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Must-know: Re-inventing retail—key elements of Walmart’s store strategies

Phalguni Soni

Overview: The hits and misses in recent retail sales and earnings releases (Part 3 of 9)

(Continued from Part 2)

Benefits of an omni-channel sales strategy

One of the highlights of this year’s earnings season has been that the retailers who have successfully implemented an omni-channel strategy, have outperformed peers. Companies like Nordstrom (JWN), Macy’s (M) and J.C. Penney (JCP), which have been more successful in implementing these strategies, delivered results in the first quarter that were well received by markets. A well implemented omni-channel sales strategy is one that combines internet sales, mobile and tablet sales, and brick-and-mortar. The omni-channel sales strategy will prevent revenue cannibalization by other online players.

Continuing our discussion of Walmart’s (WMT) revenues from the last article in this series, we will discuss some of the in-store and online strategies the retailer is undertaking to boost revenues and reduce costs going forward.

Walmart’s omni-channel strategy

Realizing the importance of omni-channel retail, or sales through multiple interfaces (online and mobile, combined with traditional store sales), the company is increasing its investments in technology to push online sales. The company also has been using some of its existing stores as fulfillment centers for online sales. “We have the opportunity to create transformative growth through stronger e-commerce capabilities,” said Doug McMillon, Walmart Stores President and chief executive officer (or CEO). “Our investments are focused on improving customer experience and fulfillment capacity. We’re working to deliver a relevant, personalized and seamless customer experience across all channels to further grow sales.” To learn more about Walmart’s omni-channel strategy and how it compares with that of the world’s largest online retailer, Amazon (AMZN), please read article eight of this series.

When small becomes beautiful for a retail behemoth

One of the key drivers of Walmart’s (WMT) retail strategy is the smaller-sized neighborhood market and small format stores. The company opened 122 of these stores last year (FY2014). The stores are located in predominantly higher population density locations (urban areas). The stores take less time to get off the ground because they are smaller (averaging 39,000 sq. ft. in size), but they generate significant sales volumes. Walmart (WMT) has also increased the speed to market of neighborhood format stores by ~50 days, which has improved revenues as well as project return metrics like the Nuveen Va Premium Income Municipal Fund (NPV) and the Voya Natural Resources Equity Income Fund (IRR).

The next article in this series will cover U.S. retail sales in the month of April, as released by the U.S. Census Bureau.

Continue to Part 4

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