WALMART CANADA TAKES ANOTHER SWIPE AT AMAZON.
FIGHTS ONLINE GIANT WITH ‘ENDLESS AISLE’ CONCEPT
AN CAST ER, ONT .• Walmart Canada is moving a step further into Amazon’s territory at a most convenient time.
As Amazon makes a bold move into bricks- and- mortar fresh grocery retailing through its pending purchase of Whole Foods, the Canadian retailer is increasing the amount of products available on its Walmart. ca website in the next two months by opening it up to an “endless aisle” of third-party Marketplace sellers, making goods from outside brands and small businesses available for sale on its website.
“This has been in the works for a long time,” CEO Lee Tappenden, a 20- year veteran of the retailer who worked in a number of divisions around the globe before taking up the helm of the Canadian unit last June, said in an interview. “We will double the SKUs we have online at the launch date, and by early next year we will have millions of SKUs online.”
At the same time, Walmart Canada is launching in- store pickup for the goods it sells online, a model known in the industry as “click and collect.” It’s a draw for customers who want to save the cost of having items de- livered to their homes. “Our plan is to have 100 stores with ( the feature) by Christmas,” Tappenden said, and over time roll out the pick-up feature to the remainder of Walmart’s 410 stores across the country.
It comes well over a decade into a war between Amazon, a pioneer of marketplace selling in addition to its own offering of goods, and big- box retailers such as Walmart and Best Buy, which have been dealing with Amazon and eBay’s encroachment into what was originally their biggest asset — a vast selection.
“Walmart was designed based on assortment, a one-stop shop, and this is still what it is today,” Tappenden said as he strolled through the aisles of the company’s Ancaster, Ont., outlet near Hamilton, which features the retailer’s newest digitally integrated store layout. “This is just making that transition to combine in- store and online.”
Walmart’s U. S. division has been on an online acquisition tear of late in an aggressive bid to fight Amazon, acquiring e- commerce brands that are more upscale and fashionable than its in- store brands, womenswear site ModCloth, menswear site Bonobos and Shoes.com.
As department stores and apparel specialists close stores at a record pace, it is predicted Amazon will be the biggest clothing seller in the U. S. by the end of the year.
Walmart. com in the U. S. opened up its distribution platform to third- party online Marketplace sellers in 2009, and Tappenden said the move will allow the Canadian unit to offer thousands of brands to consumers that are not on offer at Walmart. “Baby brands, toy, home, apparel — brands that would have an affinity with us,” he said.
Buying online and picking up in store is a feature common to large retailers such as Canadian Tire and Staples. At the Ancaster store, the one outlet at which the program is up and running, Walmart Canada has already observed that consumers spend an average of 250 per cent more on click- and- collect orders than they do on an average transaction. The Ancaster location is piloting a host of other digital innovations, such as allowing customers to scan their own items while they shop and present the tally to a cashier at the end of the trip to speed up the checkout experience.
“If you are going to stay relevant to consumers at this point, this is the right response,” said George Minakakis, CEO at the Toronto- based Inception Retail Group. “You need to bring the ( store- based) business into Amazon’s environment.”
Customers research thoroughly online nowadays before buying goods, and often cherry pick items between a number of online and storebased retailers based on price and product quality, he noted.
Amazon, as one of the most sophisticated retail data companies in the world, hones its business model around consumer search and shopping behaviour, product recommendations and pricing algorithms.
“While a lot of retailers have a very good infrastructure in place for online (customers), they have to find ways to keep people coming in to their stores, and that is the tension,” Minakakis said.
Walmart Canada, meanwhile, has been working diligently to try to maintain traffic at its stores. Fortuitously, the seeds were in place before the advent of online shopping: In 1987, Walmart U. S. made a game- changing move into fresh groceries, a category known for luring consumers to bricks and mortar stores at least once a week. The theory is, the more people come for groceries, the more likely it is they will buy general merchandise such as bed sheets and s neakers. Walmart began introducing food at its Canadian stores in 2006.
Since then, and despite the presence of much stronger incumbent grocery players, Walmart’s grocery business has grown to account for about half of its roughly $ 25.5 billion in annual sales in Canada, according to estimates.
That would put its sales on par with that of the country’s third-biggest traditional grocery chain, Metro, which had sales of $12.8 billion last year.
In addition to aggressively lowering prices, Walmart’s latest grocery initiative involves grabbing a bigger “share of stomach” in the market, trying to lure in shoppers with high- grade beef at discount store prices.
Last month, Walmart upgraded its meat to AAA Canadian Angus beef from lower- grade AA beef without raising its beef prices. While the country’s hard discount grocery chains such as No Frills and FreshCo are known for low prices, they do not carry AAA grade beef.
“A lot of people who shop at Walmart every week say that they have a Walmart shopping list and then their grocery l i st,” Tappenden said. “The Walmart l i st would be laundry detergent, toothpaste, kitchen rolls” — everything but fresh food, he says.
But selling good meat, Tappenden adds, is the key to converting more of shoppers over to Walmart’s fresh business.
“If you own the centre of the plate, there is a halo ef- fect,” he said. “If people are willing to buy meat from you, they are likely to have trust on produce, trust in grocery, trust on laundry. ( Meat) is the hardest one to get trust on.”
Kevin Grier, a food industry analyst based in Guelph, Ont., concurred with Tappenden’s perspective about consumers and produce, beef in particular.
“They are really shaking things up, and the cash register ring is a lot higher when you have beef being purchased with an order,” Grier said.
He noted Walmart recently sold bone- in AAA striploin steak for $ 5.77 a pound when a price of $6.99 would be considered a sale price at most retailers. “They would be taking a loss at that price. That makes everybody wake up, from the packers to the competitors.”
In the first quarter, samestore sales at Walmart Canada were up 1.5 per cent compared with last year, with overall basket value up 2.2 per cent and traffic 0.7 per cent.
“The growth in basket value implies that consumers are purchasing more items per trip,” Peter Sklar, analyst at BMO Capital Markets, wrote in a note to clients. Walmart Canada is presenting an ongoing challenge for the Canadian grocers, as the company appears to be gaining market share in the grocery segment.”