Marketing

Wal-Mart shows how physical stores remain a core pillar of an omnichannel strategy

Martin Koehring

Senior Manager for Sustainability, Climate Change and Natural Resources & Head of the World Ocean Initiative

Martin Koehring is senior manager for sustainability, climate change and natural resources at (part of The Economist Group). He leads Economist Impact's sustainability-related policy and thought leadership projects in the EMEA region. He is also the head of the, inspiring bold thinking, new partnerships and the most effective action to build a sustainable ocean economy.

He is a member of the Advisory Committee for the UN Environment Programme’s Global Environment Outlook for Business and is a faculty member in the Food & Sustainability Certificate Program provided by the European Institute for Innovation and Sustainability.

His previous roles at The Economist Group, where he has been since 2011, include managing editor, global health lead and Europe editor at The Economist Intelligence Unit.

He earned a bachelor of economic and social studies in international relations from Aberystwyth University and a master’s degree in diplomacy and international relations from the College of Europe.

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Only one bricks-and-mortar retailer makes it into the top five for customer service in our survey: Wal-Mart of the US, which has embraced omnichannel as a way to compete with Amazon and in response to changing shopping habits. For now, its online sales remain small. However, it is experimenting with a host of initiatives designed not just to integrate its big store presence with its online one, but also to make shopping easier and quicker—and to make its store network useful to today’s connected consumer.

Wal-Mart got into e-commerce more than a decade ago, but it remains a small part of its business: net sales were US$473bn in the year to end-January 2014, of which online accounted for just US$10bn, or 2%. Even in absolute terms, the world’s biggest retailer remains a minnow among web sellers, with Amazon outselling it by a factor of around seven to one. So when Wal-Mart decided to go omnichannel, it was not trying to transform itself into an Internet seller. Rather, it was trying to combine its biggest asset—a large store network—with new technology to avoid having its customers poached by dedicated online sellers.

In the US, Wal-Mart has more than 4,000 stores within five miles of two-thirds of the population. It plans to turn these, in combination with other distribution centres, into what it calls its "next-generation fulfilment centres"." name="_ftnref1" title="">[1] It is actually a simple idea. Rather than fulfilling web orders from big warehouses sometimes hundreds of miles away, they route them from a nearby store, whose employees pick out the goods and transport them to houses a few miles away. It is quick, cheap and has helped the company to launch same-day delivery services. But it was far from easy or cheap to organise: Wal-Mart spent some US$430m on order-management systems to enable the move and had to retrain staff to manage the stock effectively." name="_ftnref2" title="">[2]

The company is trialling ideas, including drive-through pick-up of orders and mobile-phone checkout at stores to avoid queues. Wal-Mart shows both how retailers must respond to customer demands for more flexible and speedy service and how traditional retailers must rethink the use of their store networks. Physical stores are not obsolete. Rather, they are now a core pillar of an omnichannel strategy—even if fewer people actually buy their goods there.

 

" name="_ftn1" title="">[1] "Walmart Announces New Large-Scale Centers Dedicated to Filling Online Orders", Walmart, October 1st 2013. Available at:

" name="_ftn2" title="">[2] "Wal-Mart: A Pro in Physical-Store Retail Logistics", The Wall Street Journal, June 18th 2013. Available at:

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