business news in context, analysis with attitude

As MNB was being posted on Friday morning, we broke with the just-released news that Walmart announced plans to close 269 stores around the world, including 154 in the US. The US closings include 102 Walmart Express stores, 23 Neighborhood Market stores, 12 Supercenters and four Sam's Club stores.

The company said that the closures are part of a general retooling and re-evaluation of its business, eliminating unprofitable stores and units that may have been cannibalizing sales from other Walmart stores. The company says it plans to open more than 400 stores in the coming year, with CNBC characterizing this as a shift "toward Supercenters and Neighborhood Markets in profitable locations."

In the wake of that announcement there have been a series of market-specific reactions...

• In Washington, DC, for example, local officials are outraged that as part of the announcement, Walmart will not build two promised stores there in low-income neighborhoods, saying that the decision is related to high building and labor costs that would make the locations unprofitable. (Three recently built Walmart stores in DC will remain open.)

As part of that "high labor costs" argument, the story says, some are saying that Walmart is implicitly blaming the District's high minimum wage; it currently is $11.50 an hour, and if approved via ballot later this year, could go as high as $15 an hour. These numbers, some say, made new stores untenable, which in the long run hurts the hundreds of people who would've gotten jobs there, the thousands of families who could've shopped there, and the city's tax base.

Time has a story noting that "from the get-go it seemed like the Walmart Express format was not a natural fit for the retail giant." It was almost impossible for Walmart to deliver the same shopper experience, selection and prices at Express stores of 15,000 square feet and even Neighborhood Markets of 40,000 square feet that it did at 100,000 square foot supercenters."

• And there have been a number of stories in the media about communities where Walmart is shutting down, and local residents are upset because Walmart essentially put all the local competition out of business ... and now is closing its stores, leaving residents without a local supermarket.

Meanwhile, Fortune reports that Walmart has decided to merge two devisions - its tech group in Bentonville, Arkansas, and @WalmartLabs in California's Silicon Valley - to create a new unit called Walmart Technology.

"The teams’ merger echoes the growing shift in how consumers shop and shows just how important it is for Walmart to fully integrate its nearly stores with its $13 billion a year e-commerce business," the story says, adding that "the cohesion will notably be key to helping Walmart ramp up its online grocery pick-up service better compete with Amazon’s food delivery efforts. Walmart in recent years has poured billions into e-commerce, with a view to offering customers a seamless shopping experience and get more mileage out of its thousands of stores. For instance, it allows shoppers to pick up online orders at any store, to use a shopping up to alert store workers when they are getting to a Walmart to pick up an order, and also use the merchandise inventory in its enormous fleet to speed order delivery at a time Amazon is redoubling its efforts to shorten delivery times."
KC's View:
I was really only guessing on Friday, because I hadn't seen the announcement about Walmart technology, but I did write that "the natural next step will be for Walmart to announce the degree to which it wants to integrate its bricks-and-mortar business with online operations ... and getting rid of inefficient stores may be the first step toward expanding click-and-collect and delivery operations chain-wide in the US."

Pretty good guess, huh? (Let me quickly point out that old truism about how even a broken clock is right twice a day...)

I feel bad about the communities that have grown to depend on a smaller Walmart iterations and now are losing them. I've always argued here that part of what traditionally held Walmart back was that it is a supercenter-oriented business and it never would be able to get the same kind of ROI out of small stores that it does out of big stores. When it decided to start testing small stores, there may have been more of a "on a wing and a prayer" philosophy than we knew.

Here's the thing about small stores operated by companies that traditionally operate big stores. You can't deliver the same experience. You just can't. What you have to do is figure out how the small store can supplement and complement the larger stores, reinforcing the brand while not trying to duplicate the experience. That's really hard to do, and apparently even the Bentonville Behemoth couldn't get it done.

As Walmart looks to integrate its physical business with its virtual business, it may face the same kinds of problems. It remains a supercenter-oriented business that may be genetically programmed to fight off all threats from the outside and even threats from the inside ... and e-commerce will be seen in some quarters as a threat to the core business. CEO Doug McMillon has to figure out a way to re-engineer the culture so that a true integration is possible ... just laying it out on an organizational chart won't be nearly enough.

And I still think that expanding click-and-collect and delivery operations chain-wide in the US has to be a priority.