Dive Brief:
- Walmart expects Walmart+, its newly announced membership program, to help drive awareness of its higher-margin general merchandise offerings among consumers who take advantage of the program to buy groceries and other consumables, the retailer’s executive vice president and chief financial officer, Brett Biggs, said Tuesday during the Barclays Global Consumer Staples Conference.
- Recent stimulus funds distributed by the federal government increased consumers’ buying power during the second quarter, causing them to become less price-sensitive and more attuned to convenience when shopping, Biggs said.
- Walmart is leveraging recent investments to boost its e-commerce assortment and fulfillment capabilities, according to Biggs. In particular, the retailer is reaping the benefits of adding more high-margin products, like home goods and clothing, to its online offerings in combination with the economies of scale it is enjoying as e-commerce sales increase.
Dive Insight:
As it prepares to begin selling Walmart+ memberships later this month, Walmart is looking to strategies that have helped power its brick-and-mortar operations for years as a guide. The retailer is especially interested in making it as simple as possible for shoppers who head to the company’s newly unified app to load up on more profitable items, just as they can when strolling the aisles in its thousands of stores.
“Anything you can do to make it easier for that customer to go across the aisle, so to speak, and buy general merchandise, the better, and that's why the Supercenter was such a great retail invention,” Biggs said. “I don't think online is going to be that different actually … the second quarter was a great reminder to all of us of what that flywheel really looks like when it works, and so, what we've seen so far is we have made it easier for the customer to do that.”
Encouraging consumers who head to Walmart's digital storefront for groceries to put other kinds of items in their carts is a central part of the company's efforts to grow its share of people's wallets, Biggs said. "The ability to get increasing mindshare with that customer on the grocery and consumable side, and then be able to get more of their general merchandise business, which is great for us from a mindshare perspective, market share perspective, as well as margin perspective, is a really important part of this."
Biggs said Walmart’s strong second quarter results are partially attributable to the stimulus funds that were put into consumers’ hands by the federal government, as well as to the fact that people were largely stuck at or close to home because of the pandemic. “They are not spending as much on vacations, gasoline, and things like that, and so, they would spend more in places like Walmart,” he said.
Biggs said Walmart’s introduction in May of an updated app that allows customers to shop for groceries and other products at once is helping the company drive e-commerce growth across categories by making it faster and easier for consumers to fill their carts with different types of goods. He compared the dynamic to what the retailer has been able to achieve with its physical stores.
“We will become more top of mind on general merchandise [online], and [while] we have really good strong general merchandising business, we can make it stronger.” said Biggs.
Even as the pandemic has supercharged Walmart’s online business, it has also increased expenses for the company. Walmart spent about $1.5 billion on expenses attributable to the public health crisis during the second quarter, about three-quarters of which went to extra pay and benefits for its employees, Biggs said.
Biggs added that the company intends to continue investing in higher wages as a way to recruit and retain workers, but will direct that spending to areas where competition for workers is especially high rather than to the entire country.
“I think you've got to look at it by geography, and so, there are places that are hotter than others from a wage perspective, and we're being competitive in those markets,” Biggs said.
