With a Walmart store within a 10-mile dash from every consumer in the U.S., and a split-second key tap away, they have clearly established a dominant retail position, saturating most of the country physically and accelerating its growth online.

So, Wall Street says, “Great, but what have you done for me lately?” And since Walmart doesn’t rest on its laurels, their CFO, John Rainey, speaking at a recent Raymond James Conference, said, “the company expects a higher percentage of its sales and profits to shift to ad sales, third-party marketplace sellers, and B2B services.” driver of continuous innovation that elevates their value and therefore will justifies the higher fees for their new services.

We are in the early stages of a major disruption in the world of retail advertising. Amazon Advertising and Walmart Connect are the two leading forces that are fundamentally changing retail marketing communications.

New Mad Men

Advertising, or RMN (Retail Media Networks), is a recent strategy adopted by large legacy retailers, and is now beginning to accelerate. It’s a no-brainer, given the fact that ad/media agency margins are typically 70 to 80 percent, while Walmart retail is roughly around 4 percent. And since the success of advertising is measured by traffic to its stores and online, Walmart expects ad revenues to increase 42 percent in 2023 through “Walmart Connect.”

Revenue increases are also expected from Marketplace and the increasing number of third-party marketplace vendors (10,000 pre-pandemic to 150,000 at the end of 2022). The new revenues will come from the sheer number of vendors and their related fees. To serve these vendors, and as Walmart’s supply chain and fulfillment systems continue to become more efficient and effective, Walmart has been increasing vendors’ fees, for what they are calling B2B services. And, of course, its 4700 stores in the U.S. are a big driver of continual innovation, which also elevates the value and therefore, the fees for their services.

Retail Advertising Disruptors

It’s difficult, if not impossible to exclude either Walmart or Amazon in any report focused on one or the other. They are the two elephants in the room locked in battle. Just as Amazon and its digital marketplace continue to disrupt and transform the retail, legacy publishing, and broadcast industries, we are in the early stages of a major disruption in the world of retail advertising. Amazon Advertising and Walmart Connect are the two leading forces that are fundamentally changing retail marketing communications.

Ad Agency Reset

Amazon Advertising was a pioneer and now the largest mover with its own retail advertising agency business, logging in at $20.6 billion in 2022 up from $10.9 billion in 2020,.

Walmart Connect is a distant second at $2.7 billion in 2022. However, Walmart’s ad business grew a whopping 130 percent over 2020. And there are reasons to believe that Walmart’s meteoric pace will accelerate. One reason is Walmart’s sheer size and physical dominance. Each week about 220 million customers and members visit Walmart online and in approximately 10,500 of its stores and clubs under 48 banners in 48 countries. This network provides an enormous reach for potential advertisers, both online and in store. And let’s remember that behemoth Walmart serves 90 percent of U.S. households.

Another reason is Walmart’s proprietary deal with the best-in-class ad tech firm, The Trade Desk. Unlike other demand-side platforms (DSP), Walmart’s unparalleled first party omnichannel data, combined with its walled-off exclusive relationship with The Trade Desk’s superior analytics capabilities, will provide advertisers with more efficient and effective messaging — essentially deep personalization at the point of purchase.

In a recent earnings call, Doug McMillon, Walmart CEO, said that Walmart Connect is a “high margin” business that will continue to grow alongside the retailer’s Marketplace to eventually “become a top 10 ad business in the mid-term.” This is particularly important as privacy protocols are changing and the owners of first-party data will be the winners. Cookies are on their way out; new privacy regulations are being enforced, and Apple has imposed user security features to mask IP and block cookies including ads. Being your own advertising agency only makes good business sense. And above all, Walmart is invested in anticipating the future.

Walmart Connect in Poised to Outperform Amazon Advertising

Walmart may be second to develop a large-scale advertising platform, but I do believe their strategy, along with CEO Doug McMillon’s vision and commitment (confirmed by their growth trajectory), cannot be matched by Amazon.

As mentioned, Walmart Connect’s advantage is Walmart’s sheer size and reach. However, it is also their ability to gain a more holistic and deeper understanding of each consumer’s shopping behavior through data analytics from their fleet of stores., integrated with digital data. Therefore, Personalized advertising messaging can be integrated online, in store, and even adjacent to pick-up points. Walmart calls it a “closed-loop,” omnichannel media environment. Advertisers can get their messaging in front of shoppers right when they’re making purchasing decisions – anywhere in the Walmart ecosystem.

Walmart Connect’s second significant advantage over Amazon Advertising is its exclusive partnership with The Trade Desk. Walmart’s expansive, unified, first party data, including past and predictive purchases and brand-level, in-store and online shopping behavior data provide a differentiated offer to advertisers. With such closed loop reporting, advertisers can gain great clarity about the performance that their omnichannel ad efforts are having throughout all points of the customer journey, both on and offline. And at the end of the day, Walmart Connect gives advertisers a more complete picture of how specific digital and in-store ads play the greatest role in increasing sales conversions. The wealth of data insights guides strategic decisions for optimizing both current and future campaigns and determining which channels warrant the greatest percentage of an ad budget.

Just the Beginning

As for the rest of the industry, I know there are many more retail media competitors. It only makes sense that when advertising control transfers to the retailer disintermediating agencies and third-party marketers, the retailer is in direct control of the customer experience with opt-in personalized insight and intelligence.

Operating in the digital marketplace requires savvy retailers to reimagine their marketing and advertising strategies to up their games. Amazon Advertising and Walmart Connect are already ahead of the curve and the rest of the industry may be stuck playing catch-up.

When Walmart purchased Marc Lore’s Jet.com online business in 2016, it was supposed to be the start of an amazing new ecommerce strategy for the world’s largest retailer.

It hasn’t quite worked out that way.

This week Walmart announced it sold its Moosejaw outdoor business to Dick’s Sporting Goods, marking one more divestiture of Lore’s vision to onboard a group of niche higher end brands and make Walmart.com a true competitor to Amazon. Along with Moosejaw, Lore oversaw the acquisitions of Bonobos, ModCloth, the Shoes.com URL and several other boutique-type brands. Walmart also began operating Lore’s Jet.com online business, running it in tandem with Walmart’s own site.

Lore-less

Now, many of these brands are gone, blended into the bigger Walmart operation, or just deemphasized as to be almost invisible. These moves come as Walmart has largely abandoned Lore’s (and Lore himself) plan to drive the retailer’s online business with more upscale brands. Instead, under CEO Doug McMillon, it has used grocery as its lead to attract digital customers, also offering Amazon-like tactics including its Walmart+ membership club, one-day sales events and faster deliveries of basic goods. The strategy has been quite successful for Walmart and while it continues to trail Amazon by a significant margin, it is growing faster than its rival and expanded its online business significantly (although like most retailers it declined a bit this past year as consumers returned to in-store shopping).

These niche brands were a terrible fit for Walmart. Their upscale positioning was a serious disconnect for most Walmart shoppers and the size of all of these brands for a $500 billion company was essentially a rounding error in the bigger picture.

The Lore strategy began to be dismantled several years ago, most notably with the closing of Jet.com itself in 2020, four years after buying it for $3.3 billion. What still existed was folded into Walmart’s own online operation and if you go to Jet.com now, it immediately takes you to the Walmart site. Lore himself left the company in January 2021 and since then has been working on several startups, including a food delivery service called Wonder that prepares its meals in trucks en route to customers. It has had a limited rollout and just recently announced it was eliminating the mobile kitchens and moving to more traditional cooking facilities. Makes you wonder if Lore is a one-trick pony in the food delivery category.

Moosejawed

Moosejaw’s sale to Dick’s, for an undisclosed price, marks the latest Lore brand to go. Modcloth was sold in 2019 and both Bare Necessities and the Shoes.com name were also unloaded. Walmart retains Bonobos although its founder Andy Dunn left several years ago.

For Dick’s, it’s an unusual move as the sporting goods retailer has rarely done acquisitions. While most of Moosejaw’s business is online, and that is where Dick’s is expected to concentrate its efforts in connection with its Public Lands brand, the brand also operates about a dozen stores, primarily in the upper Midwest.

Walmart has long said that buying Jet and bringing in Lore helped it gain knowledge and expertise in the ecommerce field, though in hindsight, it ended up going in an entirely different direction than Lore was taking it.

And now the reversal of Lore’s dream of fortunes continues.

Amazon has wasted the past several years and billions of dollars fiddling around with testing physical stores of all types and failing (a couple of Amazon Style stores are still breathing). It also over-predicted growth following the pandemic and retreated by shedding thousands of jobs and cancelling the planning and construction of unnecessary DCs. And Walmart marches on.

But First, a Word About Visionaries

Here’s a lesson that keeps on giving: Visionary and genius entrepreneurs like Jeff Bezos can “parachute in” from some imaginary futuristic world that we common folks could not even begin to comprehend. They lay their magical “golden egg,” it hatches, and the world of finance goes wild. And if they’re lucky, they get sucked into the money funnel which quickly swirls upward, past Unicorn status, to, well, Amazon’s speed of light. But be careful, speed kills.

In the fourth quarter, the Walmart prototype store received 31.2 percent more visits than the average Walmart received during that period. And it received 66.6 percent more visits than the average Target received during that time.

The real tricky thing for these entrepreneurs is to know when the meteor they are riding on is reaching the height where it needs to be reined in before it burns out. That means being disciplined, organizationally structured, and strategically planned for long term profitable growth. Timing is everything and if the entrepreneur is smart, he or she steps aside, eases into the board or leaves. If not, the brilliant, visionary business model can flame out as fast as it scaled. And there have been so many of those in this tech era we are living through. Whether or not Mr. Bezos stepped aside soon enough remains to be seen. His successor, Andy Jassy seems to be the professional businessman Amazon needs to define a new model going forward. We will watch closely for what his physical retail vision is once he stabilizes many wobbly parts throughout the rest of the enterprise.

Walmart Scores Another Win

The “box” Walmart is checking is literally the consumer-friendly redesign of select stores throughout their massive fleet. As a reminder: Walmart has a large brick-and-mortar footprint with 3,572 Supercenters, 600 Sam’s Clubs, and more than 5,300 retail units overall in the U.S. as of late October 2022. That scale equates to a Walmart store within 10 miles of 90 percent of the U.S. population. So again, while Amazon “fiddles,” Walmart continues to blast away, increasing both the accessibility and the desirability of its integrated, omnichannel platforms.

Another Walmart edge is the fact that it already owns the number-one share of the U.S. grocery market, at about 25 percent. And in the past two quarters, about 75 percent of its market share gains in the food category have come from households that make more than $100,000 a year, according to Chief Financial Officer John David Rainey. So, the calculus among Walmart’s executives is that if those shoppers were attracted beyond the grocery space to an inviting, updated store design with exclusive brands, they may become new (and more likely), higher-paying customers.

Stores with sophisticated lighting, fashion-forward merchandising, mini-vignettes, and engaging displays of beauty products present a more compelling destination for higher end shoppers to browse and purchase higher-priced products. Being modern rejects the “pile high and let it fly” last century discount model.

“Walmart was kind of a one-trick pony,” said Scott Mushkin, a retail analyst, and CEO of R5 Capital. “They were always about price and yes, what they’re now doing is still led on price. But they’re starting to accelerate the dynamics in stores that matter to other people, along with value.”

Mushkin has been a critic of Walmart for its sloppy stores. But he said store leaders and employees are turning things around. And he said that along with featuring more attractive shelving and evocative displays, Walmart has also shown its savvy by working with well-recognized brands and developing more stylish private brands.

And according to data from Placer.ai, an analytics firm that uses anonymized data from mobile devices to estimate overall visits to locations, Walmart’s new store design is resonating with shoppers. Placer.ai data from Walmart’s original prototype shows that visits have been much higher than in an average Walmart or Target location. In the fourth quarter, the prototype store received 31.2 percent more visits than the average Walmart received during that period. And it received 66.6 percent more visits than the average Target received during that time.

In surveys conducted by Walmart, nearly every shopper said the store’s displays and mannequins encouraged them to browse longer. “They appreciate the fact that we’re still true to who we are as Walmart,” a spokesman said. “Great prices. But then also we now have these new brands that we’re actually showcasing in inspirational ways.”

Amazon’s Big Challenge

Jassy in his new role is going to have to make a huge decision. If he envisions Amazon as a major player in retail, in my opinion, he must make the decision to expand into physical retailing. And physical retailing that offers an experience, not just a transaction. A physical store that is appealing, welcoming and staffed with helpful, stylish salespeople. As I have said before, he should acquire his way into it versus investing billions of dollars in capital and years of building out their own stores. If they don’t acquire, history is likely to repeat itself with stores that fail and stores that lack soul and inspiration.

I say, good luck Amazon.

Walmart is making fashion a priority. The strategy is to pursue niche DTC brands, and primarily those that have appeal for younger, higher-income consumers. According to an Insider article, DTC brands like Harry’s, Casper, Olly, and Quip all chose to debut in big-box retail at Target. Even though Target has a smaller footprint, their customer base is wealthier, and Target focuses on design with dedicated teams for emerging brands.

Image Reset

Unlike Target, Walmart’s image has always been the quintessential everyday lower price model. Because of its focus on products and categories that fit the strategy of high turn, high-volume basics, its systems can only accommodate vendors’ goods that could service that model. And, of course, the young DTC brands cannot. Walmart intends to work with up-and-coming brands to accommodate their size and distribution barriers. And according to Insider, “Walmart is emerging as the go-to retailer for DTC brands expanding into big-box stores.” With those barriers eliminated, emerging brands envision Walmart as “ride rocket ride.” Just a reminder, NRF data shows that Walmart is the largest retailer in the U.S. with sales last year of $459.5 billion, while runner-up Amazon delivered $217.8 billion in sales, and Target clocked in at $93.5 billion.

According to Incandela, “We know that the Walmart customer is looking for fashion brands; she’s willing to spend more and we want to make sure we have what she’s looking for.” She then noted, “We should be her preferred fashion destination, especially in these inflationary times when it’s critical that Walmart be focused on the customer and our ability to offer high quality, stylish apparel, and accessories at incredible prices.”

The Walmart Start program was created as a beauty brand accelerator program that sets smaller brands up for success by giving them a chance to launch at Walmart. The program also gives these brands access to invaluable tools like virtual classes, professional mentorships, and activation support. Walmart’s strategy is that on-trend emerging beauty brands will compel younger and higher-income customers to shop in its stores or online. In its launch even though there may be a limited selection, the promise is that these new customers will also spend time shopping around the rest of the store.

The Next-Gen Shopper

Co-founder and managing partner of Selva Ventures, Kiva Dickinson, says, “The reason Walmart is making this concerted effort is to make sure that younger people are in the store and, once they’re in, are incentivized to browse. They have so much more to gain from spending more time in that box. We’ve seen brands do more than $5 million in sales in their first year at Walmart or more than double their DTC sales.”

The race to get on Walmart’s rocket (apologies to Blue Origin) is just beginning. New upscale food, beauty and personal-care brands are entering or expanding. Bubble, a Gen Z skincare brand and DTC razor brand Billie recently entered. Owyn, a vegan-protein shake brand expanded its presence from 1500 stores to 4500 in August. There’s a rush to the Walmart Start program; the 2022 program plans to get five “buzzy” young beauty brands into 1000 to 3500 stores by next year.

Denise Incandela Takes Walmart Fashion to a New Level

I wrote in July Walmart Fashion: No Longer An Oxymoron Walmart Fashion: No Longer an Oxymoron (therobinreport.com) that “As recently as five years ago, I would have said that Walmart fashion is an oxymoron. Denise Incandela joined the value behemoth in 2017 and is now Executive Vice President, Apparel and General Merchandise Private Brands, Walmart U.S. From that moment on, I knew it was the beginning of fashion’s ascendance for Walmart. She has made a remarkable impact on Walmart fashion over the past five years.”

I just interviewed Denise an hour ago in Alvanon’s Tech Fest, an annual conference attended by thousands of fashion industry retailers and brands around the world, along with senior and C-level speakers from each of those industries. My interview with Denise ended the Tech Fest program, and the following is a distillation of our conversation. As you will read, Denise and Walmart Fashion are on the move.

I opened with an overview of Denise’s career and Walmart’s fashion business. She has been widely quoted and in the past, she said three things that really stand out:

1. She has always considered herself a “transformational change agent.”
2. She felt she had “a keen sense of what was coming down the pike.”
3. About joining Walmart, she said it was “an extraordinary opportunity to do something that hadn’t been done before.”

She went into more detail in our conversation: “I’ve always been excited to lead transformational and even innovative opportunities, starting when I joined Saks Fifth Avenue to lead its digital business – when luxury wasn’t yet online – then Ralph to lead its global digital business – to transform an American brand – and now Walmart.” She added, “Walmart has a significant apparel business but was focused on basics and opening price point. There is substantial opportunity for Walmart to expand beyond its core assortment of opening price point to higher AURs – and even fashion – to obtain more of our customers share of closet.”

The Walmart customer is very different than the customer Denise served in prior positions at Ralph Lauren and Saks Fifth Avenue. I asked her how she went from building customer relationships with premium brands to reaching a mass market customer that is price conscious. She responded, “I loved working in luxury, but we only served and impacted the top 1% of this country. The Walmart customer represents America. Millions and millions of people go through our doors every week. It’s an extraordinary privilege and honor to impact America and how it dresses. It’s a completely different scale and feels like a ‘change the world’ opportunity, which is incredibly motivating.” She added, “All women (and men) want to look and feel great, no matter their style or budget. We know that the Walmart customer is looking for fashion brands; she’s willing to spend more and we want to make sure we have what she’s looking for.” She then noted, “We should be her preferred fashion destination, especially in these inflationary times when it’s critical that Walmart be focused on the customer and our ability to offer high quality, stylish apparel, and accessories at incredible prices. This all feels like the culmination of my career.”

Denise’s promotion to EVP of Apparel and Private Brands at Walmart broadened her responsibility beyond eCommerce to include the elevation of fashion in stores as well. I asked her how she brought an overall fashion perspective to Walmart and what are some of the major initiatives that have been part of her strategy.

She responded with an extensive list of initiatives. Here are the highlights:

• Assortment transformation. Walmart added more than 1,000 brands across Walmart.com and physical stores, which includes national and exclusive elevated brands. The national brands include Reebok, Celebrity Pink, Justice, US Polo Assn., Kendall + Kylie, Levi Strauss, Champion, and Jordache. And the elevated brands include Scoop, Free Assembly, Sofia Jeans by Sofia Vergara, Eloquii Elements, Bonobos Fielder, Love & Sports, and Moosejaw.
• Design talent. This includes exclusive partnerships, that advance Walmart’s assortment fashion credibility, featuring Brandon Maxwell (Free Assembly and Scoop), Michelle Smith and Stacey Griffith, (Love & Sports), and Sofia Vergara (Sophia Jeans).
• Shopping experience transformation. Walmart is re-imagining in-store, online, and omni services to improve traffic and conversion
• The store experience. Walmart’s Store of the Future will change the way customers experience fashion in stores. Everything is being reimagined: branded shops, mannequins, new lighting, fixtures, visual merchandisers. In-store creative will showcase national brands and RFID technology in stores will deliver better on-hand accuracy.
• Online experience. The overhauled online experience includes 360 Spin and Fit Predictor technology, and the game-changing virtual try-on technology, Choose My Model. And today during our conversation, Walmart announced the next phase of their personalized virtual try-on technology with Be Your Own Model, an industry leading technology that brings the in-store fitting room experience to online shoppers.
• Omni experience. Customers can buy online and pick up or ship from store.
• Marketing and creative transformation. Shoppers will experience new imagery, be advised by influencers, and Walmart will run ads in Vogue.

So, although Denise entered Walmart prior to the Walmart Start program, her initiatives are designed to amplify the appeal to younger and higher-income consumers. She has already made her mark on this venerable retail giant convincing the C-suite that they could, in fact, up their game and elevate their image. She said in a CNBC interview, “We’re at the beginning of the journey, we have a lot of work to do.” And I’m sure she will not only do the work but exceed our expectations.

As recently as five years ago, I would have said that Walmart fashion is an oxymoron. Denise Incandela joined the value behemoth in 2017 and is now Executive Vice President, Apparel and General Merchandise Private Brands, Walmart U.S. From that moment on, I knew it was the beginning of fashion’s ascendance for Walmart. She has made a remarkable impact on Walmart fashion over the past five years.

Incandela Ascendant

Incandela’s stints in senior positions at Saks Inc., Ralph Lauren, and CEO of Aerosoles represented the kind of leadership and apparel expertise that Walmart needed. Ironically, Incandela entered the world of business with an MBA degree from Wharton. In an interview with Glamour in 2019, she said, “It’s kind of funny—if you’d asked me when growing up what I would be doing, I would have assumed it would be finance. I was a finance undergrad, a finance MBA.” And she did follow a traditional financial path, working at McKinsey and Company, the iconic consulting firm. One of her clients was Saks Fifth Avenue, which ended up hiring her. Thus, her immersion into the world of fashion.

Incandela described her new job at Walmart as, “the opportunity to do something that hadn’t been done before, and to break all status quo. Being able to come here and build a formidable online fashion business at accessible price points, where Walmart fashion was pretty much what was in the stores, it’s an extraordinary opportunity.”

About her initial job with Walmart, she said, “I consider myself a transformational change agent, every opportunity was a transformation within its own right. When I was at Saks, no one believed that people would buy apparel online—forget luxury apparel. From my own point of view, I always felt I had a keen sense of what was coming down the pike, that I could sense from a macro point of view what the macro trends were faster than others. It was never an ‘if.’ It was always a ‘when.’”

Walmart Makeover

While 60 percent of Walmart’s revenues are from its grocery business, the margins are much higher in apparel and other product categories. So, prioritizing growth in apparel is a no-brainer. As is hiring an experienced pro to make it happen, just as Walmart sped up its ecommerce business by acquiring Jet.com, and more importantly, its founder and CEO, Marc Lore. Lore did strategically reposition Walmart’s ecomm business, and with a “mission accomplished,” he moved on. Walmart’s digital growth has been in the double digits.

There is a lesson here compared to Amazon’s flailing around to become brick-and mortar-retailers in grocery, apparel (and other now closed stores), as well as their mediocre initiatives in fashion. My opinion about the reason for the physical store struggles is that there are no experienced retail professionals in Amazon’s leadership ranks. And the newly appointed President of Amazon fashion has 14 years of experience at Amazon, primarily in technology and operational teams. Just saying. The path of retail failures across the industry is littered with CEOs and senior executives who simply lacked retail experience.

Walmart Style Guide

Incandela described her new job at Walmart as, “the opportunity to do something that hadn’t been done before, and to break all status quo. Being able to come here and build a formidable online fashion business at accessible price points, where Walmart fashion was pretty much what was in the stores, it’s an extraordinary opportunity.” She was referring to her initial role upon joining Walmart in 2017. Her appointment as EVP of apparel and private brands broadened her responsibility to include the elevation of fashion in stores as well.

In 2019, Incandela made a presentation at a “Wharton Women” event where she laid out her three key business strategies for success:

Look Stylish

She first noticed how unappealing Walmart’s online presentation of fashion was, which she quickly changed to a more modern, upscale, and stylish approach. She also pursued partnerships with other brands to gain market share. Among them were Sofia Jeans, (with Sofia Vergara), EV1 (with Ellen DeGeneres), and the Scoop line. And since these collaborations leaned into current trends, they also elevated price points.

Build Credibility

Although Walmart is an established brand, fashionable apparel is not their main product  offering, Incandela said, “We needed to establish ourselves as a credible destination for fashion.” She cited the importance of moving beyond traditional marketing methods to appeal to a younger customer base and gain their trust. For example, social media influencers were an effective way to increase credibility and generate positive exposure. With tens of thousands of followers, influencers can produce an impactful ripple effect.

Be Convenient

With Amazon and other companies moving towards shorter shipping times, convenience is essential to remain competitive. Incandela highlighted how working with a company’s core brand and building on its foundations are integral components to the success of a new venture. Walmart’s impressive omnichannel portfolio, with its brick-and-mortar locations, online shopping platform, buy-online-pickup-in-store (BOPUS), and ship-from-store options, provide an accessibility advantage.

Incandela believes that Walmart’s new fashion direction is the epitome of the brand’s tagline of ‘Save Money, Live Better.’ “I was excited at the opportunity to have a higher purpose by providing great clothes at an exceptional price point,” she said.

While one could say these are fairly obvious strategies for transformation, implementing them becomes the challenge. So, let’s take a look at some of the initiatives and innovations that have redefined Walmart’s style.

The Incandela Initiatives

• Denise helmed the expansion of Walmart’s apparel assortment to provide customers with on-trend options no matter their style or budget. She’s built and launched Walmart’s successful Exclusive Elevated Brands portfolio, including Scoop, Sofia Jeans by Sofia Vergara, Free Assembly, Eloquii Elements, Bonobos Fielder, and Love & Sports (created by Michelle Smith and Stacey Griffith). In addition, she helped bring more than 1,000 popular national brands to Walmart’s online and in-store assortment, including Levi Strauss, Champion, Reebok, Jordache, Celebrity Pink, Justice, Lee, Kendall + Kylie, US Polo Assn, and more.
• For the first time in Walmart history, she brought on private brand design talent, tapping acclaimed American fashion designer Brandon Maxwell as creative director for Walmart’s elevated apparel brands, Scoop and Free Assembly. Denise also brought on external agencies and leverages designers from Walmart’s Direct to Consumer (DTC) brands to drive creative vision behind some of Walmart’s most popular private label fashion brands
• Under her leadership, Walmart entered the popular and sustainable fashion resale market through a retail partnership with thredUP and Linda’s Stuff
• With a passion for innovating within the fashion space, Denise championed and drove new advancements by acquiring Zeekit, an Israeli female-founded startup, and its cutting-edge virtual fit platform. Leapfrogging the competition as the first major, national retailer to bring this real-time imaging technology to its online customers with Choose My Model, Walmart is looking to solve what has historically been one of the most difficult things to replicate online: understanding fit and how a garment will look on your body
• She has overhauled Walmart.com’s online shopping experience by building and launching new online fashion features such as trend editorials, 360-degree spin, and Fit Predictor technology to make Walmart’s online platform an even more competitive shopping destination
• The new Store of the Future launching in a handful of markets will include mannequins, new lighting, fixtures, and visual merchandisers that will change the way customers experience Walmart fashion in stores
• She is rolling out RFID (Radio Frequency Identification) technology and new omnichannel services, such as buy online and pick up or ship from store, to enable customers to shop where, when and however they like
• Denise recognized the opportunity to expand influencer marketing in a big way, leveraging influencers to help shift perception and drive awareness of Walmart’s fashion offerings, as well as tapping into the social shopping ecosystem and opportunities it provides, Denise drove the launch of @walmartfashion to reach customers across social platforms

Three of Walmart’s private apparel lines are $2+ billion brands. And Denise continues to roll them out into select stores among their 4700 store fleet. Walmart CEO, Doug McMillon said in a Q4 earnings call that fashion apparel was one of their fastest growing categories

What’s Next?

Incandela said in a CNBC interview, “We’re at the beginning of that journey,” she said. “We have a lot of work to do.” And I’m sure she will not only do the work but exceed our expectations.

I can’t close this article until I once again emphasize that Amazon, although achieving the number-one position in ecommerce apparel sales, is still fiddling around in the physical world of retailing and they will never break through as a true “fashion” source because of the lack of professional fashion leadership.

With Denise Incandela as one of the many leaders with professional expertise at Walmart, they will continue the drumbeat of growth in all categories, ultimately becoming Amazon’s biggest migraine.

If Walmart and Target are canaries in the retail coal mine, maybe there’s a third canary in the economic coal mine named Elon Musk who recently said we are already in a recession. Think what you will about Mr. Musk and his eccentric and stratospheric imagination … maybe he’s right. My friend Richard Baum, Managing Partner of Consumer Growth Partners, reminded me that “It’s pretty common knowledge that by the time the government officially declares that we are in a recession, the country is usually on its way out of it. Not real genius on Elon Musk’s part for that observation.”

Financial Chaos

The crash of Walmart and Target’s first-quarter operating margins unveiled last week (well below what their respective CEOs expected) with only modest sales gains, led to their biggest single-day stock market declines since Black Monday in 1987. It also bled through the retail sector in general, driving selloffs. Worse, as reported by the NYT, last week’s selloff of both the Dow and S&P 500 “nearly ended the bull market that began after the start of the pandemic. It has been decades since stocks have fallen for such a prolonged period. The Dow Industrials notched their eighth straight weekly loss, the longest streak since 1932, near the height of the Great Depression.” Yikes! And yikes again. “The S&P 500 and Nasdaq had their seventh straight weekly loss, their longest such streak since 2001, after the dot-com bubble burst. All three indexes finished the week down at least 2.9 percent,” continued the report.

Just as we were unable to recognize the Covid canary, we absolutely did not see a supply chain breakdown that continues to this day. Likewise, we didn’t see the Ukraine canary with the Russian invasion, which is disrupting the global supply as well as distribution of oil and agricultural commodities.

The Canaries

Walmart and Target are canaries since roughly 70 percent of GDP growth is consumption. And since retailers are on the front line, so to speak; and these two giants are bellwethers for the entire retail sector, one could make the case that when they lose oxygen (aka business) it is a recession foretold.

The pandemic wasn’t a canary until we realized it was, and much too late. In hindsight, if we had known how long and deep it would extend globally, and the level of disruption and destruction it would inflict, we could have prepared for it. Instead, we only reacted. And the blunt instrument we used to literally save our economy was a firehose of trillions of dollars directly into the hands of citizens and businesses to prevent another 2008 meltdown.

That playbook did maintain the economy on a slow growth trajectory. However, just as we were unable to recognize the Covid canary, we absolutely did not see a supply chain breakdown that continues to this day. Likewise, we didn’t see the Ukraine canary with the Russian invasion, which is disrupting the global supply as well as distribution of oil and agricultural commodities. Let’s keep going. There are multiple canaries staring us right in the face. We didn’t plan for the U.S. commitment of over $50 billion worth of weaponry and humanitarian aid to Ukraine (so far). And we didn’t anticipate China’s zero-Covid policy resulting in massive lockdowns, which have and will continue to disrupt global supply chains. On that front, we still don’t know the extent of the China factor that is exacerbating the ongoing post-pandemic supply chain mess.

Connecting the Dots

Long story short, consumers amassed over $2 trillion (just think about that) in their savings accounts from the Fed’s pandemic firehose with enough money left over for spending. But no one connected the dots to understand how supply chains were getting totally screwed up post-lockdown and how consumers would behave once they were liberated.

Retailers were totally inventory-challenged, mostly guessing about supply and consumer demand needs, and when and where the supply needed to be delivered. No surprise here. Businesses in general, and particularly retailers across all sectors, had much of their supply sitting in cargo ships offshore waiting their turn for days and weeks to unload in seaports. And then there was a shortage of trucks and truckers to distribute the goods. Furthermore, the goods sitting in those ships were dated quickly and ended up as irrelevant to what consumers wanted and needed once they started shopping again.

Misjudging where and what consumers would be spending, Walmart’s inventory increased by 32 percent and Target’s shot up 43 percent. The result? Too few or too many goods, or the wrong goods to meet the demands of consumers, flush with cash and higher wages. The next result? Inflation. The result after that? Rising costs for production, logistics and distribution of goods (particularly oil, gas, commodities, and groceries). And the final result? Rising prices and declining sales and profits. We’re in a negative feedback loop that, if it continues spiraling downward, will lead to a recession.

How can a recession be avoided? Theoretically by the Federal Reserve “artfully” raising interest rates to reduce demand, which seems counterintuitive as it also dampens growth, particularly in high-ticket items like home mortgages, automobile loans, and credit card interest. So, one could say that even if the economy does not slip into a textbook definition of recession with the GDP falling for two successive months, it is still a downturn that will have a significant impact on all consumers.

Chasing Inflation

How would you like to be Fed Chairman Jerome Powell who is expected to defeat inflation without causing a recession? Before Russia’s invasion and China’s zero-Covid policy, Powell stated that inflation would be transitory. However, as more and more unexpected global catastrophes began to unfold, he then recalibrated and said he would likely hike interest rates sooner and higher than originally thought necessary.

According to PIMCO, the inflation rate in March was about 8.5 percent, dropping to 8.3 percent in April, and back up to 8.54 percent in May. Kiplinger predicts the inflation rate will ease over the rest of this year but will likely end 2022 at a still high rate of about 6.3 percent. And in 2023 the rate should fall faster, down to 3.0 percent by the end of the year.

Consider this:

• The higher cost of housing will keep inflation rates elevated for some time to come. Gasoline prices and heating costs are likely to stay high for a good while because of the war in Ukraine, but they may plateau instead of continuing to climb.
• The prices of cars and trucks will also stay at a high level until the semiconductor shortage ends sometime next year.
• Continued spot shortages of various items will drive their prices up, adding to the overall inflation rate. The latest is a shortage of baby formula.
• Continued inflationary pressures will likely spur the Fed to keep hiking short-term interest rates. Short rates will likely reach 2.5 percent by the end of the year.
• The 10-year Treasury note has already risen to 3 percent in anticipation of the Fed’s hikes but may edge up further.

Retail Futures

How will all this impact the retail industry? Moody’s Investors Service said, “We expect sales to increase two to four percent, while operating profit is set to decline one to three percent over the next 12-18 months.” They lowered their outlook to negative from stable for the U.S. retail and apparel industry.

Granted those numbers are predictions, and since their crystal ball is full of more data and logic than mine, they may be close to accurate. My prediction is slightly more prosaic: Because we didn’t anticipate a cage full of canaries let loose on the world, we did not prepare for them. And by not connecting the dots to what these canaries symbolize and can disrupt, we are still racing to adjust and react to them. My take is less about the numbers and more about the strategic need to be prepared for the future, not catch up to it. Scenario planning aside, a lot of this is practicing good common sense.

Oncoming Trains

At the end of the day, most of the guesswork and action must come from the brilliant minds in the Fed. Hopefully if Powell raises rates “artfully” enough to contain and stabilize a potentially runaway inflationary spiral (as opposed to using a sledgehammer) we can avoid a deep recession. For the record, during the 1970s, when the inflation rate grew from 5.5 percent culminating at 14 percent in 1980, then Fed Chairman Paul Volker used a sledgehammer and in doing so, he slammed the U.S. into a recession that lasted through the decade.

And get this: Since mid-2021 through February 2022, the U.S. averaged an inflation rate of 5 percent. Do I hear an echo? In my opinion, with all of the unraveling still going on in the geopolitical world, the war in Ukraine, China’s lockdowns, continuing supply chain disruptions, ongoing worries about virus variants, inflation rising faster than wages, a cutback in consumer spending, and rising costs for businesses with reduced operating margins and profits — along with other chaotic parts of the global condition that I surely missed, Chairman Powell can be as “artful” and gentle as he wants. But honestly, if we are not already on the edges of Elon Musk’s stated recession, I believe it is inevitable. Retail leaders: To be forewarned is to be strategically forearmed.

Back in the day when Sears Roebuck was the biggest retailer in the world, they would sell you everything, from underwear and lawn mowers to entire automobiles and the house you lived in. And they would fix it too, operating the largest retail-based home repair service in the country at the time.

Now, with Sears long gone and the big DIY twins Home Depot and Lowe’s having taken over the home repair mantle, other national retailers like Walmart, Ikea and Ace Hardware stores are looking to get into the space. To go for the obvious, they are fixin’ to take some market share.

As spending on home repairs, remodeling and redecorating continues at historically high levels, these big box stores are coming to the conclusion that their potential for revenue doesn’t end when a shopper walks out the front door (or hits the buy button).

As spending on home repairs, remodeling and redecorating continues at historically high levels, these big box stores are concluding that their potential for revenue doesn’t end when a shopper walks out the front door (or hits the buy button). Now they want to connect you with third-party services that will install those products, do some household repairs and even undertake some serious home remodeling projects.

The DIY Twins

Home repair is a business that Home Depot and Lowe’s have largely had to themselves pretty much since the Sears slide began at least a decade ago. While that Sears home repair unit is still in business – and still owned by real estate savant Eddie Lampert – without the gateway the physical stores provided, the business must be just a shadow of its former self. And of course, there are thousands of local, and more than a few national operators, offering home repairs. But the lack of a connection to a home products retailer robs them of a natural point of entry. It’s why these new home repair services are so intriguing.

A few retailers have tiptoed around the service business. Best Buy’s Geek Squad is more about hooking up consumer electronics products, but they also do a brisk business in mounting those massive flat-panel TVs on living room and home theater walls.

Several home furnishings brands from what the industry calls the “lifestyle” side of the business have also ventured into this territory including retailers like RH, Crate & Barrel and the Williams Sonoma nameplates (Pottery Barn, West Elm, et. Al.) offering design services with furniture purchases. Traditional furniture retailers like Ethan Allen and regional chains have also been doing this for years. But a new generation of repair programs takes these efforts to a whole new level. And they are coming from multiple directions, industry channels and tiers.

Walmart Meets Angi

As the biggest retailer on the planet, when Walmart sneezes it’s a sound heard around the world. So, when the Boys from Bentonville announced earlier this year that they were hooking up with Angi, the independent home repair service that used to be known as Angie’s List, it got everyone’s attention. Walmart doesn’t provide the home repair service directly, they make the introduction to Angi’s independent contractors, presumably taking a nice little slice of the action. Services range from furniture assembly and TV wall-mounting all the way to flooring and painting — and are available from any of Walmart’s 4,000 stores. The new program is an expansion of a previous program the retailer had with a company called Handy, which Angi bought several years ago.

What’s the going rate on some of these repairs? Here are some initial quotes from Angi: TV wall mounting, $79; TV stand assembly, $79;  bed frame assembly, $59; and for you home workout freaks, treadmill assembly, $89.

When announcing the program, Walmart had no estimates on its potential size since pricing depends on the individual project. Nevertheless, with Walmart’s scale this is likely to be a big entry into the home repair sphere. And it should be noted that across the highway Target also offers some home services, like “large furniture assembly” through its tie-in with the third party Handy, although it’s not believed that program extends to household repairs such as Walmart is now offering.

Ace Ups the Ante

Ace Hardware, the independent retailer-owned franchiser hardware co-op, has taken the home repair business to an even higher level. In 2019 it bought Handyman Matters, a home repair, maintenance and improvement services franchiser. It subsequently renamed it Ace Handyman Services and began offering these services out of many of its more than 5,700 stores.

Ace owns the referral service, and it works with local, independent contractors to handle the multitude of home projects like plumbing, electrical, carpentry, flooring and painting for both residential and commercial locations. This model is similar to the Walmart program.

Ikea Puts It Together

Perhaps one of the more unlikely retailers to get into the home services sector is Ikea, long known for its bargain-priced (and oddly named) furniture that sometimes seems to require the skills of an MIT engineering graduate to assemble. The Swedish chain addressed this issue in 2017 when it bought third-party assembly service provider Task Rabbit, which it now operates as an independent service. Many customers probably don’t realize it is owned by Ikea.

Ikea has long been in the business of offering design and installation services to go along with its products, particularly in kitchen and bathroom design and even custom cabinetry done through third parties. If the retailer is still not offering hardcore home repairs like electrical and plumbing, it’s conceivable that they could do so down the road given Ikea’s continuing evolution into being more than just that big box out on the highway. Ikea’s moves into smaller urban and specialized locations, like its new Livat localized concept that just opened in London, clearly show that the company is expanding off its original base so expanding services is a logical next step.

A Good Fix

Estimates on the size of the total U.S. home repair market are all over the place, generally falling in a range from $235 billion a year all the way up to $317 billion. One industry estimate is that it will reach more than $585 billion by the end of the decade, and that seems quite plausible given all the attention Americans are giving to their homes these days, a trend that shows no signs of letting up so far.

The home maintenance space is a lucrative one and could be a substantial growth area for these retailers. American Home Insurance tells homeowners they should budget about $1 for every square foot of livable space, every year, for annual home maintenance costs. That means a typical 2,500-square-foot home would require a $2,500 budget annually, or about $209 per month. With more than 110 million households in America, you do the math…though it’s likely retailers such as Walmart, Ace and Ikea have already done so.

And if you’re saying to yourselves how in the world did Sears ever lose this business…well, you’ll have to stand in line with all the people asking that question these days. At last count, there were just 22 Sears full-line stores left in the country.

Talk about a place that could have used some major repairs.

Just as Amazon and the internet in general continue to disrupt and transform the legacy publishing and broadcast industries, we are in the early stages of a major disruption of the legacy world of advertising. Amazon and Walmart are two leading forces that are fundamentally changing retail marketing communications.

Ad Agency Reset

Amazon was among the first, and now the largest mover, among retailers to launch its own advertising agency business logging in at over $31 billion in 2021, up from $21 billion in 2020, with a 77 percent share of the total ecomm ad business, according to e-marketer.

Over a hundred years ago, department store mogul, John Wanamaker, said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” And from that day forward to this current technology era, his statement was pretty much a truism across every consumer-facing industry.

Walmart is a way distant second at $2.1 billion in 2021 and a mere 5 percent share. However, Walmart’s ad business grew a whopping 130 percent over 2020. And there are reasons to believe that meteoric pace will continue. One reason is Walmart’s sheer size and physical dominance. Each week about 220 million customers and members visit approximately 10,500 stores and clubs under 48 banners in 48 countries and ecommerce websites. This network provides an enormous reach for potential advertisers, both online and in stores. And let’s remember that behemoth Walmart serves 90 percent of U.S. households.

Another reason is Walmart’s proprietary deal made with the best-in-class ad tech firm, The Trade Desk. Unlike other demand-side platforms (DSP), Walmart’s unparalleled first-party omnichannel data, combined with its walled-off exclusive relationship with The Trade Desk’s superior analytics capabilities, will provide advertisers with more efficient and effective messaging, essentially personalization at the point of purchase.

In his most recent earnings call, Doug McMillon, Walmart CEO, said that Walmart Connect is a “high margin” business that will continue to grow alongside the retailer’s Marketplace to eventually “become a top 10 ad business in the mid-term.” This is particularly important as privacy protocols are changing and the owners of first-party data will be the winners. Cookies are on their way out; new privacy regulations are being enforced, and Apple has introduced user security features to mask IP and block cookies including ads. Being your own advertising agency only makes good business sense. And Walmart if nothing else, is invested in preparing for the future.

Old World Context

Over a hundred years ago, department store mogul, John Wanamaker, said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” And from that day forward to this current technology era, his statement was pretty much a truism across every consumer facing industry. Money was thrown at print and broadcast media, the cost configured by the number of eyes and ears promised by the relevant media platforms. Ad agencies would collect their 15 percent commissions, and if their client’s revenue increased, the agency would claim that the campaign was successful. However, to build a performance based case that the ads quantitatively resulted in a specific volume of purchases was impossible. Thus, Wanamaker’s frustrating acceptance of reality has also been one of the advertising professions’ angst-driven challenges over all these years.

In fact, as a brief aside, I was one of the “Mad Men” back in the day as an account executive at a large agency. I will always remember what my boss instructed me on how to please our client. He said if the client asks you what time it is, tell them whatever time you want it to be. A bit ridiculous I admit. However, since there were very few fact-based performance measures, keeping the client happy with three martini lunches, theatre tickets, sporting events, etc., was standard practice. But I digress.

Amazon as First Mover

Amazon as first mover in a multitude of advancements in ecommerce has widened the gap between their number-one position and all its slow-mover competitors, including its biggest threat, which would arguably be Walmart.

And in my opinion, perhaps Amazon’s most profound advancement was their superior use of AI and analytics. The result has been their ability to personalize the entire shopping journey. As I wrote in 2016, “Today the customer rules: Bring it to me, just for me, new, now, and more often, where I want it and when.” Personalization, personalization, personalization. Personalization is a big deal, if not the biggest competitive imperative for this century. Amazon, like in so many other ways, is the undisputed leader. All other major retail players are hardly out of the starting gate. They are well advised to get their acts together.

Concurrent with Amazon’s ability to recommend items that they know their users would like, Amazon also realized they could create an advertising platform that could laser connect ads with personalized messaging. The revenue for Amazon would be based on a fee for each click, or through an agreed upon sponsor fee, plus other such deals.

However, the real benefit for the advertiser is the ability to understand which half of their ad budgets are working … or not. The John Wanamaker dilemma solved. More importantly, the performance informs the advertiser of the precise strategies that will work going forward. Thus, first-mover Amazon got big fast, now owning the lion’s share of ecomm advertising.

Walmart Connect as Second Mover

Walmart may not have literally been the second mover to develop an advertising platform, but I do believe there are elements in their strategy, along with CEO Doug McMillon’s vision and commitment (confirmed by their growth trajectory) that Amazon cannot yet match.

As mentioned, the first advantage of Walmart Connect is Walmart’s sheer size and reach. However, it is their ability to gain a more holistic and deeper understanding of each consumer’s shopping behavior through analytics from their fleet of stores integrated with digital data. Therefore, advertising messaging can be more personalized delivered online, in store, and even near pick-up points. Walmart calls it a “closed-loop, omnichannel media environment.” This means that advertisers can get their messaging in front of shoppers right when they’re making purchasing decisions.

Walmart’s second significant advantage over Amazon is its “walled off” exclusive partnership with The Trade Desk. Walmart’s expansive omnichannel first party data, including past purchase audiences, predictive audiences, and brand-level in-store and online shopping behavior data provide a differentiated offer that reaches more advertisers at scale. With the closed loop reporting, advertisers gain great clarity about the performance that their omnichannel ad efforts are having throughout all points of the customer journey, both on and offline. And at the end of the day, Walmart’s DSP gives advertisers a more complete picture of which specific digital and in-store ads played the greatest role in increasing conversions. This guides strategic decisions for optimizing both current and future campaigns, and determining which channels deserve the greatest percentage of the ad budget.

Just the Beginning

For the rest of the industry, and I know there are many more competitors of both Amazon and Walmart, it’s quite obvious that when advertising control transfers to the retailer disintermediating agencies and third-party marketers, the customer experience is enhanced as is the level of insight and intelligence about each customer.

Operating in the digital marketplace requires savvy retailers to reimagine their marketing and advertising strategies to up their games. Amazon and Walmart are already ahead of the curve and the rest of the industry may be stuck playing catch-up.

Wow! Another huge disruption coming out of McMillon\’s Walmart. They seem to have one speed only: meteoric. One could say I spend too much time covering their warp speed, almost-daily initiatives. But, how can I not? As the largest retailer in the world, that could have been stuck in the old world under the sheer weight of its size and arguably antiquated culture, it found a rocket ship commander in CEO Doug McMillon who is blasting through old paradigms and not waiting for anybody. Message to employees: put your jet packs on and hope you can follow this guy or find another job. Disruption ain\’t for the faint of heart. And McMillon is turning out to be the disruptor in chief, turning the lumbering behemoth into an agile, innovative startup.

Walmart\’s latest announcement was made at a recent ICSC event in Atlanta. They are reimagining their enormous supercenters along with the land and parking lots surrounding them. Walmart describes its vision as a Town Center concept. They are planning to lease the underutilized space to gyms, farmers markets, food halls, in-house and free-standing restaurants like Shake Shack, Caribou Coffee, Orangetheory Fitness, skateboard parks, ice rinks, dog parks, movie theatres, bowling alleys and a myriad of other entertainment and recreational facilities.
Not every location will include all of these. And each location will be unique, developed in partnership with the communities in which they are located, with a sensitivity to the lifestyle desires of each community.

Am I Talking About Walmart? Wow!

Speaking at the ICSC event, Walmart\’s VP of U.S. Realty Operations, LB Johnson said, \”A transformation is underway.\” That\’s an understatement LB. He continued, \”We are working with the local community to really master plan a vision, not only for Walmart, but shared with the municipality.\”

I beat the personalization (including localization) strategy to death whenever I can. This is just another enormous example. Walmart is building local lifestyle Town Centers as compelling go-to places where consumers, particularly the emerging Gen Z cohort, will want to spend some time hanging out.

Currently they are planning for more than a dozen Town Center concepts across the U.S. in Washington, Missouri, California, Texas and Arkansas, among other states. They intend to develop their first supercenter Town Center next spring in Longmont, Colorado, which includes 12 acres of adjacent vacant land around the supercenter as well as six to eight acres of underutilized parking space.

Beginning of the End of the Word, \”Store\”

Stores are for storing stuff, as we commented in our co-authored book, Retails Seismic Shift. And as I have repeated in so many presentations over the past couple years, and often included in The Robin Report, the industry\’s leaders need to delete two words from their vocabularies: \”retail store.\” When those words are spoken or written, the automatic mental visual is of a big building full of stuff. This is the biggest barrier to change. Apple SVP, Angela Ahrendts, redefined Apple stores as Town Squares. She drives that vision 24/7 in communications and reality by creating customized Town Squares as community gathering places with unique appeal to consumers in each of Apple\’s locations.

Envisioning your brand and your locations as assets that can be redefined and redesigned in the community as social and entertaining gathering places (not \”retail stores\”) is a powerful strategy. And at the risk of creating an oxymoron by comparing Walmart\’s reimagined retail stores as Town Centers, with Apple\’s Town Squares…I just did.

Walmart\’s LB Johnson said, \”We want to provide community space, areas for the community to dwell – a farmers market, an Easter egg hunt, trick or treating. We want to provide pedestrian connectivity from our box to the experiential zones that are planned on our footprint. We want to augment these experiences and activities with more food and beverage, with health and fitness, essential services and entertainment.\”

This major strategic move in the physical world also mirrors their acquisition of Jet.com and building out a long tail of cool tech-driven brands. Both initiatives are intended to compel younger, more affluent consumers. Walmart didn\’t invent the necessity of this strategic vision and they are not the first to attempt its implementation. However, they are the biggest, and may very well spur an acceleration among the other major players who are defining their own strategies for building experiential communities: Macy\’s, Kohl\’s, Target and Nordstrom, among others. And old -world mall and shopping center developers/owners should take note.

There was also a guy named Ron Johnson who had this same kind of town center concept for JC Penney several years ago. I believed in his vision. He was just unable to pull it off. But the legacy of his prophetic vision lives on.

I believe McMillon can and will pull it off.

I vaguely remember the phrase \”repeal and replace\” as a political slogan the Republicans used to gin up support for getting rid of Obamacare. As we know, nothing really happened. Well, it is happening at Walmart, based on the reversal and replacement of over a half-century of old-world leadership succession. With the appointment of Doug McMillon as the new CEO of Walmart in 2014, the Board and the Walton family knew they were \”betting the house\” by unleashing a brilliant, visionary change agent who would risk everything by fundamentally transforming the entire Walmart business model. And to do so, he would have to repeal and replace the culture — which he is doing.

Regarding two significant barriers to change — lack of capital investment and speed — he is transforming the Walmart behemoth-of-all-behemoths battleship into a speedboat by investing billions of dollars on acquisitions, partnerships, technology, e-commerce, expansion and construction of a new infrastructure, while at the same time, shedding antiquated systems and processes and adding internal innovation platforms. And speed? It\’s been like a whirlwind since McMillon took the helm. In fact, dismantling the old strategies and structures and introducing try often/fail fast innovations, strategies and structures takes mastery over a million moving parts. One might view this kaleidoscope as a fragmented mishmash of unrelated pieces that are out of control and destined for failure.

Don\’t kid yourself. Here\’s what McMillon said at a recent investor\’s meeting: \”We\’re solving problems differently and more quickly. Looking back, we had a proven model and focused on execution, but we unintentionally became risk averse. Today we\’re getting to reimagine retail and our business, to do that we have to take risks, try quite a few things and learn from our failures. That kind of behavior is in our DNA and we\’re waking up to that culture. There is a cultural change underway at Walmart, and we\’re enjoying it.\”

He continued, \”We see the big picture as it relates to an emerging retail business model that operates as an ecosystem.\” He added that the kind of business model he envisions – one that hinges on better executing the fundamentals, innovating for the future and building a differentiated portfolio of brands – is anticipated to boost profitability.

Kaleidoscope Colors

How about a quick look at the kaleidoscope of acquisitions, partnerships and other initiatives? And this isn\’t all of it.

• They put partnership deals together with Alphabet\’s Waymo for rides to and from store, Japan\’s Rakuten for Kobo\’s e-readers, and Uber and Lyft and Postmates for grocery delivery.
• They shifted their entire cloud operation to Microsoft Azure and Office 365. They have a five-year deal to work with Microsoft on artificial intelligence projects. The partnership also includes working on a cashier-less store to compete with Amazon Go. Walmart is also partnering with Handy, offering professional support for indoor projects on Walmart.com.
• They are planning to transform the Vudu subsidiary into an Amazon Prime Video competitor. They have two tech incubators and Store#8, all abiding by the mantra of \”try often, fail fast.\”
• And, of course, the acquisition of Jet.com for $3.3 billion was an enormous accelerator opening a younger more affluent market, as well as building a long tail of digital native brands, eventually to be rolled out as brick-and-mortar stores.
• Then there was the purchase of Flipkart in India, which portends to open the gate for e-commerce dominance there, as well as paving the way for a brick-and-mortar retail chain.

As more and more pieces cascade down, they will soon come together as one huge Walmart marketplace platform challenging Amazon by providing a unique ecosystem in which anything and everything from around the globe can operate.

There are many more pieces cascading down on a daily basis, which will soon come together as one huge marketplace platform challenging Amazon\’s ability to provide a unique ecosystem in which anything and everything from around the globe can operate.

The 2019 Strategy

Walmart\’s core strategy for fiscal year 2019 is to grow its e-commerce presence and develop its business through online sales (rather than new store openings), while maintaining its price leadership. The company plans to employ the following three key strategies:

1. Invest in omnichannel capabilities to achieve 40 percent e-commerce growth at Walmart U.S. in fiscal year 2019.
   Walmart anticipates a shift in the way its customers shop, and it has expanded its omnichannel offerings, including establishing more than 1,100 online grocery pickup locations in the U.S. E-commerce revenues at Walmart US grew by 44 percent in fiscal year 2018. In its latest annual report, Walmart stated that its customers who shop both in stores and online spend nearly twice as much overall as those who shop through only a single channel.
2. Increase productivity and efficiency.
   Walmart aims to improve productivity throughout the organization through lower expenses on new store openings and an increased focus on customer initiatives, store remodeling and e-commerce. In fiscal year 2018, Walmart grew its store count by 23, the lowest number over the last five years. The decision to open fewer stores aligns with the company\’s long-term goals of growing sales through lower prices and through multichannel retail.
3. Continue to innovate to keep pace with technological advancements.
   Walmart is deeply involved in progressing through innovation. Its e-commerce fulfillment centers in the U.S. are strategically located to deliver products to customers in two days. The company Store No. 8 tech incubator is led by a team dedicated to driving new ideas to transform retail.

In terms of company outlook, Walmart posted strong financials in fiscal year 2018, with revenues exceeding the $500 billion threshold for the first time. Walmart\’s scale of operations, e-commerce expansion and recent tech-led initiatives, such as establishing the Store No. 8 incubator, place it in strong position to compete against Amazon and Alibaba, which primarily operate online. To compete more aggressively against these players, Walmart has made several strategic acquisitions, including Jet.com, ModCloth, Bonobos and other millennial-focused brands.
With its acquisition of India\’s largest e-commerce player, Flipkart, and the sale of its unprofitable Brazilian operations to Advent International, Walmart looks primed to streamline its operations in high-growth markets and gain further market share across the globe.

McMillon\’s Final Words

Doug McMillon said to investors, \”I want to challenge your thinking of Walmart.\” I believe he is doing just that for all of us. And I stand by my prediction that Walmart is becoming Amazon\’s biggest headache.