Global retailer Walmart reported fiscal first quarter financial performance this week which again provides important insights for retail industry supply chain and sales and operations teams regarding the increasing importance on online customer fulfillment capability. That especially pertained to the ongoing effects of the COVID-19 coronavirus pandemic.
For the fiscal quarter that ended on May 1, overall global revenues increased 8.6 percent to just shy of $135 billion. Comparable U.S. sales from retail sales and digital channels increased 10 percent in the quarter. Online sales reportedly rose by 74 percent in the quarter, attracting new customers who tried the services for the first time. This was performed in an environment where U.S. retail sales in April declined 16 percent.
Prior strategies and investments in digital transformation, online customer fulfillment from physical stores and curbside pickup for food and grocery items likely provided added pandemic readiness response capabilities.
Despite a reported $900 million in additional costs related to raising wages, bonuses and added sick leave for store and customer fulfillment workers, along with the need to hire an additional 235,000 workers, the retailer’s reported net income was up 4 percent, exceeding analyst expectations. The Wall Street Journal recently reported that in April, upwards of 10 percent of Walmart workers, equating to roughly 150,000 workers were on coronavirus-related leave. Some employees have succumbed to the virus.
As the largest retailer of groceries in the U.S., the retailer was able to benefit from waves of consumer panic buying, as well as providing flexibility for curbside pickups for vulnerable populations. Like other retailers, Walmart struggled to maintain needed supplies for in-demand goods. In its reporting, The Wall Street Journal noted that overall inventory dropped 6.1 percent in the quarter due to out-of-stocks.
Company executives indicated to analysts that sales of grocery, food and health care products were strong, while those of discretionary items such as clothing were not.
Online Customer Fulfillment Strategies
Also this week, Walmart announced that it will discontinue the Jet.com brand, after investing $3.3 billion for the then innovative online retailer three years ago. The retailer’s current head of all online commerce, Marc Lore , was the former founder and CEO of Jet.com at time of acquisition.
Walmart CEO Doug McMillon indicated to analysts that the platform helped to “jump-start the progress we have made the last few years.” Most of Jet.com employees have been redeployed to other of the retailer’s online groups.
In our previous Supply Chain Matters blog highlighting Walmart’s prior fourth quarter and full-year financial performance, our takeaway for readers was that there were consistent signposts to needs for controlling or reducing online fulfillment costs. Walmart’s E-commerce business is yet to turn a profit, including the 2019 holiday fulfillment period. Yet, Walmart’s investments paid agility dividends in the ability to feature online ordering, store level picking, and curbside pickup capabilities in large volumes.
What is different now is that even Amazon succumbed to COVID-19 panic buying demand, despite billions in added logistics and customer fulfillment investments. Both platforms appeared to be the go-to for vast numbers of consumers that were forced to shelter, hence accelerating top-line revenue growth.
Moving forward, retail industry experts point out that many new consumers will continue to elect online ordering with either curbside pickup or direct delivery. But, as Supply Chain Matters has opined, many consumers across Europe, the UK and the United States experienced online services that appeared overwhelmed leaving a lot of disappointment and frustration. That could be opportunity lost without added attention, and thus far, that has translated to the hiring of thousands of additional workers to attack the problem. That will not necessarily be the solution without augmented automation and efficiencies.
Walmart, Amazon and other select retailers need to now double their efforts in online fulfillment capabilities for both an ongoing and post COVID-19 retail environment. Do not be surprised to read of added investments in automation and enhanced productivity, as well as people.
Bob Ferrari
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