Wal-Mart's second quarter results delivered light sales and spurred worries about the economy. But the company's ability to be an operations, logistics and information technology leader is impressive.
On a conference call Thursday it was hard to miss the information technology coursing through the comments.
Here's why these IT and operations nuggets matter. The real battleground between Wal-Mart and Amazon is playing out behind the scenes in distribution centers. Amazon's network is getting closer to the customer, but requires a heavy investment, according to Marc Wulfraat, President and Co-founder of MWPVL, who handicapped the fulfillment battle between the two retail giants on a Wells Fargo conference call.
Wulfraat's take is that you can't overlook Wal-Mart's network that already exists. Wal-Mart can build adjacent outposts to its distribution centers to cheaply serve e-commerce goals. Overall, the cost of an e-commerce business may turn out to be 4 percent to 8 percent higher as a percentage of sales than a regular retailer. Why? Processing merchandise in bulk is simply cheaper.
Here's a look at the technology and operations nuggets from the world's largest retailer.
- Walmart.com delivered double-digit sales growth.
- The company launched a locker test site to go with its e-commerce efforts. A scan and go pilot is underway and expanding from iOS to Android.
- Customers are increasingly using Wal-Mart's ship from store program from Walmart.com. As a result, Walmart.com can deliver most orders in two days or less with lower costs.
- Neil Ashe, president and CEO of Wal-Mart's global e-commerce group, said the company is investing in its global technology platform, embedding online assets into Wal-Mart's next-gen fulfillment network and integrating with the company's transportation, stores and distribution centers.
- Ashe is looking to build "talent density" and added 200 to the e-commerce unit in Silicon Valley.
- 35 stores are being used as "additional nodes" in the e-commerce fulfillment network. Wal-Mart's asset vs. Amazon in e-commerce is its distribution density.
- Wal-Mart has taken an earnings hit of 5 cents a share in 2013 for e-commerce investments and the third quarter hit will be 2 cents a share.
Operations, which are driven by "fueling the productivity loop":
- Wal-Mart's logistics team cut cost per case shipped year over year for the eighth quarter in a row.
- Trailer loading efficiency as well as routing optimization increased cases transported by mile driven 3.7 percent in the second quarter from a year ago.
- Wal-Mart added 1,400 lanes of self service checkout terminals in a move that increased utilization rates by 4 percent from a year ago for the U.S.
- Wal-Mart CEO Mike Duke said the company is aiming to bring stores in markets like Mexico and China up to U.S. productivity standards. He said:
- In Mexico, we're implementing an on-shelf availability application to target and improve in-stock opportunities. And across many of our markets, we're utilizing workforce management tools to better align associate schedules with customer traffic. These actions, among others, will contribute to International's leverage goal.
- Wal-Mart's China team cut store hours by 12.4 percent in the second quarter and that move offset wage inflation of 11.2 percent.
- All of Wal-Mart's international stores have integrated with the e-commerce business and are run by the same management team. Big exceptions, however, are Brazil and China.
- International e-commerce sales were up 16 percent from a year ago. Wal-Mart launched a Drive Through Click and Collect site via its U.K. Asda unit. These sites allow you to shop online and pick up groceries when convenient. Tesco has Click and Collect in 180 stores so Wal-Mart is playing from behind.
- Eight countries in Latin America have been migrated to Wal-Mart's Costa Rican Shared Services Center. The goal: Cut back office expenses with shared resources.
- Global process compliance is being driven by chief compliance officers for all regions.