Going into a store may no longer be a routine part of many people’s lives, but a store is no longer just a place to purchase goods. Instead, it services many physical needs—a skill Walmart
Last week, on its quarterly earnings call, Walmart announced U.S. sales of $1.5 billion in Q4, up 5.6% from the year prior. In 2021, U.S. sales were about $393 billion, up 6.3% from 2020. E-commerce penetration for U.S. sales was 6.2%, while international penetration was 21%. The role of e-commerce in total sales has grown significantly, especially with Walmart+, the company’s rival to Amazon Prime. However, it’s become more of a way for the company to combine rather than compete its physical and online presence.
Walmart’s omnichannel strategy relies on its vast real estate footprint
Walmart offered the order online and pick up in-store service long before the pandemic. When Amazon was growing in popularity, it was clear Walmart needed to step up its e-commerce game, and from the very beginning, the company had one key advantage—real estate. The company owns and operates 10,593 locations worldwide, with 5,342 in the US. These stores are in small rural towns and big city centers, giving Walmart access to various customers. Therefore, the company now relies on many stores to act as fulfillment centers.
In the company’s earnings presentation, it stated over 4,600 US locations offer in-store pick-up, with over 3,500 locations offering same-day delivery. “Last year, we increased the number of orders coming from our stores by 170% versus the previous year, and that’s on top of more than 500% from the year before. Having inventory so close to so many customers is a competitive advantage. In some cases, we’re getting items to customers in hours, rather than days,” shared Douglas McMillon, President, Chief Executive Officer & Director at Walmart.
Rather than sourcing and building warehouses, like Amazon, Walmart utilizes the capital it already owns to make the shopping experience more connected for customers.
The Walmart stores are being modernized and utilized for alternative revenue streams
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Large-format stores, including Walmart’s, have historically had a simple, low-cost design. This worked well when customers visited stores to purchase products. However, today, a store experience should be exactly that—an experience—to keep shoppers engaged and coming back.
Last year, the company remodeled around 600 stores. And it recently revealed the second phase of its new store design. Alvis Washington, VP of marketing, store design, and innovation and experience at Walmart, told Fast Company, “The last phase was about saving time; this next phase is about spending time.” The new format is being prototyped in Arkansas and focuses on technology integration, including QR codes, digital displays, mobile-app integration, and the ability to feel and touch products experientially (think furniture displays that reflect actual rooms).
This plan for an experiential store that’s tech-focused reflects what’s working well in physical retail right now. Even Amazon announced it would be opening a physical clothing store later this year called Amazon Style, which relies heavily on technology.
Another way the company is reaching customers in its stores while also bringing in more revenue is through its advertising program called Walmart Connect. Brands can advertise their products via Walmart Connect, including the option to advertise in stores. For instance, on digital displays throughout the stores, self-checkout screens, or hosting a community event at a local store. This additional real estate utilization gives the company one more touch-point to reach customers.
There’s no doubt the rivalry between Walmart and Amazon exists and is here to stay. Some say Amazon is bound to leap ahead, but it’s evident Walmart is playing all cards necessary to remain in the game, with its real estate backing each play.