Walmart Moves Toward Next-Gen Fulfillment With New Test Stores

Need to Know

• Walmart is turning four of its stores into e-commerce labs to test new ways of using its massive physical footprint to better handle upticks in online shopping.
• Employees will use digital tools and new store design features to learn more efficient ways of restocking shelves and fulfilling online orders.
• The four areas the new stores will focus on improving include omni-assortment, first-time pick rate, checkout experience, and inventory speed.
• Results are already improving—first-time pick rates (the percentage in which an employee successfully finds an item for online orders on the first try) have already improved 20% with these new test centers.
• This is Walmart’s latest push towards merging its online and physical shopping—earlier this year, the retailer combined its online and physical buying teams.

Analysis

Walmart, like many other retailers, is enjoying a huge uptick in online sales. Around 97% to be exact. As the second-largest retailer in the world, everything Walmart does exists under the second-biggest microscope in the world. That means everything from checkout to e-commerce to fulfillment is meticulously studied to find new ways to save money and meet the customer’s ever-changing needs.

For huge retailers, fulfillment is an intensive process. Because so many people are shopping online, convenient fulfillment options have become a huge deal. As other massive brands push towards in-store order picking, Walmart has lagged behind. Even though it might be a pioneer in terms of “buy online, pick up in-store,” competitors such as Target have eclipsed Walmart as leaders in innovative fulfillment.

That’s about to change. Walmart is set to transform four of its brick-and-mortar locations into test centers that will study new ways that allow the retailer to better handle recent surges in online sales.

“We’ve identified these four stores across the country to serve as test centers where we will continuously rotate new technology, digital tools and physical enhancements in and out of the stores all with the intention of helping our associates better and more easily serve our customers,” wrote John Crecelius, SVP of associate product and next generation stores for Walmart in a blog post. “We have two up and running with two more to come.”

The two stores Crecelius mentions as already up and running are located near Walmart’s headquarters in Bentonville, Arkansas, while the locations of the other two have not been revealed. These stores will remain open to the public as Walmart continues to try and walk the line between online fulfillment and in-store experience.

With these new test centers, Walmart has identified four key areas to research:

• Omni-assortment: Tweaking the different inventory that appears online versus stocked in-store, such as moving a large portion of in-store apparel online. Walmart will continue to identify other hard-to-manage categories and work to make them more freely available, as right now, not everything available in-store is available online. “By doing so, we’ll learn what it takes to make all eligible items in the store truly omni–available for customers online and in the store,” writes Crecelius.
• Inventory speed: Walmart has developed a new app that helps associates quickly get items from the backroom to the store floor. Instead of scanning each box, the employee holds up a device that uses AR to highlight which boxes are ready to move.
• First-time pick rate: New signage and updates to handheld devices will allow employees to better navigate the store and pick items for online orders much quicker. “The percentage of times associates find the item on their first attempt has gone up by 20% in some of the categories that tend to be our hardest to pick,” writes Crecelius.
• Checkout experience: Test stores will continue to improve an updated checkout process Walmart introduced earlier this year that transforms “transactional experiences into relational ones” by using hosts to guide customers through either a traditional process or a self-checkout.

The in-store option

The goal of these test centers will be to find the most streamlined ways to operate Walmart locations as both physical retail centers and online fulfillment centers. This represents a decided push from big-box retailers to fulfill online orders from actual locations as opposed to central distribution centers of micro-fulfillment models.

Competitors such as Target are already fulfilling 90% of orders (up from 55% three years ago) from physical stores, which leads to better handling of inventory, better access to services such as click and collect, and a workforce that is more knowledgeable about e-commerce. Home Depot fulfills 60% of its orders from its brick-and-mortar locations.

“In this new era of retail, assets that used to serve a single purpose will transform into flexible, scalable assets that can be used in multiple ways to serve customers.”

John Crecelius, senior vice president of associate product and next generation stores, Walmart.

These new updates to stores represent Walmart’s best shot at turning its stores into fulfillment centers. With many stores spanning over 200,000 square feet, there is ample space to store inventory, and provide better buy online, pick up in-store options for customers. According to the EOY 2019 report, Walmart has 156 central distribution centers and 33 dedicated e-commerce facilities. However, network physical stores could create is much wider, and would take less integrated services to maintain.

“Our existing footprint is already within 10 miles of 90% of the population. We have forward-deployed inventory, which is the really expensive part,” Walmart’s CEO of e-commerce Marc Lore told investors earlier this year.

The surge in online sales will only continue thanks to Walmart’s recently rolled out Walmart+, its answer to Amazon Prime. With free delivery as a key selling feature, it’s in Walmart’s best interests to enhance fulfillment.

There are no recent exact figures on how many orders Walmart fulfills from physical stores, but back in 2014, it was just 20%. Obviously that number can grow by as much as 50% within a few short years, but it looks like Walmart using 2020 as its year to fully embrace in-store fulfillment.

“In this new era of retail, assets that used to serve a single purpose will transform into flexible, scalable assets that can be used in multiple ways to serve customers how, when and where they need,” writes Crecelius. “Evolving our stores is just the beginning.”