Walmart Grows By Going Smaller with Stores, Focusing on Digital Commerce

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Walmart became a retailing juggernaut by building sprawling general-goods stores all over rural America, adding groceries, then expanding to suburbs and big cities. The byword was always “big,” which in turn drove a lot of small retailers out of business altogether.

But to maintain the giant’s sometimes-faltering momentum, Walmart chiefs increasingly are pursuing a “go-small” strategy for omnichannel retailing that emphasizes building more smaller stores rather than the traditional large ones, and expanding in unfamiliar urban environments, as well as trying to catch up with Amazon on the internet and doing a better job of avoiding not-in-stocks at its brick-and-mortar stores.

“We have delivered consistent growth and returns to our shareholders over many years,” CEO Mike Duke reminded investors at a meeting this week, “and we will continue to do so …. We are driven to win. And we are never satisfied at Walmart until we do.”[more]

No one was doubting Duke. But he and Walmart US President and CEO Bill Simon admitted that they need to focus on savvier deployment of Walmart’s considerable capital in order to continue to drive growth for a company that already is approaching a half-trillion dollars in global annual sales.

“We are much more streamlined in how we make real estate decisions and invest capital,” Duke told investors. “We are seeing stronger performance from our new stores. And we are bringing down the cost to build, expand and remodel. Over the past two years, the cost per square foot for new construction in the United States has come down by over 15 percent.”

There are at least two big reasons for this. First, Walmart is focusing on building smaller-footprint stores such as Express and Neighborhood Market outlets that help it penetrate smaller niches and markets where its traditional big boxes can’t go. It plans to build between 120 and 150 small-format stores in 2014 versus 115 this year, Simon said, according to Drug Store News—of course that’s if the urban neighborhoods at the focus of the expansion allow it

Second, Walmart continues to focus expansion on commercially depressed and largely untapped central-city markets in places like Chicago and Washington, D.C., despite its struggles with advocacy groups over paying “living wages” to the hundreds of workers Walmart is beginning to employ at its stores there.

Duke said that he was pleased “with the progress we have made in e-commerce at Walmart” but noted that “the biggest opportunity we have is winning the intersection betweeen physical and digital retail around the world.” To that end, the retailer has been diligent about adding more mobile and tech features to its shopping experiences including apps, mobile checkout and interactive displays

Walmart’s omnichannel approach isn’t unique, though. More brands, such as Gap, are employing the physical, digital strategy to bolster business growth as company’s search for the new sweet spot in retail. Still, Walmart’s definition of the term involves a much more crucial focus on its distribution strategy. 

With its incursions into central cities, smaller-format stores, more growth of Sam’s Club warehouse stores, and more than 3,000 supercenter stores, no other retailer in the US or globally can approach Walmart’s omnichannel accessibility or its reach with consumers. And Walmart plans to keep it that way.

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