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Walmart's strategy to solve the Amazon puzzle works

Walmart is in the biggest fight of his 68-year history.

To keep Walmart from Amazon and to remain the largest retailer in the world, Walmart is stepping up its grocery and buying trendy digital brands. The company is reorganizing its business and building its online assets.

"We are changing, we are adapting and we will continue to change," Chief Executive Doug McMillon said at Walmart's annual investor meeting on Tuesday.

Walmart (WMT) is advancing with a two-way strategy for different client segments: It offers cheaper and more convenient grocery shopping for its low and medium income base while acquiring high-end brands ̵

1; including bonobos and modcloth to make wealthier buyers of Walmart's image cautious.

The plan works: grocery sales growth is high at nine-year growth. Walmart's online revenue is expected to grow 40% this year, and the company said on Tuesday that digital growth will grow by 35% in 2019.

"You are one of the few established companies that made headlines on Amazon." Jason Goldberg, head of commerce practice at digital agency SapientRazorfish

Food fight

The company believes that its 182,000-square-meter supercenter is its most effective weapon against Amazon (AMZN). Amazon bought Whole Foods last year, but it just can not reproduce an expansive presence all over the world.

Walmart's proximity to the buyers' homes gives the company a head start over the rivals in the grocery store. About 90% of Americans live within 10 miles of a Walmart.

Food is the biggest traffic driver to Walmart stores. They account for 56% of the annual turnover of about 500 billion US dollars.

Under McMillon, the company has improved the quality of its fresh food choices and invested in its own brands such as Great Value and wine labels. Walmart has also cut prices to stay competitive and modernize its supply chain to keep food fresh longer.

In 2014 Walmart introduced the pickup on the roadside. Buyers can order online, pick a pick up time, and pick up their groceries by the thousands without having to leave their cars. Walmart has 25,000 trained personal shoppers who select products and meats for online ordering.

Retail experts say this option is more appealing to shoppers who do their shopping and do not have time to wait at home for their arrival. 19659002] By the end of 2019, the pick-up will be available on board 3,100 Walmart Supercenters and neighboring markets. Whole Foods has only about 470 stores and addresses a tight segment of the grocery market.

Walmart also merges his real estate in a different way. By the end of the year, 700 filling station towers – automatic vending machines for online orders – will be available there.

The company is testing a range of first and third party supply services, including Spark, a crowd platform. The company will be able to cover 40% of the US population by delivery by the end of the year.

While online deliveries still make up a fraction of the estimated US $ 800 billion US food market, Walmart is taking steps to prepare for the future

Rock climbing in the upmarket

Protecting food alone is not Enough and the construction of new shops will not cut any more.

Walmart will expand only 10 stores in the United States next year, after saturating the country with 182,000 people. Square-foot Supercenters. Walmart, for example, seeks to lure wealthier Americans with more income for clothing, everyday necessities, and housewares.

Walmart dominates low-income consumers, accounting for 30% of the $ 4 trillion retail market According to a data analysis by Morgan Stanley, he fought for battle.

But Amazon wins at the top end, which represents half of the available market.

Walmart has developed a smart acquisition strategy to reach these more affluent customers Amazon's Advantage

Rather than relying on the Walmart name, Walmart buys brands such as bonobos and online specialty stores such as Moosejaw, Hayneedle, and Shoebuy. In October alone, Walmart bought the digital brand Eloquii and the lingerie retailer Bare Necessities.

Walmart also has a new, modern-looking website. It has added more than 2,000 brands in areas ranging from kitchenware to outdoor clothing.

The redesigned site not only helps Walmart with wealthier customers but convinces top brands to sell on it. For example, on Tuesday Walmart announced a partnership with Advance Auto Parts for a dedicated page on Walmart.com.

Walmart Called a Newly Launched Jet.com, the Online Marketplace Purchased Two Years Ago, for Urban Recruiters by Lore for $ 3.3 Billion

"We Wanted to Really Position Jet.com and Make It More Sophisticated We are really focusing on the higher-income urban millennials, "said Marc Lore, Walmart's chief US e-commerce executive, on Tuesday. Jet pulls premium brands like Nike on the website. Bonobos clothes will be sold there next week.

Getting startups into the Walmart ecosystem expands the company's talent pool and know-how to reach tech savvy buyers.

For example, Andy Dunn, the founder of Bonobos, now operates Walmart's portfolio of digital-native brands, including Bonobos, Modcloth, Allswell, and Eloquii. Bare Necessities CEO and co-founder Noah Wrubel will lead the category "Walmart.com" and "Jet & # 39; s intimates".

"When they buy something, they do a great deal for the intellectual capital that they can build," Associate Alan Ellstrand Dean of Walton College of Business at the University of Arkansas said

All roads lead to Amazon

Walmart's challenges are steep and expensive

They lowered their earnings forecast on Tuesday for 2019, citing their $ 16 billion acquisition for a controlling stake in the Indian startup Flipkart. The deal, the largest in Walmart history, will position the company to take over a larger portion of India's fast-growing online retail market. Amazon was reportedly the second highest bidder for Flipkart.

Walmart's investments to ramp up online will also hurt the company's profit margins. "We expect losses to rise next year," said CFO Brett Biggs on Tuesday.

The company is a long way from Amazon expanding its online delivery capabilities: It operates fewer than 10 dedicated e-commerce facilities versus Amazon 122 (19659002) SapientRazorfish's Goldberg questioned whether Walmart has the agility and speed to disrupt yourself in time to repel Amazon.

Walmart has a tight-knit supply chain and a distribution model that allows it to be the largest retailer in the world, but the same infrastructure presents a challenge.

"My primary concern at Walmart continues to be Amazon's competition," said Ellstrand. "While Walmart continues to innovate online through its acquisitions, its Walmart.com Amazon platform remains behind."

Clarification: This story has been modified to clarify the title of Walmart's 25,000 Personal Shoppers Who chooses foods for online orders, as well as the role of Andy Dunn, Walmart's senior vice president of digital consumer brands.

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