Walmart shutters Express stores as more growth plans shift to e-commerce
Discount supermarket giant Walmart has realized that the big guys can't always play small.
The world's largest retailer on Friday said it plans to shutter 269 stores across the globe, including 154 in the U.S.
Most of the U.S. closures will impact Walmart Express stores in under-performing areas. The small-store format locations have been in pilot since 2011.
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At the time, the stores were part of Walmart's strategy to spur growth beyond its massive supercenters and Sam's Club locations. The concept was viewed as a way to offer supercenter pricing and selection in more convenient and inviting settings.
The end goal was to help the retailer better compete against bargain stores and pharmacy chains -- both of which were booming due to the lingering impact from the U.S. recession.
But instead of maturing into a growth engine for the retailer, the small, high-cost storefronts wound up putting pressure on the Walmart's profitability. Basically, Walmart decided it could not afford the pinch.
Like most retailers, Walmart is coming off of a sluggish 2015 and a disappointing holiday shopping season.
According to the latest sales data from the U.S. Commerce Department, consumer spending declined in December to make 2015 the weakest year for retail sales since 2009.
Data from the National Retail Federation depicts a woefully similar trend. While sales for November and December ticked up 3 percent to $625.9 billion, they still failed to meet the NRF estimated increase of 3.7 percent (which was also below last year's increase of 4.1 percent for the holiday shopping season).
E-commerce sales offered one of the single bright spots, with sales increasing 9 percent to $105 billion. The NRF had expected online sales to increase between 6 percent and 8 percent.
With Walmart Express now out of the growth plan, Walmart is left hedging its bets primarily on digital initiatives that aim to drive mobile and e-commerce growth. But even then, success is not a sure thing.
During its third quarter ending last October, Walmart's global e-commerce sales and gross merchandise volume growth both came in at around 10 percent, which Greg Foran, president of Walmart U.S., said was "softer than we would like."
In terms of investments, Walmart has been pouring money into e-ecommerce and digital technology with the aim of creating a mobile, social, Web and brick-and-mortar revenue cycle -- part of its bid to compete with rival Amazon. Walmart noted that it plans to funnel about $1.1 billion this year into e-commerce and digital platforms.
As part of today's announcement, Walmart said it will focus on "strengthening Supercenters, optimizing Neighborhood Markets, growing the e-commerce business and expanding Pickup services for customers".
"Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future," Walmart CEO Doug McMillon said in a statement. "It's important to remember that we'll open well more than 300 stores around the world next year. So we are committed to growing, but we are being disciplined about it."
Image via Flickr.