Walmart shakes things up, further integrating online and physical store teams

Discussion
Jul 22, 2019
Tom Ryan

In a move to better integrate its physical stores with its online enterprise, Walmart is combining both its supply chain and finance teams that work with its e-commerce site and stores. 

“Our customers want one, seamless Walmart experience,” wrote CEO Doug McMillon in an employee memo obtained by numerous news outlets. “Earning more of our customers’ business in food and consumables is foundational to our strategy, and, at the same time, we will expand our ability to serve them with general merchandise in stores and through our broad e-commerce assortment as we continue to invest and build our e-commerce business.” 

Greg Smith, current EVP of the U.S. supply chain, will head the new combined supply chain team. Nate Faust, currently leading e-commerce fulfillment, will transition to a new role.

Walmart U.S. CFO Michael Dastugue will oversee the combined finance team. Jeff Shotts, current e-commerce CFO, will lead Walmart’s U.S. marketplace business. Steve Schmitt, currently Sam’s Club CFO, will become the new U.S. e-commerce CFO, reporting to Mr. Dastugue.

Mr. McMillon said there are “a few areas where we are choosing to maintain some structural separation to enable focus and speed,” including merchandising. “Our eCommerce sales growth, improving customer metrics and progress on contribution profit are encouraging, and we want to keep that going,” he said.

One change in merchandising is that Ashley Buchanan, currently EVP and chief merchandising officer at Sam’s Club, will become chief merchandising officer for U.S. e-commerce, reporting to Mr. Lore. Andy Dunn, Bonobos co-founder currently heading digitally native brands Walmart, will report to Ms. Buchanan instead of Mr. Lore.

The memo also highlighted several appointees supporting to Janey Whiteside, who in early July became Walmart’s first chief customer officer after a two-decade career at American Express.

The management changes follow the announcement in mid-June that the team at Jet.com was being folded into its corporate web organization. Reports then arrived in early July that many of Walmart’s senior officials are frustrated by the steep losses being incurred by online operations and the retailer’s struggles trying to catch up to Amazon.com.

DISCUSSION QUESTIONS: Does it make sense that Walmart is keeping merchandising separate while combining its supply chain and finance functions for websites and stores? Is full integration of online and physical store functions the best solution for most large retail chains?

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"Customers treat retail as a seamless whole; they don’t think in terms of channels. Retailers should reflect this in their own operations."
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"Removing any silos in retail is vital to be able to move forward into the new era of efficiency and sustainability."

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21 Comments on "Walmart shakes things up, further integrating online and physical store teams"


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Mark Ryski
BrainTrust

Without insider knowledge it’s difficult to speak to the exact nature of the changes that Walmart is making, but on the surface, it makes good sense. Aligning internal departments to better achieve integration of online and physical stores is sensible for all retailers to consider since consumers increasingly don’t differentiate their online and in-store experiences – they expect it to be seamless. Changing organizational structure and alignment is not easy to do, and I respect Walmart and other retailers are who willing to make these adjustments to deliver better outcomes.

Oliver Guy
BrainTrust

Interesting move. Over the past 5+ years one of the biggest barriers I have seen to success has been the online and physical sides of stores competing with one another internally. To progress you have to combine – though it’s not always easier … It requires a huge change management effort but it needs to happen. What would really be interesting is to see how they are measuring the new internal teams.

Art Suriano
BrainTrust

I think this is a brilliant strategy. The future of retail is the successful blend and balance of online and brick-and-mortar, acting together as one unit. The retailers need to be ready for the customer whether they wish to shop online or in-store and provide the same shopping quality, service and, most importantly, outstanding customer experience. Walmart understands that most customers shop both online and in-store and has already taken great strides in melding their online shopping and in-store shopping. Whether it be BOPIS programs, or shipping from the store directly to your home, Walmart has been leading the charge on providing the needed conveniences customers want today with great success. Other retailers will follow, and those that do will find it is what their customers want as well.

Jeff Sward
BrainTrust

This makes complete and abundant sense. Merchandise and assort through the eyes of the customer and execute with maximum possible back end efficiency. This is not unlike the (really) old days when individual branches of department stores had individual buying teams. Customer focus! But now the whole back office operation can be leveraged to the advantages of scale. And if they are really smart about it, they can use this opportunity to take maximum advantage of the most fluid time/action calendars.

Neil Saunders
BrainTrust

Customers treat retail as a seamless whole; they don’t think in terms of channels. Retailers should reflect this in their own operations, not least to improve efficiency and profitability. These things are particularly important to Walmart, which has taken a piecemeal approach to e-commerce via a mix of brand acquisitions and organic initiatives, and so needs to bring everything together. That said, integration can be difficult both culturally and organizationally, so Walmart will no doubt go through some teething problems before everything works as intended.

David Naumann
BrainTrust

Integrating online and physical store corporate departments is a smart approach to offer a truly integrated and seamless omnichannel shopping experience. The decision by Walmart to keep merchandising departments separate to enable “focus and speed” may have some merit. However, in the long-run, it seems like merchandising should also be integrated. Maybe the decision to keep it separate today is more about keeping some operational stability while they are integrating the supply chain and finance teams.

David Weinand
BrainTrust

From the most recent strategies Walmart has announced, this makes sense. As they increasingly are looking at fulfilling from stores, enabling e-commerce pick up and returns, etc. combining the supply chain function into one will enable a more efficient process. Walmart has always been known for its supply chain excellence and this is likely continuing in this vain. As for others following suit, I think it depends on the maturity of their e-commerce business and strategies for store fulfillment, BOPIS, etc. but as the shopping experience is increasingly a combination of online and physical, one supply chain team makes sense.

Shep Hyken
BrainTrust

Customers want to buy the way they want to buy. And they are learning about options; in-store, online, and a combination of the two. And there are even more, such as a subscription model. So there are multiple ways customers can buy from a retailer. But the customer doesn’t care about the options you give them. They only care that they get to buy the way they want to buy. The retailer that gives them the experience they want is the retailer they will do business with. For some companies, like Walmart, “full integration of online and physical store” makes sense.

Bob Amster
BrainTrust

Walmart is going in the right direction with the most recent reorganization. Eventually folding all merchandising organizations into one will complete the necessary transitions into unified commerce and further ensure that there are no merchandising inconsistencies between channels.

Harley Feldman
BrainTrust

It makes sense to not integrate merchandising with supply and finance functions at Walmart. Merchandising should be focused on growing the customer base while the supply chain and finance functions should focus on fulfillment efficiency and cost reduction. Separating these areas should find a healthy balance leading to Walmart’s future.

Full integration of online and physical store functions is best for the consumer. It is the only way to get to true omnichannel fulfillment. Each retailer may get to this integration differently but, if that is what the customers want, the retailer must deliver it.

Shawn Harris
BrainTrust

There are some integrations that are logical. I hope this was assessed as an opportunity, meant to enhance the two business growth potential, vs. just a move to save OPEX. A few years ago, I wrote a piece where I attempted to model these sorts of e-commerce/traditional integrations: “Is Omnichannel Even Possible?

Here’s an excerpt:
“Provide your traditional and ecommerce business units with “Good money,” which is money that encourages a focus on driving growth and profits, respectively. The two businesses should have independent administrative functions, including finance and HR. However, they should share customer data, product information, marketing assets, inventory insights, and fulfillment services. All inter-organizational shared services should be accessible via discreet web services. In addition, ecommerce should leverage the core business’ supply chain where appropriate; augmenting to meet its unique needs, up to and including leveraging services like Amazon’s Fulfillment by Amazon (FBA), in order to support scaling.”

Dick Seesel
BrainTrust

Walmart is taking some necessary steps to integrate its “back office” functions as part of its omnichannel initiative. But finance and supply chain are different from marketing (already integrated) and merchandising (not yet) because these are more visible to the customer.

Kohl’s went through a transition not long ago from separate silos for e-commerce and brick-and-mortar buying, and breaking down the barriers between the two makes more sense. The customer should see one merchandising point of view, even if e-commerce will always carry many more SKUs than physical stores. Walmart needs to take this step.

David Dorf
BrainTrust

Breaking down channel silos is absolutely the right move, and I’m surprised it took Walmart this long. But I’m perplexed they are keeping some parts divided “to enable focus and speed.” Is “focus and speed” not required in stores? I suppose with limited resources you have to place your bets, and Walmart is putting their chips on the Web.

Bob Andersen
Guest

This could be key to competing with Amazon. Walmart online is missing out on cross-selling (cross-merchandising) opportunities. Walmart online needs to move beyond “Customers also viewed” to “Customer also bought” these complimentary products. Then consider offering bundle deals that beat Amazon pricing with pick up in-store. Bundle deal margins can be hammered by the added delivery costs of several items, but customers picking them up at a store might solve the margin problem. If so, it could lead to a new winning strategy for Walmart: Bundle BOPIS?

Andrew Blatherwick
BrainTrust
It is a great move by Walmart to integrate their supply chain and store operation across the business. Removing any silos in retail is vital to be able to move forward into the new era of efficiency and sustainability. Why would you want two parts of your business competing with each other, especially when you need them to utilize the same resources? However, not also integrating the merchandise area will add pressure on the efficiency of the supply chain. With two silos trying to get the best inventory, delivery and service level for their customers, the supply chain team will have to become the arbiters of who gets priority. We have already seen retailers ring fencing inventory, starving stores to maximize online availability and late clearance due to mixed priorities. How will keeping two merchandise functions remove those inefficiencies? How will the supply chain team manage the pressure from both sides who will presumably be targeted and rewarded on the success of only their part of the business? Total integration is the only way to… Read more »
Cynthia Holcomb
BrainTrust

Walmart has decided to stop the bleeding by throwing merchandising, i.e. the product onto an island of itself. A rare insight into the Walmart headspace of politics and a return to mass merchandising. Read between the lines, supply chain and finance will now manage product merchandising by proxy. Andy Dunn reporting to Ms. Buchanan instead of Lore speaks volumes. Digitally native brands including the acquisition of Lore leadership have now been leveraged to serve their purpose. Under the guise of integrating online and physical store functions to better serve the customer, this backs up Walmart’s earlier announcement to focus on grocery in its battle for dominance over Amazon. Time, attention and physical resources will now shift to own the 30-minute delivery, BOPIS, and other digital-to-physical world grocery shopping customer experiences. Structural separation of merchandising will enable “focus and speed” for grocery, not merchandising. McMillon’s comment on e-commerce sales growth as “encouraging” likely means future sell-offs of digitally native brand acquisitions and more mass manufactured, deeply discounted non-grocery products.

Josh Clouser
Guest

From the high level perspective we are given, this is a win for the Walmart customer, who’s experience will be much more streamlined. The practicality of combining two separate storefronts into one will require much strategizing and structure to ensure “both” are equally successful. This feat will be very difficult to do, these organizations are often times very siloed. If Walmart can work through the learning pains to better deliver to their customer’s needs and wants, this work will prove beneficial to all.

Sterling Hawkins
BrainTrust

These kinds of things should start to be routine. It’s not rocket science that consumers want one experience across all the touchpoints and our organizations can be geared to serve that. And at the same time, things like merchandising stores is a unique function to stores themselves and that necessitates a little more focus. I think Walmart is setting a new norm.

Ken Morris
BrainTrust

One of the biggest challenges we have identified for retailers is the disparate systems and organizations that they usually operate. How can you offer the seamless shopping experience that customers expect with the organization, processes and technology at odds, running in silos, with yesterday’s inventory information?

Walmart has taken a huge step by combining supply chain and finance to be able to operate and fulfill easily across channels. Keeping its merchandising separate doesn’t seem to make sense but there may be a need to keep that area separate for the time being as they move towards a seamless integration across other areas.

I believe the biggest issue is the technology silos that don’t have real-time inventory information. That is the biggest challenge faced by every brick and mortar retailer competing with Amazon. Amazon is real time and the others are batch, synchronized only at end of day, because of the decentralized point of sales paradigm.

Kenneth Leung
BrainTrust

I think merchandising for now needs to stay separate because of the store specific expertise such as shelving, planograms, layouts, and regional customer preferences is still different than “endless aisle” ecommerce merchandising. There are definitely synergies, but maintaining separate groups for now makes a lot of sense.

Steve Dennis
BrainTrust

First and foremost, we have to remember that increasingly, the customer is the channel and the distinction between channels is typically not very helpful. To be truly customer-centric and deliver on a harmonized retail experience a high degree of integration is a must. Underneath a harmonized retail organization structure, merchandising and marketing should have some degree of specialization reflecting that certain categories have more pronounced shopping channel dynamics that others. But the overall organization should be organized around the customer, not the channel.

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Braintrust
"Customers treat retail as a seamless whole; they don’t think in terms of channels. Retailers should reflect this in their own operations."
"I hope this was assessed as an opportunity, meant to enhance the two business growth potential, vs. just a move to save OPEX."
"Removing any silos in retail is vital to be able to move forward into the new era of efficiency and sustainability."

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