Leaked Walmart memo reveals competitive threats from Amazon, Instacart and Target

Walmart is still the world’s largest retailer, but a recent memo from the company highlights its struggles to overcome competitors like Amazon, Instacart, and Target. The document also alludes to the challenges the Walmart + company’s new subscription service faces in retaining new members.

The 100-page February document, which was viewed by Recode, was created for the ad companies Walmart invited to compete to handle the planning and buying of ad placements for the retail giant. The memo makes several blunt assessments of the uphill battle Walmart faces to maintain its once dominant position in the retail market, including in the grocery industry in the United States, where the company has long been in business. ° 1 in sales.

“The grocery store, the company’s growth engine, is rapidly losing shares,” reads one slide. “More than ever, the Walmart buyer[s] choose the competition, ”the slide continues, alongside logos from competitors like Publix, Target and Albertsons, as well as statistics showing the increase in customer traffic at those chains and a decline at Walmart.

“Walmart is not the first and the favorite,” says another slide on the grocery industry. “Must increase assortment quality + value!”

Even in the online grocery market, where Walmart ranks number one thanks in large part to its popular curbside pickup service at its supercenters, the memo says the company barely holds the leadership position. The delivery company Instacart gained popularity at the expense of Walmart at the start of the pandemic, when the retail chain couldn’t keep up with the rush in customer demand, the memo says, and is seen on a chart below. joint as being almost on par with the retail giant at the top of the US online grocery market.

Walmart spokeswoman Molly Blakeman declined to comment on the memo and its contents.

While executives at the $ 400 billion retail giant are known to be self-critical internally, the memo is notable in the grim picture it paints of how competitors are reducing Walmart’s strengths and challenges. facing the company in trying to build a viable business. alternative to Amazon Prime. Walmart has indeed benefited from the pandemic, with revenue and profits increasing in the company’s last fiscal year and online sales rising nearly 80%. But many of Walmart’s competitors have benefited as well, from Amazon and Instacart to Target and regional grocery chains like Texas giant HEB – and the memo makes it clear.

One of Walmart’s biggest new bets is Walmart +, a subscription service that Recode first reported and that launched in september at $ 98 per year or $ 12.95 per month. The main benefit of the service is unlimited delivery of groceries and other general merchandise from Walmart stores which, for orders over $ 35, will be delivered same day. The service also offers next day delivery on select Walmart.com items, fuel discounts at Walmart and partner gas stations, as well as access to “Scan & Go” technology, which allows shoppers to use smartphones to scan and purchase products. in Walmart stores.

The Walmart memo from February says the company is seeing improvements in the percentage of members who renew when their membership expires. But Walmart says the service still needs to improve renewal rates, as well as the conversion rate of free trial participants to paid members and the number of members who buy general merchandise in addition to low-profit groceries. .

A source close to Walmart + told Recode that member retention has indeed been an issue for the new subscription service during its short existence and that retention is highest among members who use the benefit. discount on the essence of the program. Walmart + is still less than a year old, however, and the memo says the company will add more perks to the service in 2021 and may offer longer free trials as well as discounted subscriptions. Before the launch of Walmart +, Recode reported that the retailer had considered other perks such as as a branded credit card, early availability on product offerings, and member access to another company’s popular video streaming service. Walmart has felt pressure to create its own membership and loyalty program in part because more than half of Walmart’s top spending families also have Amazon Prime memberships, Recode reported in 2020.

Amazon, of course, is not the only threat mentioned. The memo also reveals a decrease in the lead for Walmart over Instacart, the online grocery company whose contractors buy orders from partner grocery chains and deliver them to customers’ doors the same day. An attached graph shows that Walmart held nearly 40% of the online pick-up and delivery grocery market before the pandemic, compared to just about 20% for Instacart. But the graph shows that Walmart’s share fell to 31% in February this year, and Instacart is nibbling on its heels with about a 30% share (Amazon is listed as a competitor to the online grocery store on the slide, but its market share is not shown in the graph.) Walmart says in the memo that it hopes to maintain its No. 1 position, in part, by investing in innovations such as drone deliveries and the creation of mini-warehouses attached to stores that can respond faster to online orders.

Additionally, the memo says Amazon and Target earned a greater portion of the average shopper’s spending from Walmart in general merchandise categories during the pandemic. Among a set of competitors including Amazon, JC Penney, Target and several other retailers, the paper shows that Walmart and Walmart.com have some of the lowest buyer satisfaction scores for quality and selection in the clothing category. Still, a company mission is to “make Walmart a credible clothing destination,” the document says.

Despite all the obstacles and competition on many fronts, Walmart is now valued at $ 20 billion more than a year ago. But as the pandemic abates in the United States, Walmart seems well aware that continued growth is not guaranteed – and that its response to the range of competitive threats it now faces will determine its future.

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