Operations
05 April
Walmart: 65% of stores will be automation serviced by 2026
The retailer is making a push to connect its supply chain and increase use of robotics and data.
Inside an automated fulfillment center. (Photo via Walmart)
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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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Retail Media
19h
Gopuff moves fast on a new retail media approach: Non-endemic ads
The quick commerce marketplace is partnering with Rokt to expand beyond CPG advertising.
(Photo via Gopuff)
In some ways, retail media campaigns function like promotions in a brick-and-mortar store.
With retail media, brands can reach customers with advertising on the websites where shopping is taking place. This proximity to the point of sale provides an opportunity for brands who are already selling within a marketplace to take advantage of opportunities to elevate their position in search results, and stand out from a crowd of listings. This is the same goal that many brands have when they purchase highly-trafficked space in a store. But instead of checkout aisle and endcap placements, there are now sponsored products in search results.
But that’s not the end of the story.
The fact that retail media is internet-based and powered by first-party data collected at the purchase level is poised to open up new opportunities to reach consumers that go beyond today’s norms.
One such example is the introduction of non-endemic advertising. This allows brands that aren’t directly selling a product within a marketplace to purchase ad space.
Why would a brand want to advertise in a place where they can’t make a direct sale? The thinking goes like this: The marketplaces have the audience, and the data on them that allows for precise targeting. They can be places to learn about a new product, just as much as they can be a place to buy.
One early example of the recognition of the opportunity in non-endemic advertising arrived this month. The quick delivery marketplace Gopuff partnered with ecommerce technology company Rokt to enable brands outside the CPG category to advertise on Gopuff’s app.
Under the hood, the companies are combining machine learning technology from Rokt that is designed to present relevant offers to customers with a Gopuff audience that is made up of Gen Zers and millennials, engaged and curious about trying new brands.
The partnership will enable advertisers to target customer segments by demographic and location. Customers will also receive offers to try new brands, such as Hulu, AdoreMe and Noom.
What sets this advertising approach apart will be the consumer categories where it is focused. Typically, ads on Gopuff are focused around the convenience store items already available on the app. Now, shoppers will see other kinds of products in the mix, and they will click through to checkout pages that are outside Gopuff if they are interested in buying. This also has the potential to change how advertisers approach media spend. It means everyone from a sporting goods brand to a car company can now consider Gopuff as they plan. They must also consider how these channels work together as a whole.
"We are thrilled to partner with Gopuff and enhance its ad business, helping it move beyond the CPG category," said Elizabeth Buchanan, CCO of Rokt, in a statement. "By delivering relevant offers to Gopuff users, Rokt will help Gopuff Ads' brand partners across all categories create more meaningful customer connections and drive incremental sales."
The partnership underscores how retail media networks have three key building blocks for digital advertising: They’re a destination that people visit with an intent to shop, they have the audience that brands want to reach and they have data that can help to reach the right consumers.
It points to how ecommerce marketplaces can not only become the new store, but also emerge as ad networks like Facebook and Google before them. It’s a big reason why retail media networks have exploded over the last year, and why growth is forecast to continue to accelerate.
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