Walmart’s first quarter sales were not great, but longer term success could be driven by an interesting range of pilot programs and expanding initiatives the company shared during a recap of its results.
Most notable among these is the ongoing success and expansion of Neighborhood Market. The smaller format (40,000-sq.-ft.) food and pharmacy combination store produced a 5% same store sale increase during the first quarter. The gain was the result of a 4% increase in traffic and broad-based strength across categories, most notably produce, meat, adult beverages and pharmacy.
“Our Neighborhood Market fleet performed consistently well through the entire quarter, including throughout the periods of inclement weather,” said Walmart U.S. president and CEO Bill Simon. “In fact, April marks the 46th consecutive month of positive comps for the format, further validating our strategy to accelerate the unit growth. Neighborhood Markets delivered solid comp sales performance regardless of the age of the store.”
Walmart ended last year with 407 Neighborhood Markets and Walmart Express stores which are even smaller. During the first quarter, it added another 13 Neighborhood Markets and a new convenience store format called Walmart To Go in its hometown of Bentonville, Ark. During the remainder of the year, Simon said Walmart is on track to open between 180 and 200 Neighborhood Markets and 90 to 100 Walmart Express stores.
In addition to the sales contribution, the expanding network of smaller stores are central to an omnichannel strategy and a concept Walmart calls, “tethering.” In essence, it means leveraging larger supercenters as fulfillment centers with smaller stores serving as inventory access points to either place orders or pick up merchandise. Simon said, Walmart is tethering express stores to supercenters and giving shoppers the ability to receive orders placed at Express stores the same day.
“On May 2, we opened the first fully tethered Walmart Express store in North Carolina. Customers are buying products, such as bicycles and swimming pools, which they can’t traditionally get inside a 10,000-square foot box,” Simon said.
Other noteworthy merchandising initiatives and key developments discussed during Walmart’s earnings presentation included:
• Plans to revitalize the entertainment area in supercenters. During the second quarter, Simon said Walmart will re-lay the department to allocate more space and prominence to unidentified growth categories.
• The grocery delivery and pick-up experiment which began in San Francisco three years ago and was expanded to Denver last year continues to perform well. Early sales in Denver are beating company estimates and exceeding results of the more established program in San Francisco.
• Sam’s Club is experimenting with a subscription service that allows members to order goods online and have them delivered on a regular schedule based on the member’s rate of consumption.
• A more rewarding proposition is in store for Sam’s members beginning June 12, when a new “Sam Plus Member Cash Rewards,” program launches. Members at the $100 Plus level will receive $10 for every $500 spent on qualifying purchases. Plans also call for the June 23 launch of a new cash-back credit card that allows members to receive 5% cash back on gas purchases, 3% on travel and dining and 1% on other purchases.
• Self checkout continues to gain momentum at Walmart’s U.K. operations where more than half of all transactions are now processed through a self checkout. In addition, the order online pick-up at store service, known as “Click & Collect,” available at 300 U.K. locations, was enhanced to offer same day pick up at 89 stores.
• Walmart achieved a coup in Brazil where a national ad campaign that kicked off in February features the national soccer coach, a timely move considering soccer is at an even higher level of interest this year with the FIFA World Cup getting underway next month. The company also opened an e-commerce fulfillment center in Brazil.