Walmart Unveils Next-Generation Business Model

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Walmart Unveils Next-Generation Business Model

By Mike Troy - 02/18/2021
Grocery pickup at Walmart helped fuel a 69% increase in e-commerce growth during the fourth quarter.

Walmart’s U.S. sales rose nearly 8% to within a rounding error of $100 billion in the fourth quarter as the retailer felt the impact of a now familiar blend of COVID-19 related factors.

The company said the number of transactions at U.S. stores declined 10.9%, but reported the dip was offset by a 21.9% increase in average transaction size, resulting in a same store sales increase, of 8.6%.  E-commerce sales increased 69%, the lowest quarterly rate recorded during the past year, and was driven primarily by online grocery orders fulfilled by stores, whether for pickup or delivery. Operating income for the U.S. division increased 17.4% to $5.2 billion from $4.4 billion.

Walmart president and CEO Doug McMillon said the results marked the completion of a strong fourth quarter and fiscal year in which the company's amazing associates stepped up to take care of customers during a busy holiday season in the midst of a pandemic.

“Change in retail accelerated in 2020. The capabilities we’ve built in previous years put us ahead, and we’re going to stay ahead,” McMillon said. “Our business is strong, and we’re making it even stronger with targeted investments to accelerate growth, including raises for 425,000 associates in frontline roles driving the customer experience.”

Walmart said the wage investment will increase the U.S. average to above $15 an hour, but also indicated it will be investing in more automation.

“This is a time to be even more aggressive because of the opportunity we see in front of us,” McMillon said. “The strategy, team and capabilities are in place. We have momentum with customers, and our financial position is strong.”

Walmart plans to invest around $14 billion in 2021 with a focus on supply chain, automation, customer-facing initiatives and technology. The company did not specifically mention store remodeling efforts or new store construction or relocation activities.

However, broad details were provided around a long-term strategy Walmart said will enable it to grow faster by leveraging unique assets to build a business model that will define the next generation of retail. For example, the company said its integrated omnichannel strategy will focus on:

  • Being the primary destination for customers providing value on items they want and need supported by increasingly efficient pickup and delivery, which will drive accelerated growth.
  • Innovating to enhance a seamless, digital customer experience designed to deepen customer relationships and increase share of wallet, enabling the company to diversify the business model by growing related businesses with accretive margins such as marketplace, advertising, financial services and data monetization.
  • In the U.S., the company is continuing to invest to provide more customers with access to high quality, preventative and affordable healthcare to complement its other healthcare offerings, including providing vaccinations across the country and in geographies the federal government defines as medically underserved.
  • Continuing to invest in associates and create opportunities by raising wages for an additional 425,000 frontline associates after raising wages for 165,000 associates last fall.
  • Actively managing the portfolio and deploying capital to priority areas such as capacity and automation in DCs, FCs and market fulfillment centers to accelerate sales and profit growth.
  • Creating shared value for all stakeholders, including associates, customers, shareholders, business partners, suppliers and the planet.

“We have tremendous momentum having just completed a year with record sales and operating cash flow,” said Walmart CFO Brett Biggs. “We accomplished this while accelerating our long-term strategy of transforming Walmart into a dynamic omnichannel business. It’s now time to accelerate even more.”

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