Walmart is spending $11 billion to improve stores, customer experience

Walmart is embarking on a major store renovation effort to refresh tired, old stores and optimize them to become online fulfillment and delivery hubs.

This week, Walmart announced a series of store redesigns, with an emphasis on technology improvements. The retailer said it’s doubling down on automation to make store operations more efficient, including the addition of 1,500 autonomous floor cleaners; 300 autonomous shelf scanners; 1,200 unloaders that scan and sort items unloaded from trucks; and 900 pickup towers, or vending machines that dispense online orders within stores. By the end of the fiscal year, Walmart expects to have a total of 1,700 pickup towers, 3,100 grocery pickup locations and 1,600 grocery delivery locations.

Walmart’s plans are part of a bigger effort to remodel 500 stores this year, with a focus on e-commerce, technology and supply chain improvements — plans that will cost the retailer $11 billion this year. Like Target, CVS, Kroger and other large retailers, Walmart is focusing on physical stores as lines of defense against Amazon.

Walmart said the investment in store makeovers is ultimately about meeting the needs of diverse sets of customers.

“We’re using the stores as that connector to be able to serve customers how and whenever they want,” said Walmart spokesperson Delia Garcia. “Customers can order online and use [in-store] pickup towers, and some customers want to browse and look for things, and we want it to be pleasant and convenient.”

Walmart’s store redesigns will include installing self-checkout machines, adding new signage, updating inventory and presentation of electronics and hardware departments, revamping grocery presentation and implementing pharmacy department makeovers that will include private consultation rooms. The company said all of its stores — including the largest-format Supercenters, medium-sized stores and neighborhood markets — will be part of the design revamp. Walmart is also planning on building new stores in Florida and California.

Bill Duffy, associate director at Gartner L2, said the moves are likely a response to customer expectations, driven by e-commerce, and that all large retailers are refreshing physical locations to amplify online shopping experiences with added value in stores.

“This is a bigger story than just Walmart; brick-and-mortar retailers are using their physical footprints as an asset against pure play e-commerce retailers,” he said.

Like Walmart, Target is also remodeling stores. It expects to renovate 1,000 stores by 2020. But the significance of Walmart’s investment is its immense reach, with more than 5,000 stores. According to Walmart, 90% of the U.S. population lives within 10 miles of a Walmart store; the retailer’s scale offers a competitive advantage against other retailers and Amazon.

Walmart’s moves to roll out thousands of robots, Duffy said, was likely motivated by the need to balance the role of the store that doubles as a traditional retail location as well as a fulfillment and pickup center for online orders. While store renovations have become a cost of doing business, the challenge is to measure their effectiveness.

“It’s really hard to measure the return on investment of store refreshes,” said Forrester principal analyst Sucharita Kodali. “You can more easily measure declines in retention when stores are old and gross, and a refresh is about avoiding any decline.”

In addition, in considering a makeover of a physical space, big-box retailers need to think of their physical spaces less as warehouses and more as places where customers can relax, browse and gain more value than could be derived from buying goods online. As click and collect becomes more common, retailers will increasingly need to balance the dual role of the store as a location that’s designed for browsing and an e-commerce fulfillment center. As a result, retailers are under more pressure to make the store visit entertaining and relaxing for customers.

“Because it’s so much easier to shop on Amazon, you have to make sure that every time the customer comes to the store, they’re designed in a way that’s not alienating,” said retail store designer Sergio Mannino, owner of a New York-based creative design firm. “The physicality of the store needs to be felt. Maybe there’s something new going on in the store, or maybe there are new products every month that rotate — Walmart could do the same.”

The headline of this story was updated on April 15, 2019 to reflect the broader scope of Walmart’s $11 billion investment.

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