The Transformation Path of Walmart: Breaking the Deadlock and Starting Anew
It is hard to determine since when the "exit" of retail hypermarkets has begun to become the mainstream narrative.
On one hand, consumers are changing, with a stronger demand for cost performance. Ordinary consumers' pursuit of health, self-pleasure, and personalization is deepening. On the other hand, the supply is also changing, with increasingly fierce channel competition. Warehouse membership stores have ushered in a development climax with their unique cost performance. Vertical channels represented by snack discount stores have attracted a large number of young consumers with their rapid expansion and low-price strategies. Instant retail platforms that offer anytime and fast delivery services have become the new "favorites" online.
What kind of products do consumers need today? How are online and offline channels being redistributed? How should retailers find opportunities in a difficult situation? At a turning point, many problems linger over the retail industry. Many established retailers are retreating step by step, and some even disappear completely in this round of changes. Every new and old player must think about, "Why do consumers choose me?"
We often use words like "philosophy" and "art" to describe retail. How to understand people actually determines how a retailer positions itself and answers the question "Why do consumers choose me?" Walmart may be one of the retailers that has thought the most about this. Its founder, Mr. Sam Walton, concluded thirty years ago, "Walmart can maintain a good momentum because it continuously meets the needs of customers."
Perhaps for this reason, this "pioneer of Chinese hypermarkets" has maintained a good position and action in every change. From an international perspective, Walmart ranked first in the "Top 100 US Retailers in 2024" list. In the Chinese market, Walmart has also ranked first in the "CCFA China Supermarket TOP100" for three consecutive years.
For many Chinese consumers, Walmart is the first hypermarket in their lives. Looking at a longer time period, this giant has certainly experienced ups and downs in China. But from the results, compared with its rivals in the same period, it seems to have a more special ability to turn flexibly - it has passed through economic cycles such as the financial crisis, actively integrated into online channels, turning the impact of e-commerce into a "false proposition", and is still going against the trend of the "retreat of hypermarkets" in the industry, taking the initiative to change.
At the beginning of this year, Walmart announced the completion of the renewal and upgrade of the first batch of 29 hypermarket stores in 8 cities across the country. At the end of the year, there is a new observation window for its changes. Its Kunming Longquan Store and Kunming Zhengda Store opened on December 25 and 27 respectively, and the latest generation of stores made their debut, presenting the transformation results of this year.
As Morgan Stanley wrote in a report, "If you don't talk about Walmart, you can't talk about the meaning of being a consumer." Taking the opportunity of the opening of two new stores in Kunming, 36Kr conducted an on-site visit to Walmart's latest store.
In the new generation of stores, many intuitive changes, including product updates, shelf displays, and store designs, are visible. But the more internal feeling it brings us is that the secret to the longevity of an evergreen may lie in the simplest principles and unwavering goals.
Behind the products is the 'person', forgetting all formulas and purposes
"In the past year, Walmart has had a deeper thinking about the strategic origin of 'customer first', and around the vision of 'spend less, live better', it has been continuously thinking about who Walmart's customers are." Walmart CMO Zhu Jun recently said when talking to 36Kr and other media about the transformation ideas in the past year, "Today, this question has a very clear answer, which is the urban middle-class small families."
"Who am I" and "Who do I serve", these questions determine what products a retailer sells. In the glorious period of hypermarkets in the past, the Chinese market as a whole was in a stage where materials were moving from scarcity to abundance. Whoever could gather enough products could gain enough customers. When the supply became extremely rich and consumption began to be clearly stratified, the focused issues were put on the table.
For a "big and comprehensive" player like Walmart, the more it anchors the needs of urban middle-class small families, the more it means it needs to subvert the past and show the courage to make choices. For example, should the original regular and lukewarm products still be sold? Should every category give up comprehensive coverage? It is not a "micro-update" in the original system, but a deconstruction and reconstruction of the entire product system.
However, in the new generation of Walmart stores opened in Kunming, the changes in products are visible to the naked eye, and the focus on "people" is reflected in almost every detail.
When introducing the new Kunming store to the media, Zhu Jun could tell the reasons why each product appeared on the shelf like the palm of his hand - "This drink is refreshing and relieves greasiness, and is very suitable for a side dish", "The ingredient list of this dried fruit is clean, with 0 sugar and 0 fat", "It only costs xx yuan per pack", "The price of fresh beef is low and in small packages, which is what our customers need, and it is a test of the supply chain capability", etc.
Relatively, many conventional products that lacked a sense of value in the past have disappeared, and the SKUs of each category are streamlined but persuasive.
Take the baking area as an example, Walmart has comprehensively upgraded the quality, with daily freshly baked products and the use of 100% animal cream. New trendy flavors are constantly emerging, and resources are concentrated to create big hit products. With the SKU reduced by more than half, the sales of the entire category have increased year by year, and the output of individual products has increased significantly. This Christmas, they also launched the festive Panettone bread, bringing a strong Christmas flavor to customers.
The logic behind this is that although many of the original products can also bring in income, they essentially consume operating costs and customer stickiness at the same time. In the reconstruction of product power, only by fully demonstrating the sense of value can the customer's mental perception of Walmart be truly established and the brand be established in the new industry change.
The improvement of the sense of value also forces retailers to break away from their original "channel" role and instead "dive into" product development.
In the latest Walmart stores, the proportion of private label, co-created products, and discounted big brand products has significantly increased, such as the giant Strawberry Bear plush toy and the Three Squirrels giant snack combination. Some customers said on social media, "The new Walmart store is so great that I can't get out."
According to 36Kr's understanding, differentiated products in Walmart's new generation of stores already account for a considerable proportion. But Zhu Jun's attitude towards this is surprising. He doesn't like to talk about those data results that might be proud, but patiently emphasizes the starting point - "All of Walmart's actions are to meet the expectations of the middle-class small families. We will not pursue numbers such as 'what is the proportion of differentiation' and 'what is the proportion of private labels'."
Another detail is that in Walmart's new generation of stores, the clothing area is filled with big brands such as Under Armour, Gap, Dickies, Nike, Adidas, and Reebok, with extremely attractive low discounts. These custom-developed products by these brand merchants are very in line with the preferences of contemporary middle-class consumers - they have both the quality perception of big brands and sufficient cost performance.
But when the media threw the question "Will all of Walmart's clothing follow the big brand discount route in the future?" to Zhu Jun, his immediate answer was: "Everything is centered around the customer. Today, their pursuit of quality clothing is big brand discounts, but if the needs of the middle-class small families change one day, we will respond at any time." This answer is flexible and solid.
Omni-channel is not a simple 'e-commerce + shelf'
"In recent years, Walmart China has been repeatedly talking about three things: product power, efficiency, and omni-channel." Walmart China CEO Zhu Xiaojing said in a speech. If the product power of the new generation of stores is a thick and thin subversive reconstruction, then "omni-channel" should be something that Walmart has been working on and continuously iterating.
The topic of "omni-channel" is not new and is also the focus of retailers' discussions. The problem is that it is not a simple, self-talking word.
For many traditional retailers, completing the established action of moving from offline to online means moving towards an omni-channel. But from the customer's perspective, it is not a mechanized channel supplement concept. The core is whether the same high-quality shopping experience can be provided in every channel.
This is why, although the slogan of "omni-channel" is often shouted out, the online sales proportion of domestic supermarkets is mostly only about 20% to 30%. Walmart has always been a "top student" in this regard - currently, nearly half of its sales come from online.
This is behind a deeper understanding of the omni-channel starting from "people". Zhu Jun has talked many times, "Omni-channel convenience" is an important value proposition for the middle-class small families. The classic portrait of this customer group is: they are educated, digital experts, and have a strong omni-channel consumption ability; at the same time, due to their busy lives, they have a high demand for convenience.
Perhaps it is the starting point of making customers' consumption more convenient that determines that Walmart can almost catch the early bus in every channel change.
On the one hand, where there are consumers, there is Walmart. From the private domain mini-program to the public domain platform, its current channel layout is already very complete. Various fulfillment methods such as "Fast Delivery within 30 Minutes", "On-time Delivery" covering more areas, "City-wide Delivery", "Nationwide Delivery", and "Direct Delivery by Suppliers" are relatively mature, jointly constituting Walmart's pursuit of increment.
On the other hand, a good "omni-channel" also means the refined operation of the existing stock. When it becomes a consensus that online traffic has peaked, Walmart's approach is to continuously expand new public domain channels according to the changes in customers' consumption habits, while continuously iterating private domain channels such as mini-programs.
As we understand, the private domain has become an important source of its online income - the concept of "private domain" has experienced from being extremely popular to becoming a formality, but excellent players can harvest precipitation through meticulous operation, and this narrative may be staged in every "new channel".
The more important point of the omni-channel is that online and offline cannot be discussed separately. Only by combining the data advantages of online user operation and conversion with the offline characteristics of experience and product delivery can the entire system be truly revitalized from the root.
On the basis of nearly half of the e-commerce proportion, Walmart is now focusing more on offline stores. In Zhu Jun's words, "The omni-channel with the store as the core is Walmart's omni-channel development idea."
In the space division of the new generation of stores, Walmart has broken the traditional model of defining categories by procurement for a long time, and instead reshaped the space around daily consumption scenarios. It has set up 16 blocks in the store, such as breakfast, hot pot and barbecue, outdoor travel, pets, fresh produce, and global shopping. At the same time, it also highlights a stronger sense of scene through cross-display to improve the convenience of customers' shopping decisions.
Zhu Jun also emphasized the demand differences between online and offline, "Walmart stores should be known for fresh food, select non-food products offline, and put more non-food products online." This is the understanding of the roles of different channels.
In the constantly changing business world, the omni-channel is destined to be a dynamically changing road. Walmart's story is that it extends from offline to online, and takes offline as the core to drive the omni-channel. The two are like two intersecting lines that move forward by leveraging each other, achieving a virtuous cycle of "you take a step forward, and I follow". Only in this way can the omni-channel truly present a complete appearance.
Many people underestimate the determination required for EDLP
On July 2, 1962, the first Walmart officially opened, with the big signs on both sides reading "Everyday Low Prices" and "Satisfaction Guaranteed". In 1974, "Every Day Low Price" (EDLP) was listed as Walmart's business philosophy, and it has dominated Walmart's development in the following fifty years.
But in fact, since Walmart entered China, the market has re-evaluated this principle countless times, believing that it is not feasible in the Chinese market - especially during the e-commerce boom, various promotional activities have triggered national frenzies several times. Among the meaningful and effective "high and low price promotions", the latter is more chosen.
However, Walmart has adhered to this principle to this day. A consensus within Walmart is to embrace change. That is, in order to adapt to the changes in customer needs, almost everything in Walmart can change, and only a few things will not change - including the "EDLP principle".
The logic of discount promotions and exchanging for short-term profits is easy to understand, but what exactly has this method brought to the business world? For customers, it is the dynamic and confusing prices and the sense of insecurity of "afraid of buying expensive" every time they consume. For suppliers and brand merchants, it is the tidal inventory pressure, the embarrassment of being broken at any time, and the ubiquitous communication cost.
Today's facts also show that when the consumer market becomes mature, people are becoming more and more tired of irrational promotions. In the past two years' Double Eleven promotions, "merchants who don't want to participate" and "quiet" consumers have become the focus of industry discussions.
The reason is that every promotion will increase the complexity of the business model, and the costs generated will either empty the retailer or squeeze the supplier, and eventually be passed on to the customer.
In contrast, Walmart's EDLP is not a temporary marketing method or a simple pricing strategy, but requires the ability to be brave in making choices. For example, in the upsurge of full-reduction promotions, can you resist the temptation of short-term profits and still use a more difficult way to maintain competitiveness from the source; or how to persuade brand merchants to practice this concept with Walmart.
"Getting rid of the reliance on promotions is a strategic consensus reached by Walmart with major brands and suppliers, and the process is very difficult." Zhu Jun said this.
Source procurement, scale advantages, full-link efficiency improvement, product customization, etc., are all necessary conditions for achieving EDLP.
But after crossing the mountain, EDLP brings long-term stable prices, greatly enhancing the sense of security and trust of customers, while also reducing the communication and decision-making costs of retailers, suppliers, and customers - this is a "difficult but correct" choice that brings greater certainty to the industry.
According to our understanding, a considerable proportion of Walmart's products have achieved EDLP, and this proportion will continue to expand. Now when you open Walmart's mini-program, you can no longer see any promotional coupons.
A persuasive example is that although the price of fresh produce fluctuates all the time, an egg sold in Walmart stores has not changed in price for 13 consecutive months, but its sales have achieved a significant increase - the simple original intention, after long-term practice, constitutes the trust and consensus between Walmart and customers.
Conclusion
For Walmart, taking the customer as the first starting point is a proverb that has been shining for more than 60 years. This is true for the persistence of EDLP, as well as for every store change, product upgrade, and channel improvement.
At the end of the recent media meeting, Zhu Jun once again talked about the strategic goal set by Walmart four years ago, "To become the most trusted omni-channel retailer in China". He concluded, "Trust is the core