walmart’s original prototype shows that visits have been much higher than in an average Walmart or Target location. In the fourth quarter, the prototype store received 31.2 percent more visits than the average Walmart received during that period. And it received 66.6 percent more visits than the average Target received during that time.

In surveys conducted by Walmart, nearly every shopper said the store’s displays and mannequins encouraged them to browse longer. “They appreciate the fact that we’re still true to who we are as Walmart,” a spokesman said. “Great prices. But then also we now have these new brands that we’re actually showcasing in inspirational ways.”

Amazon’s Big Challenge

Jassy in his new role is going to have to make a huge decision. If he envisions Amazon as a major player in retail, in my opinion, he must make the decision to expand into physical retailing. And physical retailing that offers an experience, not just a transaction. A physical store that is appealing, welcoming and staffed with helpful, stylish salespeople. As I have said before, he should acquire his way into it versus investing billions of dollars in capital and years of building out their own stores. If they don’t acquire, history is likely to repeat itself with stores that fail and stores that lack soul and inspiration.

I say, good luck Amazon.

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