Did you know Walmart will add $130 billion dollars to its annual revenue over the next five years? To accomplish this goal, it will offer new products and services. It will also alter its operations, which will fundamentally change the way you work with them.
The team at Legacy Retail believes Walmart’s strategies need to be internalized by your team to ensure you adapt, remain competitive, and get your share of the coming growth
To learn more, please continue reading.
Big goal
At Walmart’s 2023 Investment Community meeting, its leadership revealed a number of new goals and how they plan to achieve them. They shared that they are working to reduce their unit costs by 20% over the next three years, which will increase their company’s operating margin and provide investors with higher ROI.
Walmart plans to achieve these goals by making its fulfillment centers 55% automated and its stores 65% so. And by automation, it means “data, software, and robotics” will be responsible for a large share of manual labor within its fulfillment and in-store operations.
They also indicated that 90% of their capital expenditure would be deployed against achieving two goals: 1. transforming their unit economics and 2. working to become the leading omnichannel retailer through the development of an automated and integrated supply chain model.
Robotics investment demonstrated
Walmart led interested parties on a tour of its Brooksville, Florida, distribution center. First, robots were seen receiving inbound shipments; then, sensors scanned these products and separated them into their proper categories; finally, the items were sent to automated grids to be further processed.
Robots were also observed building pallets at an accelerated rate – 130 for every 75 built by a person. It was estimated that about half of the robotically built pallets went directly to the sales floor.
All of this means Walmart will see increases in a number of factors: productivity or operational speed, inventory tracking, pickup and delivery services, and the ability to process significantly more units more quickly.
In Walmart’s estimation, all of this will result in greater customer satisfaction because its consumers will have a multiplicity of quick options for shopping.
Looking back to look forward
The industry-wide ripple effects of Walmart’s big strategy will be fully felt in the near future. Currently, the Legacy Retail team has a number of predictions about how these strategies could affect the future of retail. Before speculating about what is to come, it helps to look back.
In 1913, Ford Motor Company instituted the moving assembly line, a technological advancement that increased its output of vehicles while simultaneously decreasing its need for strenuous human input – a fundamental shift. Ford’s success with this technology dramatically increased its revenue and would later revolutionize every industry.
It does not take a significant stretch of the imagination to see the parallels between what Ford did and what Walmart is doing. When Walmart implements its strategy nationwide and finds success, it has the potential to foment another major shift.
This shift will look like a considerable share of retailers following Walmarts lead and implementing various forms of heavy automation in their own supply chains. This means the retail industry of today – vendor and customer side – will vastly differ from the retail industry of the near future.
Further predictions and takeaways
In this blog’s first section, we mentioned that Walmart would increase investor ROIs. Inversely, it is likely that supplier costs will decrease. The Legacy Retail team predicts this because Walmarts lessened costs to process goods will naturally lead to it requiring lessened costs from its suppliers.
Another likely consequence of Walmart decreasing its unit costs by 20% will be increasingly affordable but quality goods for its consumers, which will deepen customer loyalty. Compound this cost reduction with a likely 2023 recession – as was recently predicted by the Federal Reserve – and Walmart’s current lead over its competition could become greater.
Walmart vendors (especially those who sell necessities) may see sustained sales, or even an uptick in sales, throughout the coming economic instability. This will be due to the well-known consumer behavior of decreasing discretionary spending during such economic times.
Regarding the vendors mentioned above, they will be positioned to outlast those in less dynamic retail ecosystems. This could occur because they will be insulated from economic disruptions.
To project even further, these brands will have established such dominance in their categories during this time that other brands at other retailers will be hard-pressed to unseat them when things rebound.
In light of all of this, Legacy Retail recommends that current Walmart vendors dig their heels in deep and work diligently to cultivate a strong relationship with this retailer. The team also recommends that Walmart hopefuls work tirelessly to stake a claim within this retailer – your future may depend on it.
The Legacy Retail team is working with its clients to ensure they understand the bold strategies and growth Walmart is pursuing, placing them in the best position to achieve their customer goals. So if you are a current Walmart vendor or considering becoming one, Legacy Retail can help you adapt or maintain your status as a competitive player in their stores. To contact us, click here.
