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As Walmart’s stores increasingly become hubs for both in-person shopping and ecommerce, Walmart is set to bring more automation to its supply chain to move goods.
The news: At its Investment Community Day, Walmart executives outlined plans to connect the retailer’s supply chain and add more automation, all while using data across operations. This included bold goals to serve stores with automation, and reduce costs.
What are the goals? Walmart laid out of the following goals to be achieved by the end of fiscal year 2026:
- 65% of Walmart stores will be serviced by automation.
- 55% of fulfillment center volume will move through automated facilities.
- Unit cost averages could improve by 20% as a result of this, Walmart said.
Key quote from Walmart CEO Doug McMillon: “We are in a unique position to serve our customers and members however they want to shop, which will fuel continued growth. As we grow, we will improve our operating margin through productivity advancements and our category and business mix, and drive returns through operating margin expansion and capital prioritization.”
According to remarks from executives, this will be driven by three key pieces:
Connecting the supply chain: Over the years, Walmart built several different supply chains: An ambient supply chain for general merchandise that serves stores, a perishable supply chain for grocery and supercenters, an ecommerce fulfillment network and delivery from stores. Now, Walmart has re-engineered the supply chain network to connect these pieces by combining digital catalogs, use data and add automation.
Add technology to centers: The company is building data, software and robotics capabilities in a variety of different facilities, including ambient fulfillment centers, ecommerce fulfillment centers, perishable distribution centers, and newer market fulfillment centers that are attached to stores. “In many cases, we don’t need to build a new facility,” said Walmart US President John Furner, according to prepared remarks. “We’re able to use the existing assets we have more flexibly and efficiently for new ways of working.” The investment event included a visit to a Florida distribution center that demonstrated how increased item storage and technology allow for a “more consistent, predictable and higher quality delivery service to stores and customers and react more quickly to customer demand,” according to a news release.
Automating stores: Walmart’s 4,700 stores remain central nodes for its operations, both for in-person shopping and ecommerce. The company has inventory within 10 miles of 90% of the U.S. population, which brings distinct advantages for last-mile delivery, both in terms of speed to customers and costs for Walmart. “So we’re picking and fulfilling orders from our stores, batching deliveries to create more density, and delivering to doorsteps, garages, and all the way into the customers’ homes,” Furner said. “We have a strong store pickup business, and we need to become more competitive with to-home delivery, especially for general merchandise. Automation greatly helps. It helps us combine orders and create more density."
How will automation change Walmart?
What will it mean for employees? Walmart said the result increased automation will be roles that “require less physical labor but have a higher rate of pay.” The company said it sees increasing throughput per person as a result of automation. “It all starts with our associates,” McMillon said. “We are a people-led, tech-powered omnichannel retailer.” Yet there were signs this week that there will be tradeoffs in this process. Just as the meeting was getting underway, Walmart said it would lay off 2,000 workers from five fulfillment centers. According to CNN, a spokesperson said it was a move to “better prepare for the future needs of customers.”
The returns: With more automation, Walmart believes it will be able to lower costs, and increase profit. The company said that it is aiming for 4% sales growth over the next five years, which would add more than $130 billion. “On top of that, we think the opportunity for operating income growth over the next 3-5 years could be better than what we've outlined,” CFO John David Rainey said in a statement. Along with operational efficiency, Walmart is honing in on its high-margin digital businesses for growth, including advertising, data, memberships and marketplace. While significant investment is required to stand up these capabilities, ultimately Walmart believes that technology will help to boost the bottom line.
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Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.