Two top e-commerce executives will leave Wal-Mart Stores Inc.

and the retailer will change the way it manages its global online retail operations as part of a major shakeup announced today. The retail chain, No. 6 in the Internet Retailer Top 500 Guide, announced in a corporate memo that its e-commerce leaders in developed countriesthis includes the United States, Canada, the United Kingdom and Japanwill now report directly to executives who oversee the store operations in those countries. Previously, e-commerce executives reported to vice chairman and head of global e-commerceEduardo Castro-Wright. The retailer says it made that move because shoppers want to be able to move easily between the big retail chains stores and web sites. In these markets, our brands, as well as our bricks-and-mortar presence, [are] wellestablished, and our customer is demanding continuity between both channels, a seamless experience as she shops in her store and online, comparing prices, assortment and availability, reads the memo. Related Articles In such markets as China, India and Latin America, the retailers global e-commerce unit, established in early 2010, will be directly accountable for e-commerce in those countries, according to the memo. We have a tremendous opportunity and latitude to lead the way in creating a new retail experience for our customers in these markets because our brand and physical presence are still in their early growth stages, the memo reads. As part of the change, Wal-Mart will lose two leading e-commerce executives, Raul Vazquez and Steve Nave. Vazquez led the development markets group for the retailers global e-commerce team and was the former CEO of Walmart.com. Nave was senior vice president and general manager of Walmart.com. The retailer says both are leaving voluntarily. The retail chain has named Joel Anderson president of Walmart.com, the retailers U.S. e-commerce operation. He joined Wal-Mart four years ago and has been serving as senior vice president for the northern Plains region. He reports to Bill Simon, Walmart U.S. president and CEO. Previously, Anderson worked as chief merchant for ToysRUs.com; Toys 'R' Us Inc. is No. 29 in the Top 500 Guide. He also lead the BabiesRUs.com business, Wal-Mart says. The e-commerce changes come amid Wal-Mart's efforts to beef up its online capabilities. This spring, for instance, the retail chain announced the acquisition of Kosmix Corp., whose technology searches and analyzes online social data, such as Twitter posts, to personalize web content. Wal-Mart says the purchase will help the retailer develop its social and mobile commerce initiatives faster. Wal-Marts move today is hardly surprising and reflects the retail chains practice of having executives do tours of duty in both e-commerce and bricks-and-mortar posts, says Jim Okamura, managing director of Chicago retail consulting firm Okamura Consulting. Wal-Mart is really just applying the same kind of thinking on a global scale, he says. He says the closer relationship of the offline and online operations in developed markets will help Wal-Mart come to better pricing and merchandising decisions. Wal-Mart now sees Amazon as one of its main competitors, he says, and Wal-Mart is getting smarter in how it can compete with the endless aisles of Amazon. While the moves could help Wal-Mart in its battle against Amazon, the retail chain for too long has treated its ecommerce operation almost as a stepchild, says Craig Johnson, president of Customer Growth Partners, a retail consulting firm. "Wal-Mart has been lagging in e-commerce," he says, "but a simple moving around wont change it. They need to devote the resources to e-commerce, make a commitment to it.

Mike Duke's strategy for Wal-Mart Stores may seem like a page out of the past, but he's focused clearly on the future.
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In remarks at the company's annual meeting in June, the chief executive officer of the world's largest retailer detailed his vision for reaching a next generation customer. By this, Duke meant more than just an Internet-savvy shopper though that too matters but consumers worldwide whom he sees aspiring to afford the things Wal-Mart can provide best for them. Our next generation customer will include millions who are striving to join the emerging global middle class. They're from the countryside in Punjab, the blue-collar suburbs of Sao Paulo, Brazil. They're in the big cities from the wards of Chicago to the boroughs of New York City. They're connected to the world through smartphones and social media. They're in charge of when they shop and how they shop. And, believe me, they know who has the lowest prices. They don't want to have to choose between products they can afford and products that mean a better life, like sustainably grown fruits and vegetables. They have higher expectations for the role of business in solving problems. Saving people money so they can live better earns trust. Much of what Wal-Mart is trying to accomplish today under Duke is encapsulated in his description of the next generation customer, including efforts in the U.S. to reestablish strengths in everyday low price and assortment that deteriorated to a degree in recent years, and a plan to do so with a variety of shopping options including digital ones. Duke has served as Wal-Mart's CEO since February of 2009. He joined the company in 1995 and has at varying times led the logistics, distribution and administration divisions as well as Wal-Mart U.S. From 2005 to 2009 he served as vice chairman with responsibility for Wal-Mart International before succeeding Lee Scott upon the latter's retirement. He is a Georgia native who began his retailing career with Federated and May department stores. Will he go down in history as the man who saved Wal-Mart? I don't know if we can say so yet, Neil Stern, a senior partner at McMillan Doolittle, Chicago, told SN. What he has done is articulated a plan that involves an expansion of the store footprint, particularly into small and medium-sized stores, which is a fairly direct threat to the supermarket industry.

But while he's playing around with what their real estate expansion plans are, they also are challenged with fixing the current business. Frankly, unless you get the current business going you can't really expand into other areas. That's a dual challenge Wal-Mart faces, and it's considerable. Wal-Mart's issues with its supercenters are well documented. A move toward culling selections and renovating stores under the Project Impact strategy backfired when cash-strapped shoppers turned away from Wal-Mart when they couldn't count on finding the products they wanted. In the meantime, those shoppers found more retailers able to deliver low prices, often in more convenient locations. This phenomenon prompted Wal-Mart under Duke and Walmart U.S. President Bill Simon to work hard on developing more convenient shopping vehicles, including revamping the Neighborhood Market grocery store now called simply Walmart Market so that it can deliver returns to rival those of supercenters. That store, along with a newer and smaller vehicle called Walmart Express, will see more aggressive rollouts this year. In supercenters, products are returning to shelves and Wal-Mart is making a strong new commitment to the everyday-low-price mantra of its past. Officials say the strategy is taking root, with a plan to return U.S. stores to positive comps same-store sales had declined for eight straight quarters by the end of year. Adding back SKUs is a short-term thing, noted Stern. The strategic issue is what Wal-Mart's position in the marketplace will be from a pricing standpoint and whether EDLP which admittedly took them pretty far is still the formula for success in the future against increasingly sophisticated supermarket chains that have a lot of data, analytics and software at their disposal, as well as new competitors that Wal-Mart didn't have in great quantities 20 years ago like dollar stores and hard discounters like Aldi and Save-A-Lot. It worked in 1990, but will it work in 2011? Elsewhere, Duke is leading Wal-Mart to further expand worldwide. The company this year won approval to acquire its first stores in Africa with the acquisition of Mass-Mart of Johannesburg. And its plans in the digital space appear just as ambitious. Wal-Mart's digital division made a key purchase this year of a Silicon Valley startup named Kosmix that can give the company a platform to build a sales effort around social media. And it moved to become a leader in the emerging Internet shopping channel in China, acquiring an Internet company there. With our stores and low prices, we can really take advantage of mobile technology and this era of price transparency, Duke said last month. We can combine our stores, our systems and our logistics expertise into one continuous channel to drive growth and serve the next generation customer around the world.

Let me by very clear in global ecommerce, we will not just be competing. We will play to win. Duke's other priorities for Wal-Mart are to improve the retailer's development and acquisition of talent throughout the organization and to lead an effort to broaden and accelerate our work to make a difference on big issues. These include a commitment to sustainable agriculture, participating in hunger relief efforts and providing more healthy foods. Richard George, a professor of food marketing at St. Joseph's University in Philadelphia, said he wouldn't bet against Duke. He described first encountering Duke while addressing Wal-Mart executives at a function several years ago and coming away impressed with Duke's passion for the business. At the meeting I stood up and said, I'm from the Northeast, and I have to say, your stores up here are god-awful, George related. Next thing I know I was getting applause, and Mike Duke was at my elbow. We talked for 45 minutes. He said, We haven't figured out the Northeast yet, but we will. And it was that tenacity, and his excitement for the business, that really showed through. I think Mike Duke really understands it, he added. Many people would deny they ever had a problem. His attitude was, Let's fix it. He's a preacher of vision and a lover of change. A lot of companies like to pat themselves on the back. But I've been to enough Wal-Mart meetings to know this is a company that spends a lot of time on the correction of errors.

COMPETITIVE ADVANTAGE

Wal-Marts competitive strategy is to dominate every sector where it does business. It measures success in terms of sales and dominance over competitors. Its strategy is to sell goods at low process, outsell competitors, and to expand. Generally, Wal-Mart does everything it can to win over competitors. A typical Wal-Mart model is to build more stores, make existing stores bigger, and to expand into other sectors of retail. Every step of the way, it strives to make money and dominate its competitors, to the point of putting some of them out of business.

The corporate mission of Wal-Mart can be stated as follows: As Wal-Mart continues to grow into new areas and new mediums, our success will always be attributed to our culture. Whether you walk into a Wal-Mart store in your hometown or one across the country while youre on vacation, you can always be assured youre getting low prices and that genuine customer service youve come to expect from us. Youll feel at home in any department of any storethats our culture. The company has three Basic Beliefs or core philosophies Sam Walton built the company on. Those beliefs are: (1) Respect for the Individual, (2) Service to Our Customers, and (3) to Strive for Excellence. Respecting the individual is a call for treating their employees well and pushing them to excel in what they do. The commitment to their customers is a goal whereby the stores respect a pricing philosophy to always sell items as low as they can while providing excellent customer service. The third belief is to strive for excellence, that is, to expand the store, innovate or reach further in to new markets and to grow. Other beliefs include, exceeding customer expectations with aggressive hospitality such as using door greeters. The store also features patriotic display and themes in its US stores. Another goal for the company is to support efforts in the local community via charitable contributions. Wal-Mart identifies several affiliations with charities such as the United Way and the Childrens Miracle Network. During the 1970s, the retail industry became highly competitive, but, at the same time the economy became weak due to inflation. Sears was the leading retailer in the nation, during the 1970s, however, the recession of 1974 1975 and inflation affected Sears adversely. Sears targeted middle class families and expanded its overhead. Wal-Marts strategy was to compete with its rivals and lower overhead expenses. Compared with Sears, which consisted of more than 6,000 distribution centers, Wal-Mart had only 2,500 comparable units. Wal-Mart centered on small-towns first then tried to move to large cities. This happened while other retailers centered on larger urban centers. However, as the economy faced a downturn, people wanted low price stores. Furthermore, as people became mobile, they moved to small towns and suburbs and were willing to travel further to buy low price products. During the 1980s, local chambers of commerce supported Wal-Mart because they believed that the company helps a local economy by providing good quality products at low prices. Unfortunately, critics contend that the success of Wal-Mart hurts the existing local independent merchants. Despite the criticism that Wal-Mart destroys small-town competitors, the local chambers of commerce endorsed Wal-

Mart. In addition, the chambers of commerce account that the arrival of Wal-Mart provided jobs for people and a more diverse opportunity for local merchants by adapting to the new business environment. When Wal-Mart first arrived on the scene with their low prices, K-Mart stores was unable to discount brand-name products. Customers wanted to buy good quality brand-name products. K-Mart provides nonname brand goods cheaply; however, it could not maintain constant low prices with its name-brand products. K-Mart and Sear could not beat Wal-Mart due to several reasons: First, Sears prices are higher than Wal-Marts because the Sears infrastructure gives it higher overhead costs. K-Mart declined in customer appeal because it neglected its store environment and could not provide satisfactory levels of service for its customers. Widespread complaints of poor customer service at K-Mart began to surface while Wal-Mart placed emphasis on customer satisfaction and neat store environments. Wal-Mart is also on top of their game because of the management strategies they employ. The management strategies of Wal-Mart emphasize its workforce and its corporate culture; that being a morally conservative, religious, and family-oriented business. Wal-Mart emphasizes how it listens to the needs of its workforce so that each employee is able to suggest improvements to company policy and practice. At Wal-Mart, store employees are called associates. The company offers generous financial rewards for employees by means of profit-sharing plans such as stock-purchase options. Furthermore, the company provides comprehensive training programs for all employees. Wal-Marts Control System Each store constituted an investment center and was evaluated on its profits relative to its inventory investments. Data from over 5,300 stores on its such as sales, expenses, and profit and loss were collected, analyzed, and transmitted electronically on a real-time basis, rapidly revealing how a particular region, district, store, department within a store, or item within a department is performing. Information enables the company to reduce the likelihood of stock-outs and the need for markdowns on slow moving stock, and to maximize inventory turnover. To reduce the costs of shoplifting and pilferage, Wal-Mart addressed this issue by instituting a policy that shared 50% of the savings from decreases in a store pilferage in a particular store, as compared to the industry standard, among that stores employees through sore incentive plans. The Sundown Rule is a corporate directive whereby all Wal-Mart employees, be they store associates, management, or corporate staff, must reasonably answer a customers or supplier request or question within 24 hours. The Ten Foot Rule states that store employees must greet, smile, and attend to a customer in a store when within 10 feet of them. Its a type of aggressive hospitality policy. Wal-Mart also compels its staff to engage in morning cheers where they recite company sayings. A final, yet important rule, which is a strong part of the corporate culture is Sam Waltons Pricing Philosophy which underlines the company strategy of selling items for less than their competitors, always. Wal-Mart pushed the retail industry to establish the universal bar code, which forced manufacturers to adopt common labeling. The bar allowed retailers to generate all kinds of information creating a subtle shift of power from manufacturers to retailers. Wal-Mart became especially good at exploiting the information behind the bar code and is considered a pioneer in developing sophisticated technology to track its inventory and cut the fat out of its supply chain.

Wal-Mart became the first major retailer to demand manufacturers use Radio Frequency Identification Technology (RFID). The technology uses radio frequencies to transmit data stored on small tags attached to pallets or individual products. RFID tags hold significantly more data than bar codes. During the first eight months of 2005, Wal-Mart experienced a 16 percent drop in out-of-stock merchandise at its RFIDequipped stores. Though Wal-Mart may have been the top customer for consumer product manufacturer, it deliberately ensured it did not become too dependent on any one supplier; no single vendor constituted more than 4% of its overall purchase volume. In order to drive up supply chain efficiencies, Wal-Mart had also persuaded its suppliers to have electronic hook-ups with its stores and adapt to its latest supply chain technologies like RFID which could increase monitoring and management of the inventory. Wal-Mart used a saturation strategy for store expansion. The standard was to be able to drive from a distribution center to a store within a day. A distribution center was strategically placed so that it could eventually serve 150-200 Wal-Mart stores within a day. Stores were built as far away as possible but still within a days drive of the distribution center; the area then was filled back (or saturated back) to the distribution center. Each distribution center operated 24 hours a day using laser-guided conveyer belts and cross-docking techniques that received goods on one side while simultaneously filling orders on the other. The company owned a fleet of more than 3,000 trucks and 12,000 trailers. (Most competitors outsourced trucking.) Wal-Mart had implemented a satellite network system that allowed information to be shared between the companys wide network of stores, distribution centers, and suppliers. The system consolidated orders for goods, enabling the company to buy full truckload quantities without incurring the inventory costs.

Wal-Mart seeking greater freight control

Jun 11, 2010 1:20 PM, By Brian Straight, managing editor

Retail giant Wal-Mart Stores is pushing an innovative approach to supply chain management whereby the companys private fleet will take over delivery of goods from suppliers to its distribution centers wherever it is cost-effective to do so. It has allowed our suppliers to focus on what they do best, manufacturing products for us, Kelly Abney, Wal-Mart vp of corporate transportation, told Bloomberg News. With lower costs usually come increased sales. According to the Bloomberg report, Abney said Wal-Mart is in the processing of contacting manufacturers about this approach with the goal being to lower costs for the suppliers, which in turn would lower the cost of goods to the retailer. A Wal-Mart spokesperson told Fleet Owner that some manufacturers have accepted the plan.

Wal-Marts truck fleet has 6,891 tractors and over 55,000 trailers. It is the 22nd largest private fleet in the U.S., according to the Fleet Owner 500. The company hopes leveraging the sheer volume of its, fleet along with employing independent contractors when necessary, in this way will further reduce costs. In 2009, Wal-Mart trucks traveled nearly 750 million miles, almost 100 million less than in 2008, company spokesman Lorenzo Lopez told Bloomberg. The supply-chain plan could have a ripple effect throughout Wal-Marts supply chain, according to ananalysis by John Schulz of the Gerson Lehrman Group. If Wal-Mart were to pull that freight off common carriage--or even threaten to pull it--that would result in tons of excess capacity at a time when the U.S. trucking industry is just recovering from a three-year freight recession, Schulz wrote. The extra capacity in the industry is just now starting to fill with freight, but Wal-Mart could exacerbate that recovery with a shift of freight capacity. If nothing else, he continued, the mere threat of this is likely to cause a cascade of discounting from its for-hire network of carriers, which fear a loss of Wal-Mart freight could drastically throw off its freight flow and balance among its remaining customers. A separate analysis by Gerson suggests the impact may be even more widespread than that: The suppliers today use Wal-Marts volumes to keep their own logistical costs down, so if they lose control of that volume to Wal-Mart, they are in a weakened negotiating position that will likely result in [the costs of] their non Wal-Mart shipments becoming higher. In addition, Gershon added, the suppliers will have to initially deal with additional transport service providers that Wal-Mart selects to move their goods, causing potential inefficiencies at distribution centers as they become congested with trucks not being able to get to loading and unloading doors. This will be solved over time, but there will be inefficiencies. Schulz contended the bottom line is that Aall in all, this is not good news for the for-hire trucking industry. It likely means one of two things: a) Wal-Mart pulls some freight from its forhire partners or b) if it keeps that freight with those carriers, it gets a greater discounted rate for doing so. Swift Transportation, Con-way Freight and Greatwide Logistics are among Wal-Marts customers. Wal-Mart reported first-quarter sales and earnings last week of $99.1 billion, a 6% increase from first quarter 2009.

The pros and cons of FDI in retailing

The Cabinet has approved 51 per cent FDI in multi-brand retail, a decision that will allow global mega chains like Wal-Mart, Tesco and Carrefour to open outlets in India. The Cabinet also increased the foreign investment (FDI) ceiling to 100 per cent from the present 51 per cent in single-brand retail.

The following are the main issues raised by those in favour of foreign equity in multi-brand retailingand those opposed to it: Those against: - It will lead to closure of tens of thousands of mom-and-pop shops across the country and endanger livelihood of 40 million people - It may bring down prices initially, but fuel inflation once multinational companies get a stronghold in the retail market - Farmers may be given remunerative prices initially, but eventually they will be at the mercy of big retailers - Small and medium enterprises will become victims of predatory pricing policies of multinational retailers - It will disintegrate established supply chains by encouraging monopolies of global retailers Those in favour: - It will cut intermediaries between farmers and the retailers, thereby helping them get more money for their produce - It will help in bringing down prices at retail level and calm inflation - Big retail chains will invest in supply chains which will reduce wastage, estimated at 40 percent in the case of fruits and vegetables - Small and medium enterprises will have a bigger market, along with better technology and branding - It will bring much-needed foreign investment into the country, along with technology and global best-practices - It will actually create employment than displace people engaged in small stores - It will induce better competition in the market, thus benefiting both producers and consumers