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Walmart is Preparing to Take on Amazon

Thursday, June 1, 2017  
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It’s before 8 a.m., but here at Bud Walton Arena, named after Walmart’s co-founder, Hanson’s “MMMBop” is blaring through the speakers. Blue lights are flashing to the beat, and thousands of Walmart employees in matching T-shirts (“Happy to help”) are cheering with their arms in the air.

 

There are two days left until Walmart’s shareholders meeting, an annual affair known primarily for its pomp and circumstance, but the festivities are well underway. It’s part pep rally, part pop concert as Walmart executives and employees take the stage to talk about what’s next for the company as it shifts its focus to online shoppers.

 

“There’s never been a more disruptive time in the history of retail,” says Judith McKenna, chief operating officer for Walmart U.S. “We know there is no going back. There is only going forward.”

 

Walmart — which last year had $486 billion in annual revenue, more than three times Amazon.com’s $136 billion — is locked in a tight battle with Amazon for the next generation of consumers. The retail giants — one founded in 1962 and the other in 1994 — are experimenting with new ways to make themselves indispensable to customers at a time when longtime companies such as Macy’s and Sears are fading fast. (Jeffrey P. Bezos, the founder of Amazon, owns The Washington Post.)

 

For Walmart, the challenge will be getting Americans to use its website with the same ease and frequency that they now use Amazon, which last year accounted for 33 percent of online U.S. sales. (Walmart accounted for 7.8 percent, behind eBay, according to the research firm Euromonitor.)

 

The average Amazon shopper spends $157 on the site each month, compared with $27 at Walmart, according to a 2016 survey by research firm Mizuho. Walmart is hoping to narrow that gap by adding to its lineup of products and lowering its minimums for free shipping. (Amazon, meanwhile, seems to be moving in the other direction: The company opened its first bricks-and-mortar store last week.)

 

Walmart last year bought Jet.com for $3.3 billion, and brought on its founder, Marc Lore, as the head of e-commerce. In the months since, Walmart has bought up specialty retailers including ModCloth, Moosejaw and ShoeBuy.com.

 

But just as important, executives say, is the company’s collection of 4,600 stores across the country, which account for the bulk of the retailer’s sales.

“It’s a physical footprint unrivaled by any company anywhere,” said Greg Foran, president and chief executive of Walmart U.S. “The convergence of digital and physical gives customers choice on how, when and where they purchase and receive their items.”

 

To that end, the company has begun offering discounts to online shoppers who pick up their purchases at Walmart stores. It has also begun offering free two-day shipping on orders over $35, down from $49. (Amazon has followed suit, first lowering its minimum requirement from $49 to $35, and most recently, to $25.

 

On Friday, more than 16,000 shareholders, Walmart employees and others will gather in this arena to vote on the nomination of 11 board directors, including Walmart chief executive Doug McMillon and Marissa Mayer, chief executive of Yahoo.

 

Shareholders will also vote on pay packages for key employees, including McMillon, who last year was paid $22.4 million in cash and stock awards, and Lore, who received a total of $243.9 million, making him one of the country’s highest-paid executives. The nonbinding vote, part of “say on pay” measures set by Congress, comes as labor groups across the country call on corporations such as Walmart to raise the minimum wage to $15 per hour.

 

Other proposals introduced by shareholders include one that would require the board chairman to be “independent of management,” and another that requests an independent director with environmental expertise. (Walmart, for its part, has asked shareholders to vote against these measures.)

 

But on Wednesday morning, the mood was decisively festive. An accounts payable specialist sang the “Star-Spangled Banner.” Actor and former professional football player Terry Crews emceed, and pop singer Julia Michaels performed. Bags of caramel chocolate M&Ms parachuted from the ceiling.

 

A slide show displayed recent company milestones, ranging from a 1.5 percent quarterly increase in comparable store sales, to “we closed at 6 p.m. on Christmas Eve.”

 

But the one that got the loudest cheers: “Ecommerce sales up 63 percent.”

 

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