Walmart may be the world's biggest retailer, but has lost a bit of its swagger in recent years. The chain has been cutting costs so much that it's struggling to keep some shelves stocked and scrambling to keep up in the instant-delivery age of Amazon. Dollar stores are eating into its low-end customer base; its higher-end urban stores have been slow to emerge; and its international expansion has had some high-profile setbacks.
On Tuesday, Walmart executives told investors that they aren't taking that beating lying down. They have a path to growth, and it has something to do with what they call "ecosystems."
Let me explain.
In Walmart's thinking, there are three types of shopping trips: There's the stock-up mission, which brings families to Walmart's 3,200 nationwide Supercenters. There's the basic grocery run, when shoppers want to go someplace nearby and more navigable, such as one of Walmart's 300 "neighborhood markets." And there's the "immediate access" stop, when shoppers head for the traditional convenience store. That convenience stop is the segment Walmart hasn't really touched, except for a handful of "express" stores in Arkansas.
Put the three together, and you get an "ecosystem," as chief executive Bill Simon described on Tuesday. In a time of domestic oversaturation and overseas obstacles, this is the model the retailer is banking on to satisfy ever growth-hungry investors.
The key to making the ecosystem work, Walmart says, is "tethering." You can tether your hiring and back-office functions together for greater efficiency. You can tether your inventory distribution systems so that fresh items can be sent out from the giant supercenters quickly in response to demand. You can even tether your online orders, so that anything a customer might want can be delivered to a nearby market that day. The theory: Rather than one huge store that offers endless goods all in the same place, you have three stores that offer most of those goods, at the time and place you want them.
"So, imagine you're at work, and you decide you need gas on your way home, and you know that Walmart Express store -- because you go by it every single day -- has fuel, and you decide what you want for dinner, and you want a rotisserie chicken, and, by the way, later that night, you decided that you'd like to play scrabble with your spouse," Simon said. "I mean, go on your phone, let the store know that you want a scrabble board, certainly something that's not going to be carried in a 10,000 SKU assortment, and it will be there, ... or a sewing machine or anything that's in the Supercenter assortment."
A dollar store that can get you a Scrabble board on short notice? Walmart's building at least another 120 of them over the next year. That way, the retailer's thinking goes, you've got Walmart all around you, for nearly anything you might need at any time.