Walmart CEO Doug McMillon wants to crack the code on apparel and home goods

Business

Walmart logo is seen at a store in Mountain View, California, United States on Tuesday, November 19, 2019.

Yichuan Cao | NurPhoto | Getty Images

Walmart CEO Doug McMillon said Tuesday the retailer’s heavy spending on e-commerce has built a thriving online grocery business and touted that it has a strong portfolio of brands and a foundation that will allow the company to grow.

But he acknowledged the company still has to find the formula for selling apparel and home goods.

McMillon spoke at the company’s investor day in New York about how the giant retailer is weaving together its brick-and-mortar stores and its website. Walmart has spent billions of dollars to build up its online business. It bought Jet.com for $3.3 billion in 2016, and since then it’s bought digitally native clothing and home brands, including Bonobos and ModCloth.

“We’ve invested a lot to do it, but we’re now in a position to play offense in an omnichannel game,” he told investors and analysts. “We’ve got a strong set of chess pieces to work with.”

McMillon went on to explain that one of its greatest e-commerce assets is its huge number of stores, which not only power in-store sales but act as fulfillment centers for online orders.

“There’s a Walmart within 10 miles of 90% of Americans, within five miles of 70% of Americans and fully half the U.S. population is within just three miles of a Walmart,” he said. “That’s a unique position, and we’re taking advantage of it.”

He said a customer who shops in Walmart stores and through the company’s app or website spends two times as much as those who spend in stores only.

Walmart can use groceries and same-day delivery as a hook for customers, so they buy other kinds of merchandise, too, McMillon said. But he gave few specifics about other ways the retailer will drive up sales of home goods and apparel.

Ahead of the presentation, Walmart reported disappointing fourth-quarter earnings, which it attributed to lower demand for toys and video games over the holiday season, but also said it struggled with apparel sales.

Its fourth-quarter results and fiscal year 2021 forecast fell short of analysts’ expectations, and it warned its supply chain in China could be hurt by the coronavirus outbreak.

E-commerce sales grew by 37% last year, but the business is still not profitable. Walmart anticipates sales growth will moderate to 30% in fiscal 2020. McMillon said e-commerce sales are on track to be about $50 billion this year.

“The losses we’re experiencing today are necessary to build a business model that can compete and avoid being outmixed,” he said.

Walmart recently shut down Jetblack, a membership-based service aimed at affluent, busy families who lived in New York. Customers could text an order for any item, except fresh food, and have it delivered to their home.

Marc Lore, who leads Walmart’s e-commerce business, said the company learned more about customers’ shopping habits through Jetblack. He said he expects a growing number of shoppers to use texting and voice to make purchases, so Walmart is testing new ways to allow them to shop that way and get to know their preferences.

He said Jetblack members used the service nearly 10 times per week. Now, he said, Walmart wants to add similar shopping options “in a way that’s scalable and sustainable.”

He said Walmart will continue to add new technology that encourages customers to make purchases, too. For example, he showed a demo of Insperience, a virtual reality feature that helps customers see how a couch or another item would look in a room. He said it will be available in stores soon.

Home decor, like apparel, is one of those higher margin categories where Walmart would like to boost its sales. But for the moment, Walmart is still learning how to predict and adapt to customers’ preferences.

For example, McMillon said stores didn’t have the right mix of apparel over the Christmas season. He said its clothing “looked like red and green” and had too much at the low end of price points instead of mid-price.

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