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Walmart revs up innovation to reposition itself in modern retail

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With a solid foundation in place, WalMart is increasingly going on the attack. Efforts to broaden the online assortment, improv customer-value, and enhance convenience have helped fuel the impressive ramp in US ecommerce sales growth. Photo: Bloomberg

With a solid foundation in place, WalMart is increasingly going on the attack. Efforts to broaden the online assortment, improv customer-value, and enhance convenience have helped fuel the impressive ramp in US ecommerce sales growth. Photo: Bloomberg

With a solid foundation in place, WalMart is increasingly going on the attack. Efforts to broaden the online assortment, improv customer-value, and enhance convenience have helped fuel the impressive ramp in US ecommerce sales growth. Photo: Bloomberg

There has been much debate about the effectiveness of TV advertising in recent years - particularly as we witness the proliferation of digital video recorders and streaming services such as Netflix and Apple TV. However, occasionally an ad will come along that is so clever, it keeps viewers tuned in and even creates enough buzz to go viral on social media.

In early January, WalMart released its 'Grocery Pickup, Famous Cars' ad - and it has generated quite a following. This advertising campaign reflects the significant changes happening in WalMart.

On the off chance that you don't know, WalMart is the world's largest retailer - operating retail stores in various formats (supercentres, discount stores, and neighbourhood markets) around the world and providing a broad assortment of merchandise and services at everyday low prices.

WalMart has a legacy of creating disruption within the retail sector, as it was the first to roll out the large supercentre format in the US and establish the everyday low-prices strategy. However, for nearly two decades, the company merely repeated its once innovative playbook - and the competition quickly began to copy it.

Recognising the need to reposition the business for success in an increasingly digital retail marketplace, CEO Doug McMillon has sparked a cultural transformation that is taking the company back to its roots as a bold, innovative retail disruptor. He wants to reshape the company into a more nimble, fully integrated omni-channel retailer. The change is real. Consistent growth in store traffic, robust e-commerce momentum, and an increasingly focused international operation all provide early evidence that the strategy is working. All this comes at a time when many traditional retailers are losing relevance with consumers. The company is also increasingly employing significant innovation in the areas of technology and automation across its stores to help increase productivity, manage inventory, reduce costs, and serve customers in new ways.

With a solid foundation in place in its 'brick-and-mortar' business, WalMart is increasingly going on the attack. Efforts to broaden the online assortment, improve the customer-value proposition (through measures such as free two-day shipping, pick-up discounts on non-store items), and enhance convenience (through the likes of online grocery) have helped fuel the impressive ramp in US ecommerce sales growth.

While WalMart's US business gets the most attention from investors, the accelerated pace of change under way outside the US should not be ignored. WalMart International is reducing its exposure to or completely exiting non-core markets and businesses and refocusing its attention on four key markets: Canada, Mexico, China and India.

Given the potential of the markets, China and India understandably receive consistent interest from investors. WalMart is executing a different strategy in each market, positioning itself as a primary retail partner within the JD.com and Tencent digital ecosystem in China. While strategic partnerships are key to developing the business in China, the company is also repositioning its physical presence in the south of the country and developing its omni-channel offering.

In India, WalMart owns the entire Flipkart ecosystem, investing $17bn in it last year. While not without risk, Flipkart's portfolio of strategic assets (including ecommerce, specialty apparel, logistics and payments) provides multiple ways to drive market share.

The WalMart of today may bear little resemblance to the company founded by Sam Walton in 1962, but seismic changes impacting the sector mean it will look very different again in the years to come.

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  • Aidan Donnelly is head of equities in Davy Private Clients. For disclosures, visit www.davy.ie/Aidan Donnelly
  • Any investment commentary in this column is from the author directly and should not be seen as a recommendation from The Sunday Independent


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