What Walmart can teach retail

Internet Retailing

23rd Oct 2018

If retail talk in the 1990s was focused on the threat of big box retailers (aka ‘category killers’), epitomised by the domination of Walmart in the US, it seems that retail talk in the 2010s has been about the threat of ‘pure plays’ to dethrone these very ‘category killers’, epitomised by the current battle between Amazon and Walmart.

Walmart’s efforts to subdue Amazon without creating an Amazon equivalent (Jet.com aside) have been noteworthy, and they hold some important lessons for every retailer, even if your opponent is not necessarily Amazon. Here are three key points to take away from their offence:

1. Don’t hug the anchor.
When competing with others, particularly disruptive entrants, it’s easy to write them off – dismiss their lack of retail know-how, their execution or actions. Just think about Amazon 11 years ago. At its IPO, it was being heralded as the unprofitable book store. Part of the key to Walmart’s current success has been its ability to see beyond its traditional retail economic engine. It isn’t ‘hugging the anchor’ so to speak and hoping things will miraculously stay offline. This is all about a mindset and cultural shift – the underpinning to any real change. Which brings me to point 2…

2. Go big, or you will go home.
There is no incremental game. We all want big reward with little effort or risk but that concept is basically a unicorn – it does not exist. Walmart has shown that if you want to go big, you have to allocate resources (bringing in Jet.com CEO, Mark Lore, and a plethora of other talent), budget (it has spent US$3.77 billion on acquisitions like Jet.com, Bonobos, Shoes.com since 2016) and take on a fair amount of risk in order to get the reward. It boils down to a simple concept: the fundamental indicator of success (and of failure) is the allocation of resources.

3. Shape the game you want to play.
We often play the game we find in any market. We look to our competition and react to their pricing or product instead of shaping the game we want to play. With the creation of Store No. 8 (Walmart’s incubator) they are moving from a defensive to an offensive play. Store No. 8 is an incubator with its own P&L and separate location in California that is dedicated to identifying emerging technologies that can be then applied across Walmart. It’s their long-term innovation engine. To quote ex-Rent the Runway founder, Jenny Fleiss (who is now a part of Store No.8 – talk about talent), the goal is to “think about the future of retail five years down the road”. Just check out JetBlack, a members-only messaging to purchase concept currently in beta test in New York City. When this concept is rolled out across Walmart, it will be a true game changer.

There is no doubt the next 10 years will bring along another disruptive competitor, and we all know it won’t be another Amazon or Walmart. That said, the lessons Walmart is teaching retail are universal at their core and remind us of the words of founder Sam Walton: “To succeed in this world, you have to change all the time”.

Pippa Kulmar is co-director of Retail Oasis.