Walmart Product Managers Decide To Bet On Their Stores

Walmart product managers think that they know how to compete with Amazon
Walmart product managers think that they know how to compete with Amazon
Image Credit: Ben Schumin

Let’s face it: being a product manager at Walmart is both the best of worlds and the worst of worlds. It’s best because Walmart is a very large company. Oh, and they have stores that are located just about everywhere. It’s also the worst because you are the company that Amazon is coming after. As Amazon’s catalog keeps growing larger and larger and people flock to their two day delivery guarantee, the Walmart product managers have been finding themselves under more and more pressure. The good news is that they think that they may have found their secret weapon. They think that they know how to do battle with the likes of Amazon.

It’s All About The Stores

The Walmart product managers find themselves in a tricky spot: they are currently very successful, but they are now facing more challenges than ever. What should they do about this? It turns out that they have an answer: giant stores. The product managers have decided that they won’t win by building an unprofitable e-commerce operation or other stand-alone ventures. Instead, they think that their supercenters could be the heart of a web of businesses all working together to attract shoppers and drive profits. So what are these “supercenters”? Supercenters are sprawling stores of around 180,000 square feet offering 100,000 products. What they offer includes groceries, clothes, camping gear and televisions. Customers are also able to fill medical prescriptions, transfer money or get their hair done. These stores are often open 24 hours and can be community gathering spots.

The product manager’s re-emphasis on the giant outlets Walmart started building in the 1980s was a change from a strategy laid out just a year ago. In this new view of their company, disparate parts of the business would interact to drive profitable growth. The Walmart product managers want to capitalize on its customer data to sell online advertising to brands. The product managers are keeping their eyes open for new sources of revenue. As an example of this, Walmart plans to build “edge computing” capacity, in which data is processed physically close to where it is being collected. This is a faster system than sending data to the cloud. That system which would be spread out among retail locations, could then be rented out amid new demand by autonomous vehicles and other systems that may use the technology to process large amounts of data quickly.

The Walmart product managers believe that added warehouse and shipping capacity could be sold to third-party sellers, to allow more companies to easily sell their wares on Walmart customers would have a bigger product selection, and Walmart could collect fees for processing and shipping. The hope is that online orders for Walmart’s groceries and other items could increasingly be fulfilled by traditional stores, where customers can go to pick up goods. The time where customers might have been worried that supercenters were too big has long passed. The supercenter footprint and positioning gives the Walmart product managers a great opportunity to expand services and help the economics of the model. The Walmart product managers have largely weathered the shift to online shopping and the rise of Amazon. Their sales from U.S. stores and websites open a year have risen for 20 straight quarters, as they added online grocery pickup in store parking lots, cleaned up stores and lowered prices. As other traditional retailers lose customers and fail to compete, the Walmart product managers have increased their market share.

Next Steps For The Walmart Product Managers

The problem that the Walmart product managers are facing is that the sales gains have been costly. They spent heavily to improve stores and to grow online, and the efforts have been dependent on U.S. stores producing steady profits to fund these investments. The product managers have been wrestling with the best way to continue. The good news is that Walmart’s revenue is more than twice Amazon’s. However, the pace of Amazon’s profit growth is racing past Walmart’s. In the last year, Amazon’s operating income tripled to US$12.42 billion, while Walmart’s operating income grew 8% to $22 billion. The profits at Amazon’s largely come from its cloud-computing arm and nonretail activities, such as advertising.

At Amazon, their Amazon Web Services, their cloud-computing business, generated $25 billion of revenue in the first nine months of the year, or 13% of the company’s total, yet it generated 62% of Amazon’s operating income in the period. Interestingly enough, ad revenue at Amazon hit over $3.6 billion in the most recent quarter. It turns out that the company is now the third-largest U.S. seller of digital ads after Facebook Inc. and Alphabet Inc.’s Google. At Walmart, the product managers are asking, “Where is our cloud?”. They understand that they can’t do this without another revenue source. The Walmart product managers believe that they need a new strategy that is focused on growing through supercenters, the giant store format the retailer first opened in 1988. The product managers hope to generate growth by adding retail services and using the physical locations for new forays into technology, as well as capitalizing on their vast amount of data that they have on their shoppers.

The Walmart product managers saw that a bright spot in e-commerce was directly tied to its stores: more than half of the 40% growth in U.S. e-commerce sales last year came from expanding online grocery pickup or delivery service run out of stores. At the same time, they were seeing results from their push to improve stores, snagging shoppers from other traditional chains. The product managers believe that the giant stores could be the base for new ventures like fast delivery, health clinics and other services. It is possible that Walmart’s stores could also act as a base for potentially profit-making technology infrastructure or business-to-business services.

What All Of This Means For You

Product managers at Walmart are very busy people. They are in charge of marketing one of the most popular stores out there. However, at the same time they are dealing with new challenges. Online retailers like Amazon are growing faster than Walmart is and if they are not careful, Walmart may eventually get overtaken by this new breed of online retailer. What are the Walmart product managers to do?

If the Walmart product managers want to take their new competition on, they are going to have to get creative. They won’t be able to defeat them by expanding into e-commerce. What they are going to have to do is to find ways to leverage their supercenters in order to drive more business. The product managers are looking for new sources of revenue. One idea that they are considering is creating edge computing resources that would be based in their supercenters that could then be sold to local businesses. The Walmart product managers are also allowing other retailers to sell their products though Walmart’s online store. Walmarts’s biggest competitor, Amazon, makes its money through cloud computing and online ad sales. The Walmart product managers want to compete by creating new services that can be sold via their supercenters. The supercenters are seen as driving existing business such as e-commerce and providing a base for new lines of business.

The Walmart product managers have realized that they have a unique asset that nobody else has. They have a collection of supercenter stores that they can leverage to generate more revenue. To maximize their profits they are going to have to find ways to get more customers to come to their supercenters more often and create new services that can be based in the supercenters. If they can do this, then Amazon needs to start to watch out for Walmart!

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that Walmart should build more supercenters?

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