A new Canadian Walmart photographed on Oct. 10th, 2018, the day before it opens in Burnaby, B.C.Jackie Dives/The Globe and Mail
Lee Tappenden is refashioning Walmart Canada Corp.’s bricks-and-mortar stores for a digital age.
The chief executive of the discounter’s Canadian division is focusing on redesigning stores to make them easier for employees to navigate when picking and packing groceries for e-commerce customers who come to fetch their orders.
Mr. Tappenden said in an interview Walmart is spending $175-million this year on updating 20 of its 410 outlets with an eye on improving staff productivity for online grocery order pick-ups. The budget for revamping existing stores is 41 per cent higher than last year and 75 per cent more than in 2016, company officials said. In that same period, it is opening only one new store – on Thursday in Burnaby, B.C. – compared with numerous stores in previous years.
“In our remodels, grocery pick-ups play a large part in our thinking,” Mr. Tappenden said at the company’s head office as he sketched on a white board the floor plan of a renovated store with modified employee “picking routes” and pick-up areas closer to designated parking for e-commerce customers.
Walmart and other grocers are racing to squeeze costs from their systems and improve store layouts as they work to marry digital and physical stores. They’re shifting their focus to investing in existing outlets rather than building new ones in their face-off with cyber dynamo Amazon.com Inc.
Loblaw Cos. Ltd., this country’s largest grocer, is rushing to bolster its store efficiencies as it “blankets” the country this year with its PC Express click-and-collect e-commerce at 700 locations, where customers pick up their online orders for a fee of between $3 and $5 or free with a PC Insiders paid membership. By year-end, Walmart plans 165 stores with its free pick-up service for grocery orders of $50 or more.
Loblaw CEO Galen Weston said in July that the company’s most established click-and-collect supermarkets are generating enough sales to break even, covering the added labour expenses of picking and packing online orders.
“It’s a reflection of volume and the efficiency with which those stores are able to process that volume – both improve over time,” Mr. Weston said.
Mr. Tappenden is also concentrating on what has been the hallmark of Walmart’s strength: enhanced logistics and productivity.
He said he aims to boost picking-staff productivity in stores by 10 per cent to 20 per cent by creating faster “picking routes” and eventually splitting up pickers’ assignments so they pick only specific products for online orders.
He said Walmart in China benefits from using different pickers for different types of goods. “This model is on steroids in China in terms of their ability to pick quickly using space effectively,” he said.
Grocery pick-ups are important to Walmart because customers spend three times more on an e-commerce pick-up order than a regular bricks-and-mortar shopping trip, Mr. Tappenden said.
As well, pick-up customers fork out twice as much as those ordering home deliveries through Instacart, he said. Both Walmart and Loblaw have teamed up with Instacart, which provides grocery delivery service for an extra fee.
Online pick-up shoppers tend to have higher incomes and be time-starved, dual-income families, Mr. Tappenden said. They buy higher-margin products such as organic and gluten-free foods compared with items purchased by in-store shoppers, he said. Pick-up customers tend to stock up on items for weekly shopping while home-delivery customers often buy fewer items for a particular meal or shorter period, Mr. Weston has suggested.
Mr. Tappenden said some of the elements of the latest store redesign, such as orange-hued pick-up areas, come from a test Walmart supercentre in Ancaster, Ont., while the next generation of his store-of-the-future will arrive next year in the Toronto area with even more digitally friendly features, he said.
Walmart is refining its pick-up strategies, hitting its target of moving customers in and out of its parking lots within five minutes 90 per cent of the time, he said.
He is working on increasingly reducing inventory in the stores’ backrooms, using data to ensure the stores aren’t shipped more inventory than shoppers are expected to purchase. As he lowers storage-room inventory levels, he is providing space for fast-selling items – from bananas to potato chips – to be stocked in the back room for quick e-commerce order picking and packing, done separately from other merchandise, he said.
“We would never expand the backroom to make way for this,” he said referring to merchandise for e-commerce customers. “That’s just the worst use of capital.”
In Canada’s densely populated cities, Walmart doesn’t plan to introduce smaller stores but rather is teaming up with different partners, such as Instacart, for home delivery or grocery pick-up sites, he said. “We believe we have a real estate portfolio today that meets the future needs, combining online or offline shopping.”