Walmart’s Strategic Plan Signals Industry Changes

But not the end of brick-and-mortar

Author: Patricia Orsini

October 11, 2017

Walmart seemed to signal a landmark shift for the overall retail industry when it said earlier this week that it will sharply scale back store openings and instead focus on ecommerce.

If Walmart, the largest retailer in the world, says ecommerce is the focus, where does that leave the brick-and-mortar sector?

But Walmart’s ecommerce efforts, like the industry news of thousands of store closings this year, can obscure the fact that physical retail is actually growing. The pace is slow and overshadowed by the rise of ecommerce, but growth is occurring nevertheless.

eMarketer forecasts that nonecommerce retail sales will increase 2.8% this year, better than last year’s gain—a surprising change considering the widely heralded “retail apocalypse” headlines over the past months.

Ecommerce, on the other hand, is expected to jump 15.8% this year, also outstripping 2016’s gain.

Walmart CEO Doug McMillon told a gathering of investors at its Bentonville, Arkansas, headquarters on Tuesday that the retailer will open fewer than 25 stores in the coming year, as “we are making a deliberate choice that we are going to win in ecommerce.”

For the year (fiscal 2019), the company expects to open fewer than 15 new supercenters and fewer than 10 new neighborhood markets. But it plans 500 store remodels and 1,000 new online grocery locations. And ecommerce is expected to grow some 40% for the year.

Walmart’s physical presence is the key to winning in online grocery sales, McMillon said in his presentation. And that viewpoint certainly parallels Amazon’s decision to acquire Whole Foods earlier this year.

This dynamic of interdependence can be seen in data from JDA showing the sharp increase in the number of consumers who say they buy online and pick up in-store.

The fact that physical stores continue to bring in the bulk of sales sharpens the focus for retailers: They need to retain and attract in-store shoppers while optimizing operations to earn their share of ecommerce dollars.