Consolidating buying operations will allow the Bentonville, Arkansas-based retailer to eliminate redundancies in its buying operations and improve coordination between buying teams, according to Reuters. The company has already alerted some vendors to the changes, but it is expected to officially disclose updates at a meeting with suppliers later this week.
Wal-Mart’s in-store buying team, based in Bentonville, will now be responsible for placing combined store and internet orders with suppliers who sell on both platforms, per the report. An item available approved for sale at the brick-and-mortar stores will also be approved for sale online.
But the company won’t ignore online-only sellers. Wal-Mart’s online buying team based in San Bruno, California, will continue to work with suppliers that make products that sell solely on Walmart.com. Wal-Mart plans to use its brick-and-mortar expertise to offer the lowest prices on its e-commerce platform, according to the vendors.
“The way it operated until now was extremely inefficient for us and them,” a large consumer goods supplier said, per Reuters. “For example, they would buy 5 million cases a year for stores and 500 cases (for) online and then make us go through a different buyer for online. It was a nuisance.”
As the world’s largest retailer, Wal-Mart’s action has the potential to affect business for many of its suppliers, which range from large companies to very small ones. According to data gathered from Bloomberg, a few companies bring in an especially high percentage of their revenue from Wal-Mart, notably Orrville, Ohio-based J.M. Smucker at 30 percent of revenues; Oakland, California-based Clorox at 26 percent of revenues; and Winston-Salem, North Carolina-based Hanesbrands at 20 percent of revenues, among many others.
Wal-Mart CEO Doug McMillon and new e-commerce head Marc Lore hope their latest effort will streamline operations and help the company compete directly with online e-tailer Amazon.com. But it remains to be seen what challenges will arise in trying to shake up the company so fast.
Last month, Wal-Mart launched free two-day shipping to compete with Amazon Prime. The company has also quickly grown its online platform from 8 million items at the beginning of 2016 to more than 20 million items at the end of last year.
But Wal-Mart faces an uphill battle as Amazon has been successfully established in this space for quite some time. Amazon has long had free shipping via Amazon Prime. Prime charges customers $99 each year for free two-day shipping on orders and also comes with Amazon’s video streaming service. And even though Wal-Mart has 20 million items available online, Amazon is far out in front with 300 million items available to online consumers.
Lore shook up Walmart’s e-commerce division last November, which saw several high-profile executives part ways with the company. Those who exited included Fernando Madeira, head of Walmart.com; Dianne Mills, senior vice president of global e-commerce human resources; and Brent Beabout, senior vice president of e-commerce supply chain.
Source: Sacramento Business Journal