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Tech inspires wonder and attracts attention. It helps humans do their jobs better, and makes it easier for consumers to access products instantly.
But for business leaders, there’s a constant need to weigh competing interests. For all of the results that technology can bring, there is also significant investment needed to make that happen. Factor in a competitive environment, and it is all the more important to consider which of those investments will result in a true edge.
So it’s worth asking: How is technology not only adding capabilities, but truly growing a business?
Listening to Walmart’s recent earnings call to recap the quarter ended January 31, it was clear that top executives have considered this question on a scale that is befitting of the world’s largest retailer.
Walmart was born before the rise of the digital economy. The company became a behemoth through brick-and-mortar through the 80s and 90s, and it still derives much of its strength from the big box stores that are in the center of most American towns.
Technology, in the form of ecommerce capabilities, is a newer arrival. In part, executives realized over the last decade that they had to build ecommerce to keep pace with where the retail world is heading. More people are shopping online and having goods delivered, so Walmart must have offerings to match. This only became more of an imperative during the pandemic, when the demand for ecommerce skyrocketed.
As the company introduces new technology, there is also an opportunity to consider what it adds.
Walmart US President John Furner put it succinctly: “We've always been known for price, but…we're also now being known for convenience, and a lot of the things that we're doing are helping our customers live better with the convenience that we're offering.”
At Walmart, there is no shortage of new technology being introduced, and investment driving it.
The company has grown ecommerce into an $80 billion business that represents 13% of Walmart’s global sales. It also connected its digital sales to stores with the goal of creating an omnichannel experience. In the quarter ended Jan. 31, ecommerce grew 8.3%.
It recently upgraded its digital customer experiences with a series of feature rollouts to Walmart.com, and is growing its marketplace. It also launched an ecommerce site for businesses and nonprofits.
It has an advertising business that generated $2.7 billion in the last year, growing nearly 30% year-over-year and 41% in the most recent quarter.
It is increasing pickup offerings, and adding delivery capabilities. Over the last two years, store-fulfilled delivery sales have nearly tripled, and are now at nearly $1 billion a month.
Automation is playing a bigger role in the supply chain. At perishable distribution centers, automation helped increase throughput 50% better than expectations. They're the kind of results that are driving the company to grow.
In the store, a new AI-powered platform using a voice and chat capability is being used by more than 50 million customers.
With each of these capabilities in place, Walmart is interested not only in how they are performing on their own, but in how they are connected.
One key to this is the company’s ecommerce marketplace, where consumers shop for goods online.
“Marketplace is perhaps the linchpin of all this because that gives us the ability to sell third-party merchandise as well as first party,” said Walmart CFO John David Rainey. “And just this last quarter, we now have over 400 million SKUs on our marketplace. A significant portion of those actually avail themselves of our fulfillment services as well, which is a great benefit for us. But as we get more assortment on the marketplace, we get more eyeballs coming to our website. That allows more advertisers or makes advertisers want to spend money there, too, with the larger audience.”
Another key nexus is the Walmart+ subscription program provides customers with delivery and access to digital capabilities, as well as streaming media. Executives noted that it's a part of the entire digital ecosystem.
“It’s a way that customers can access an interesting combination of all of our assets from our digital front-end, which is becoming one experience over the last couple of years,” said Furner.
Ecommerce also connects to physical retail. The company has stores within 10 miles of 90% of the population. That’s a huge advantage not only for bringing people in, but delivering goods to them in a cost-effective manner.
“It's becoming more difficult to measure the differences in ecommerce and stores because stores are acting as fulfillment centers at times,” Furner said. “They’re stores primarily, and then they are fulfillment centers. So there are a lot of blurred lines between all these channels. So having an offer that is great for consumers in terms of the behavior they're seeking, which is convenience, and not worrying about incremental delivery fees is working fantastically.”
These capabilities are also helping to attract higher-income consumers. Walmart+ members and people who use ecommerce and delivery tend to be younger and more tech-savvy. It’s a customer base that the company stands to grow. On one hand, it has convenience that they appreciate. On the other hand, the low prices are proving attractive at a time of high prices. Higher-income households accounted for nearly half of the gains the company saw in the U.S. this quarter.
By adding convenience, Walmart is also attracting new customers. Its tech capabilities also present opportunities to grow business lines in advertising and fulfillment. That’s how technology can change a business.
Trending in Retail Channels
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.