A radical transformation is underway in Bentonville, Ark.
How the nation’s largest retailer is reimagining its business model in ways that were once unthinkable
A radical transformation is underway in Bentonville, Ark. Walmart senior executives are pursuing a growth strategy that leverages the retailer’s unique collection of assets and brand equity with elements of Amazon’s approach, and a dash of Kroger and Albertsons.
“Think about it as a flywheel that’s spinning, powered by a mutually reinforcing set of assets,” is how Walmart President and CEO Doug McMillon describes the business model that he sees emerging in the years ahead. “We’re starting to drive the top and bottom line in more expansive ways. Our bottom line is becoming more diversified, which will enable us to generate more operating income growth over time.”
Diversification means that Walmart plans to make money in ways that would have been seen as heresy just 10 years ago. To get investors excited about the growth prospects for a $560 billion global business, however, requires fresh thinking about new sources of revenue. So Walmart is focused on scaling businesses such as its marketplace and fulfillment services, advertising, financial services, data monetization and last-mile delivery, even as it increases the productivity of its existing selling space.
A spinning flywheel with mutually reinforcing assets doesn’t have quite the same ring to it as the productivity loop, a concept Walmart spent decades refining and highlighting as the driver of its success. The concept was simple and involved aggressive expense control, which enabled everyday low prices, which simplified the supply chain, which improved in-stock levels and drove sales, which enabled expenses to be leveraged to drive growth. Adherence to the concept of expense control, simplified operations and low prices proved to be a powerful combination. Walmart gained market share and transformed the complexion of the retail industry, and then the food retailing industry, with the expansion of supercenters.
