In three years, 65% of Walmart stores will be serviced by automated warehouses. This is the retail giant’s goal as inflation continues to weigh on sales and margins.
Half of all packages automated
Walmart says it is ready to take the next step in its digital transformation. After laying off 2,000 warehouse workers last month, the retailer now announces plans to further automate its distribution centres and shops. By 2026, 65% of its shops should be supplied automatically, while reducing costs by 20%.
More than half of the parcels handled by its fulfilment centres should be processed automatically by January 2026. This was stated by the US retail giant at its annual meeting with investors. The company is “most excited about the automation capabilities” it has at its disposal and will invest more in the technology this year.
Over time, Walmart expects to need less physical labour thanks to the increase in per capita processing capacity, but to keep the same number of employees, or even hire more, to fill new, higher-paying positions. However, the number of jobs will grow more slowly due to automation.
Beyond the stage of scaling
Yet it is not just a matter of digital acceleration. CEO Doug McMillon said, according to PYMNTS, that the retailer is entering a phase “that is less about scaling store pickup and delivery, e-commerce assortment and e-commerce fulfillment center square footage, and more about execution and operating margin improvement.”
Walmart is now moving towards a fully connected supply chain, both in terms of data and software. The company even hopes that part of a customer’s order can come from the shop and part from the fulfilment centres. Indeed, the 4% growth the chain expects to achieve over the next three to five years will be made possible by the combination of the power of physical retailing and the “growing digital relationship” between Walmart and consumers.
Services earn more than retail
For the current fiscal year, which ends on 31 January 2024, CEO McMillon sees net sales growing by 2.5-3% and earnings by 5.90-6.05 dollars per share. For this quarter, he maintains his forecast of a 4.5-5% increase in sales at constant exchange rates. Inflation continues to weigh as consumers buy more low-margin food items and less higher-margin items such as clothing and housewares.
Walmart is nevertheless at a turning point, said CFO Rainey, as it invests in other revenue streams. Over the next five years, services such as advertising, fulfillment for merchant partners and membership programs will contribute more to profitability than retail sales. Profits may therefore turn out to be better than expected.
The retailer’s new five-year plan will focus on membership models, consumer choice (omnichannel and in offer) and a thoroughly modernised customer experience.
