Walmart’s Grocery Business is Appealing to More Affluent Consumers
Walmart on Tuesday announced that its fourth-quarter earnings fell short of analysts' forecasts. The retailer giant witnessed weak demand for video games, toys and apparel during the holiday season. Specifically, sales from physical stores and website open for at least twelve months- a key indicator of the retailer’s health- increased merely 1.9 per cent during its final quarter for 2019.
The outlook for the upcoming year also came up below expectations as growth within the e-commerce space is likely to slow. However, Walmart asserted that the forecast excludes any impact from the deadly coronavirus outbreak. The company will be watching the situation closely and cautioned that sales in the first quarter might be adversely impacted.
On a brighter note, the company is reeling in higher-income consumers, including those new to the retailer as a result of its online grocery business. President and Chief Executive Officer of Walmart USA John Furner, witnessed pricier products such as organic vegetables and choice cuts of meat in customers’ virtual shopping baskets. Consequently, the convenience that comes with the service is well-aligned with a typical consumer who is time-poor yet affluent.
The Bentonville, Arkansas-based retail giant has a vast footprint across the US but is usually popular among shoppers in rural areas, small towns and suburbs. Back in 2016, Walmart acquired Jet.com for $3.3 billion to win over the e-commerce company’s customers that tend to be in urban areas, are young and affluent. Even as Jet.com has been wound down, Walmart has bought over other brands to expand its customer base.
As of the fourth quarter of 2019, Walmart offers online grocery pickup at more than 3,000 stores and same-day delivery at more than 1,500 stores. Presently, it is experimenting with a new service called InHome that delivers groceries directly to customers’ fridges. Walmart’s vast range of groceries, including organics and premium beef, has helped attract different kinds of customers. Likewise, this trend is also witnessed across other channels where customers are buying goods from the retailer’s home and proprietary fashion brands.
Due to its scale as the world’s largest retailer, Walmart can save millions just by making even the slightest adjustments to how it runs its business. Specifically, CFO Brett Biggs revealed that $60 million would be saved annually by changing its process for buying shopping bags. Additionally, cost reductions of up to 15 per cent will also be seen as the firm switches the vests its workers wear to that of recyclable materials.
Walmart is also on track to save $100 million annually by centralising how it maintains the equipment in its stores to be more energy efficient. For instance, $30 million could be saved by swapping out existing stepping tools in its distribution centres to that of a lighter-weight version. An additional $200 million can also be saved by changing the light bulb in its stores and parking lots.
By Caroline Wong
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