In the world of retail, three companies stand out above all others: Amazon, Costco, and Walmart. Of the three, Walmart is the largest retailer by revenue – $611B in 2022, and store count – over 4,700 stores operate in the U.S. Walmart’s stores provide the company with a unique advantage as there is a Walmart store located within 10 miles of 90% of the U.S. population making it easier for customers to visit and shop.
What I find most fascinating about Walmart is that they generate 60% of their revenue from selling groceries. Walmart controls 25% of the grocery market in the U.S. By comparison, Amazon controls less than 3%. Groceries are strategic to Walmart. Another category that’s strategic to Walmart is food. I’ve stated since 2013 that Walmart has an opportunity to imagine a new way for Americans to eat. (I’ve also stated that Amazon can also imagine a new way for Americans to eat but it will be more challenging for Amazon due to their lack of stores.)
According to reports, Walmart appears to be ready to expand their focus on food. Walmart has announced its hot rotisserie chicken is now available for same-day delivery. Previously, shoppers could only order cold chicken for delivery. “We’ve optimized our operations to add more delivery slots and availability, which allows Walmart to deliver our hot rotisserie chicken the same day for its customers,” according to a Walmart spokesperson.
Walmart has also launched a new digital recipe hub where shoppers can select a recipe and add all the ingredients to their online cart. Paprika Chicken & Rice Bake, for example, has 10 ingredients (including salt and pepper) and costs $21.35 to prepare for five servings, according to the recipe site.
What appears to only be a move by Walmart to sell rotisserie chicken, is in fact the begging of something much larger – Walmart is going to own the kitchen – and it will transform the food industry.
Walmart understands exactly what consumers buy and what they eat due to Walmart’s extensive use of data. The beauty of data is that it allows companies to see and learn things they otherwise would miss. Walmart has learned that consumers are looking for faster and easier ways to eat hence the popularity of meal kits and prepared meals. Walmart has also learned that even during periods of high inflation, consumers like to eat out at restaurants; food delivery is exceptionally popular.
I’m convinced that Walmart is planning to do much more than deliver hot rotisserie chicken to customers. Instead, Walmart is going to perfect a method for delivering precooked meals that only require heating. Walmart is also going to create the ability for delivering hot cooked meals that meet the needs of individuals and families. This is much harder to do than it appears. To make the concept a success, I anticipate that Walmart is going to open a series of commissaries to prepare precooked meals on a large scale for delivery. Walmart will also open smaller facilities capable of cooking and delivering hot meals; in certain cases, Walmart may choose to make the meals inside their stores.
As I stated earlier, groceries and food are strategic to Walmart. Food and groceries are the only reason why Amazon isn’t already larger than Walmart. Walmart understands that under no circumstances can they lose the grocery war to Amazon. if they do, Walmart will slowly crumble. Think about that. Walmart generates 60% of their revenue from selling groceries. Walmart controls 25% market share of the grocery market. Imagine if Amazon increases their market share from 3% to 15% or 20%. Who will Amazon hurt the most? Walmart.
I believe Walmart must make a Big Move to ensure they maintain their lead over Amazon as long as possible. Among the ideas that Walmart should consider are the following:
- Split into business groups each managed by a CEO. Each CEO will report to a board of directors and assume full responsibility for the groups performance.
- Assign a CEO to be exclusively responsible for groceries and food and name the group Walmart Grocery and Food. Walmart should assess running Walmart Grocery and Food as a separate company. Splitting up the company should accelerate growth and improve the performance of the stock. Sam’s Club should be included under the purview of the CEO. The CEO should have responsibility for all store operations related to groceries, supply chain, logistics, commissaries, last mile delivery, and vertically integrating the company to own and operate facilities specific to food production. I would name Chris Nicholas CEO, and David Guggina Chief Supply Chain Officer and COO of the new Groceries and Food division. (Chris Nicholas should be considered the favorite to replace CEO Doug McMillon followed by John Furner and David Guggina.)
- Take Walmart’s grocery and food business public under another name and ownership model. It’s the fastest growing business within Walmart.
- All non-grocery retail should be managed by a CEO and run separately. I think a lot of sins are being hidden related to Walmart’s non-grocery related retail business. Running the group as a separate company presents very interesting possibilities for Walmart.
- E-commerce should continue supporting food and general merchandise but it too should have its own CEO.
- Operate logistics as a separate business group with its own CEO.
Walmart is a grocery retailer that also happens to sell general merchandise. I’m not a fan of the way Walmart is structured. Separating into business units will significantly make each business group more agile and able to Think BIG. What I suggest is only one of many possibilities that Walmart can pursue.
The bottom line is this: Whoever owns the porch, owns the home. Amazon is currently the online leader of retail delivering billions of packages annually to U.S. consumers. However, it’s also true that whoever owns the kitchen owns the home. This is where Walmart has an advantage. Providing consumers with increased solutions for meeting their weekly meal and grocery needs will increase sales and make Walmart much more strategic to their customers.
Although I consider Walmart to be an innovative company, I strongly suggest that they crush all assumptions about who they are and what they can do. For example, splitting up into business groups is a big decision. However, doing so removes the status quo and allows Walmart to operate with increased speed and far less complexity. Volume hides a lot sins. Operating individual business groups each with their own CEO, will uncover hidden truths and should propel Walmart’s sales and growth – this is especially true for groceries and food.
Think BIG, Walmart. Think REALLY BIG!
