Happy Chinese New Year. There is an old Chinese proverb that says: “The best time to plant a tree for shade is 100 years ago. The next best time is today.” These days we can plant faster growing trees and harness building technology to provide shade much faster. But the proverb still rings true. “Play catch up as fast as you can.”
I met Doug McMillon, chief executive of Walmart’s global business, some years ago, very briefly, in the Walmart China office in Shenzhen.
I’d arrived on a Hainan Airlines flight from Sydney. Doug had arrived on a Walmart private jet out of Bentonville. He was on a higher pay grade than me too. Still is. He was a hugely down-to-earth individual for a man who runs one of the biggest companies on the planet. The company he leads competes head to head with the majority of major retailers in many parts of the world, and directly with Amazon in the ether.
Doug was speaking earlier this year at a retail conference in the US. The shortened transcript is here below the Walmart blog announcing the new two day free shipping the retailers has introduced to compete with Amazon Prime.
In the address he makes strong points that reinforce the things that retailers have spent 100 years growing, versus the new pure online retailers that have only a few short decades to build their retailing model. He is also clear that Walmart and all other traditional retailers are planting new trees to compete with retailers like Amazon.
“It’s up to retailers to adapt to these changes–and in some areas even lead the way–or they’ll fall behind and disappear,” he said.
He explains the shift to the automation and the introduction of artificial intelligence (AI) of our mundane shopping items and the need to focus on the exciting, emotional parts of the shop.
“Shoppers fulfil their everyday needs – items like laundry detergent, paper, light bulbs, grocery staples and shampoo – in the easiest way possible through a combination of stores, e-commerce, pick-up, delivery and supported by artificial intelligence (AI),” he says.
“Shopper desires – think emerging fashion, fresh produce, and items they’ve never seen before – will still be fun to explore in stores as well as with virtual reality (VR).”
And Walmart already does harness its 100 year old trees…the store network and supply chain to fulfil online, but with a lighter environmental footprint than Amazon.
“At Walmart we already see the value customers place on personalisation and convenience, through our success with grocery pick-up and delivery in several markets around the world.”
Doug goes on to say: “When it comes to environmental sustainability, retailers and policy-makers face new challenges with the increase in packaging waste and emissions that come with the growth of e-commerce. Shipping packages one at a time is not only wasteful and environmentally unsustainable, it isn’t cost-effective. The demand for convenience will force retailers to come up with new ways to ship items–in batches versus one at a time–that are better for business and the environment.”
And it’s not just convenience that’s been delivered by online, but global choice of products planted in the minds of shoppers by the online retailers in the late 1990s.
“Shoppers all over the world now know, and can see, what people in other countries have, and they want access to it all. And they want it now. Chinese customers want access to Louis Vuitton bags from France and milk from Australia,” Doug says.
Over the Black Friday, Christmas and New Year sales in the US, Amazon’s increasing success translated into job losses and store closures at US department store Macy’s and other mainstream big box retailers in January. Amazon’s prices remain low, range wide and their artificial intelligence and history of “throwing to the crowd” with other shopper recommendations are its “100 year old trees” that many retailers are failing to respond to.
These traditional retailers’ only choice is to borrow money or downsize until they can invest to build new retailing models to compete. If they can’t compete in time, then they’ll run out of money and close.
Many simply won’t make the change in time.