Walmart to invest $3.5B in Canadian operations

Move meant to help retail giant stay on top of shifting shopping habits: CEO

Walmart Canada is planning to spend $3.5 billion to boost its presence in the struggling Canadian retail sector.

The money will go toward upgrading stores, adding technology that lets clerks cash-out customers anywhere, while also expanding the chain’s online ordering and distribution network, Walmart said in an announcement on Monday.

Walmart Canada’s chief executive Horacio Barbeito said the investment is meant to allow the retailer stay on top of Canadian shopping habits, which have shifted drastically in the pandemic.

The crisis has accelerated trends in e-commerce, with Walmart’s Canadian operations doubling or tripling their online grocery order volumes in some regions. In its most recent earnings update in May, Walmart Inc. reported a 74-per-cent increase in its U.S. e-commerce business.

“Obviously this is something big,” Barbeito said in an interview. “This is something that brought forward volumes that we were expecting in the next three years or so. So definitely it did have a role on how we shaped our investment plan.”

The Canadian investment, to be spread out over five years, will include $1.1 billion to build two new distribution centres — one outside Toronto, the other outside Vancouver — and upgrade an existing one in Eastern Ontario, roughly an hour away from both Ottawa and Montreal. The new distribution centres will use new automation and inventory management technology to ship orders to Walmart’s big-box stores as well as directly to customers who ordered online.

Supplying massive stores and individual customers out of the same facility is a somewhat radical move, according to Jean-pierre Lacroix, president of the Shikatani Lacroix firm that consults on retail design.

“It’s at the leading edge of the trend,” he said. “Two years from now, it’s going to be table stakes.”

Lacroix said upgrading both Walmart’s online and bricks-andmortar businesses in the middle of the pandemic was both an “offensive and defensive” move, able to steal market share from Canadian competitors while also keeping pace with the global online retailer Amazon.

Barbeito said Walmart also plans to apply lessons from the pandemic to its new distribution warehouses. That includes adding flexibility so warehouses can hold a “safety stock” of critical products as a buffer against sellouts and empty shelves when demand spikes unexpectedly — as it did when the pandemic hit Canada in March.

Adding safety stock to warehouses is something of a departure from the supply-chain norms in the post-coronavirus world, when most suppliers and retailers used a “just-enough, just-in-time” strategy, providing only the products needed at a given time, to avoid extra costs associated with holding extra inventory.

“We will have flexibility to build safety stock where it matters,” he said.

Walmart is also continuing to work with some suppliers to potentially narrow down the flavours or types of products they make, so their production lines can produce more volume of a few flavours, rather than less volume of more flavours.