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10 Things I Think I Think I Love and Don’t Love about Walmart Right Now (Part 2 of 2)

In this conclusion of a two-part series, Chris Walton and Omni Talk (click here to subscribe) discuss why it is still REALLY hard to love Walmart. 

Welcome back to Part 2 of the two-part series, The 10 Things I Think I Think I Love and Don’t Love about Walmart Right Now.

If you enjoyed the “loves” from Part 1, and you have masochistically decided to come back for a second helping, then you most certainly will enjoy the “don’t loves” in this week’s post.

One caveat too before we start. Because I need the click bait — “don’t love” — is actually a pretty strong phrase. In reality, a better word or phrase that sums up my current feelings about Walmart would be — “give me pause” — but that doesn’t really read all that good (poor grammar intended).

So, away we go . . .

The 10 Things I Think I Think I Don’t Love

(or that give me pause) about Walmart Right Now

1) Walmart’s History — while I laud Marc-las (Marc Lore and Douglas McMillon) for their efforts to jump into the ecotone and create a new retail culture, creating this new culture will not be easy. Generally speaking, legacy bricks-and-mortar retailers have too much debt dragging them down to turn their ship in the right direction.

Walmart’s incredibly successful history could in fact be its downfall.

Walmart’s (and many other retailers’) historical debt comes in many forms:

Technical Debt — i.e. years and years of legacy technological systems have likely been built, cobbled, and band-aided together at Walmart for decades in support of a bricks-and-mortar business model that was relatively unchallenged since the early 1960s. Rewiring this technical debt to make Walmart an “omnichannel” best-in-class retailer against Amazon, without disrupting short-term earnings expectations, will be a tall order.

Architectural Debt — now let’s assume, for the sake of argument, that Walmart can rewire the technology. The next hurdle Walmart will face is rebuilding its store infrastructure to accommodate all its desired omnichannel capabilities. This effort will take an incredible amount of time because it literally requires breaking down actual walls. Reconfiguring architecture is not simple. It means city permitting, construction timelines, and likely business disruption too. These efforts take years, not the days or weeks to which people within e-commerce or tech are accustomed.

Operational Debt — even if Walmart can rewire their tech and their stores, mentally people will need to learn how to operate Walmart’s business differently. This exercise in neuroplasticity will be no easy feat.

The older we are and the more accustomed we get to doing things a certain way, the harder it is for us to rewire our brains to do something new.

Neuroplasticity is going to hit the old line leaders in Arkansas and those out in the company’s field organization like a kiss at the end of a wet fist. It will be hard for these leaders to adjust because, for their entire careers, they were only ever asked to manage incremental changes on Walmart’s old line business model.

The new omnichannel business model will not be incremental. It will be a murky step-change, replete with many complex incentive structures and new operating procedures. The mentally dexterous or curious will adjust to it, while the rigid will struggle mightily, which brings us to the next type of debt on the list, the most dangerous internal debt of all — cultural debt.

Cultural Debt — the people who do struggle adjusting cognitively to a new business model will do their damnedest to survive. They will not die off easily.

Some employees will try their best to learn a new set of skills, but the harsh reality is that many people will not be able to adjust to the new way of doing things and so they will get scared. They will get scared that the progressive ideas that they have difficulty processing will usurp them of their fiefdoms — i.e. their titles, their roles, and their financial meal tickets. This fear in turn will lead to perverse incentives, whereby employees will begin to act in their own self interests vs. the interest of the greater good, even potentially looking to sabotage efforts that could be beneficial in the long-term.

While we like to see the world through rose-colored glasses, the reality is that the employees that have difficulty seeing the good in the future will also be the same employees who try to derail progress and quell the prairie fires that most need to start.

2) Walmart’s Brand Debt — one type of debt deserves its own singular call out too, Walmart’s brand. Even if Walmart can get around the problems I mentioned above, Walmart’s brand could be too firmly entrenched in the mind of the American consumer.

Most people don’t go to Walmart because they love Walmart. They go to Walmart because they have to go to Walmart. Amazon, on the other hand, continues to engender more and more brand love every day because Amazon’s experience is so consumer-centric and frictionless. A trip to a Walmart store is anything but frictionless. Yes, Walmart stretches the paycheck of the average consumer, but it isn’t a particular inviting store environment.

Flashback to the early part of this decade — Walmart actually ran the inviting store experiment before. Walmart’s Chief Merchant back then, John Fleming, tried to overhaul Walmart stores via his Project Impact, but the Walmart customer did not respond.

So this begs the question — will the Walmart customer respond to experience upgrades now? Fleming failed with simple concepts like brighter stores and clutter-free aisles. How will the Walmart consumer react now as store experience overhauls are not just physical overhauls but are also overhauls that require different technological fluency as well?

The brand context might just be too sticky to overcome. How Walmart thinks about its “store of the future” plans in this regard will matter significantly (more on that later).

3) Grocery — take what I just said in #1 and #2, and now heap a big freaking load of your Thanksgiving leftover mashed potatoes on top of both them. Walmart’s grocery business is another enormous albatross around its neck.

While grocery does give Walmart a stronghold on America’s collective paychecks, grocery also could likely inhibit Walmart’s ability to pivot its stores’ omnichannel designs.

I foresee problems for three reasons.

First, grocery is just freaking hard. Freezers, coolers, wet racks, and bears — oh my!

Second, internally, it will be hard for leaders to consider innovative ideas that don’t solve the “grocery question.” Corporate inertia will bias them to think incorrectly that innovative ideas that don’t rewire grocery are only “half-solves” and therefore should not move forward. So any “store of the future” initiatives that Walmart might try to undertake could be bogged down by this phenomenon.

Third, as this bias potentially bogs down momentum, the competition will not stop. The competition, whether they are grocery focused or not (for our purposes let’s assume they are not) will continue to evolve and iterate without having to think about the “grocery question,” meaning current competitors and new entrants will work hard and fast to take Walmart’s share of the non-grocery business.

Walmart, therefore, needs to make sure grocery does not become a shackle around the ankle of progress, lest it also leave Walmart exposed at the flanks.

4) Store of the Future — speaking of a “store of the future,” what exactly are Walmart’s “store of the future” plans?

As I have mentioned before, “store of the future” is one of the most misunderstood terms in retail.

Generally speaking, store of the future initiatives entail one of three ideas: #1) An incremental pivot on your current store business model #2) An entirely new, disruptive, and scaleable store business model #3) A concept store initiative (akin to what you would see in the auto industry via the “concept car” approach).

Retail companies should always have bets placed in all three buckets to some degree, depending on where they are in their life cycle and how strong their business models currently are.

We have seen Walmart’s case #1 incremental ideas — e.g. order pickup towers, pickup in-store incentives, healthier food options, scan-and-go implementations, etc. but where and in what state of fidelity are Walmart’s store of the future plans?

What is Walmart’s idea that runs on entirely different retail metrics altogether?

We clearly don’t know. Walmart has not tipped its hand.

Yet.

5) Concept Store — we also clearly don’t know what Walmart is testing in the concept store arena either. Like its store of the future plans, Walmart has not debuted any full-scale concept car-like store initiatives at this point.

Concept initiatives are valuable because they are live experiments in front of consumers where retailers can walk on a tightrope with little risk. Amazon Go is a great example of a concept initiative, so is Nordstrom’s “local” installation in California. The idea is to try things, sometimes even crazy things, to see what sticks and to see what doesn’t. Some ideas will work, and some ideas will certainly fail, but the important thing is to learn from the experiments and to apply those lessons back into efforts #1) incremental pivots and #2) scaleable, disruptive ideas.

We have not seen Walmart’s plans here to date. Does Walmart have any? Is Walmart being smartly secretive (my guess actually)?

Or does Walmart’s silence tell us something?

Hard to say right now. But a concept initiative could be the single best way for Walmart to overcome its brand context issue because a concept store does not have to be a Walmart.

It could be anything.

6) Steroid PR — what we do know is that Walmart is in the press frequently right now. I think the scientific term is . . .

. . . a lot (my English teacher Mrs. Thiebert would be so proud).

It is almost like Walmart is deliberately trying to seed something in the media every few weeks — whether VR, groceries in your trunk, or pick up towers. I can’t fault the tactic either. It appears to be working quite well, as evidenced by the correlative run up in the stock price.

But, soon, very soon, just like the bald-headed James Tolkan said in Top Gun someone is going to have to cash these PR checks.

7) Lord and Taylor Mall WTF? — an example of something that raises my PR eyebrow is the recent announcement Walmart made surrounding its plans to start an online mall with Lord & Taylor.

Say what?

An online mall? Isn’t Amazon’s and Walmart’s marketplace already an online mall?

Or is Walmart trying to sell us a bag of goods that sounds like something cool but really isn’t anything like what is being pitched? Is Walmart really telling us that consumers are going to go to a new portal by Walmart to shop by subretailer? Can’t we already do that by searching for a particular brand or filtering for a brand on a website or on Google?

The value in this seems counterintuitive to me given how e-commerce works.

Or, maybe I am just dense, and I need someone to explain to me why this is cool vs. just PR?

I would love to hear what you think. I am skeptical. Feels like window dressing.

Walmart’s brand context matters here too.

8) Beverly Hills VR Showcase — along the same lines here, but from a slightly different angle, the recent Beverly Hills VR demonstration brings up some similar questions and then some.

Now, caveat, I was not at the star-studded VR gala (though I would have loved an invite), but the event does seem like more of the same — slam bam PR to some degree.

But, let’s assume, for the sake of argument, that the gala wasn’t just PR.

What’s concerning is not whether the PR is real or fluff. We can easily validate that. My colleagues in the press can start logging each announcement Walmart’s Store No. 8 makes and then check back in on each announcement three, five, seven, and even 10 years out, as Walmart highlights, and thereby determine if any of them have any real, discernible value at a later date.

No, what’s concerning is that a Beverly Hills “gala” (Walmart’s term, not mine) does not jive with Walmart’s brand.

Gala? Walmart? That goes together like Lebron and Kyrie.

While, admittedly, this dissonance could just be a further example of cultural and brand debt bias rearing their ugly heads when they aren’t really there, what if the potential issue is real?

Walmart’s heritage does matter here to some degree.

For Walmart to remain successful at its current scale, Walmart needs to appeal to mass-market America. Big wig parties at plush Beverly Hills mansions might play for right now, but flash forward a year or two from now and how will they play as store leaders are working overnight shifts to process freight as store traffic continues to be cherrypicked by e-commerce? Or as Walmart’s consumers struggle paycheck to paycheck to make ends meet?

Galas seem tone deaf.

Hold your showcases instead, Walmart, in places like Des Moines or Detroit, places that need your investment and that want to see you win.

Beverly Hills couldn’t care less.

9) Year 2 and 3 of the Marc-las Bromance — While Douglas and Marc are clearly bromancing the industry right now, the allure of the bromance could easily wear off by year 2 and most certainly by year 3.

One of my former mentors told me, “Year 1 is easy. How you comp or anniversary yourself in year 2 and 3 really tells me how good you are.”

Next summer will be an important proof point for Walmart on this time table, as will the summer after that.

Right now, everything Doug and Marc seem to do has the feeling of a newlywed couple — photoshoots, announcements, etc. — but should the bromance hit any proverbial forks in the road, the question becomes, “Will the bromance endure or will Marc and Doug start complaining about who left the toilet seat up, and will their friends (i.e.  Walmart’s Board) ever think it is time for an intervention?”

The ferocity with which the bromance got out of the gates only sets our expectations that much higher. If the bromance fails to live up to our expectations here soon, there could be short tempers and hell to pay on many sides.

We are a few years out from knowing if Marc-las is Paul Newman and Joanne Woodward or just Brangelina.

10) The Flywheel Fight to the Death — brace yourselves for a war.

I have posted Amazon’s flywheel many times.  Here it is again, courtesy of the Motley Fool:

amazon-flywheel-cycle_large

For all intents and purposes, Walmart appears to be running the same flywheel playbook as Amazon. Walmart’s recent acquisitions (Hayneedle, ModCloth, Moosejaw, etc.) indicate that Walmart is keen on increasing its assortment selection as quickly as possible.

The move might make sense strategically. Walmart’s stores are firmly implanted across America, giving Walmart a supply chain that could ultimately be more powerful and flexible than Amazon’s, but this fact is not a given.

As much as I would like to see an all out c*ck fight between Marc-las and Seattle Jeff, I hope there is more to the strategy than trying to get into an all out price and selection war with Amazon. While Amazon and Walmart may be able to endure an all out war for a long time, the collateral damage on the rest of the industry could be disastrous.

America and the industry in total need there to be more to Walmart’s strategic plans than what we have seen thus far.

So far we have only seen a traditional e-commerce play to bolster Walmart’s ranks.

This play is good for a stock price run up to $100, but we need more.

The omnichannel play is not yet apparent, and it will need to be soon.

In conclusion, my sincerest hope is that the above highlights not just what Walmart, but what all retailers and what all of us as consumers might want to keep top of mind right now.

Don’t forget too — my “loves” far outweigh my “don’t loves” of Walmart right now. Walmart deserves a ton of credit for jumping into the omnichannel water head first.

No matter what side of the Walmart love fence you come down on, we can all learn from the Walmart experiment.

We should all be careful students of Marc-las, if even just for the hyphenation.

Be careful out there,

Chris

P.S. Next week I plan to republish The 10 Things I Think I Think I Love and Don’t Love about Walmart Right Now in its full long-form format. Please help me to get the word out about this upcoming post by sharing your feelings about Omni Talk within your social networks. Your recommendations and encouragements to subscribe to Omni Talk give me the inspiration to keep on blogging away every week. I am hoping the full length Walmart post will be Omni Talk’s most read post yet — please help to share the word!

P.P.S. I am considering developing some new content for my faithful Omni Talk subscribers surrounding retailers’ quarterly earnings statements. I would love to know what retailers you would most like me to follow each quarter. Please leave your thoughts in the “leave a reply” section below.

My content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this blog or any other website for that manner, and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

Chris Walton View All

<p>Chris Walton is an accomplished Senior Executive with nearly 20 years of success within the retail and retail technology industries. He is well-versed in merchandising, store operations, inventory management, product design, forecasting, e-commerce, pricing and promotions, and tech product development.</p>
<p>Chris was most recently a Vice President with Target, where he led the retailer’s Store of the Future project and also ran the Target’s home furnishing division for e-commerce. He previously worked for GAP, Inc., as a Distribution Analyst and Manager.</p>
<p>Chris holds a BA in Economics and History from Stanford University, and a MBA from Harvard Business School.</p>
<p>He likes to dress as Darth Vader for Halloween, and his wife also frequently asks him to ask Alexa, “to turn off the music.”</p>

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