4 Things Retailers Can Learn From How Walmart CEO Doug McMillon Turned Things Around
Investing in employee wages has been a big priority for Walmart.
It’s been a challenging year for many retailers, but Walmart has been a bright spot in the sector.
Last week, the Bentonville, Ark.-based company reported a 2.8% increase in revenues both online and in-store for Q2, with a 37% rise in sales in the e-commerce space. The strong earnings report, which led the retail giant to up its full-year guidance, marked the 20th straight quarter of same-store growth for Walmart.
Things haven’t always been so rosy for Walmart. When CEO Doug McMillon took over five and a half years ago, the retailer faced slowing growth and increased competition from Amazon, grocers and the off-price channel.
In an interview with Fortune published today, McMillon provided some insight into how Walmart has turned things around. Below are four ways McMillon has combated the so-called retail apocalypse — and tips for other retailers to try.
Investing in Wages
McMillon attributes much of Walmart’s success to its associates — and he says investing in wages was “a way to get people excited and let them know that they were our first priority.”
In February 2015, Walmart announced it would up its minimum wage to $9 for all employees, far above the current federal mandate of $7.25. After further increases, the chain now offers a minimum $11 per hour; its average full-time sales associate makes $14.26.
Higher minimum wages are a win for employees they benefit — and result in positive press for companies. But there’s often more to the story. Making Change at Walmart, a project of the United Food & Commercial Workers labor union, says the wage hikes often are meant to camouflage retail layoffs. (Walmart upped its wages from $10 to $11 on a day it announced plans to cut 10,000 jobs.)
Banking Big on Online
In 2016, Walmart scooped up e-commerce platform Jet.com for $3.3 billion as part of a bid to do more in the e-tail space. (Jet founder Mark Lore was kept on and put in charge of Walmart’s U.S. e-comm business.)
With brick-and-mortar business booming, Walmart gained “some more competence and freedom to be more aggressive in e-commerce,” said McMillon. Given the 37% boost in online sales Walmart reported for Q2 — which the company said reflected strength in its online grocery and Walmart.com business — the focus on e-comm seems to be paying off.
Despite Walmart’s online success, Jet.com hasn’t been a success. Jet.com’s workers are being integrated into the Walmart team, the retailer announced in its most recent earnings call. Lore’s push into the e-fashion space reportedly hasn’t gone as well as Walmart might have hoped: In particular, the $50 million acquisition of buzzy direct-to-consumer site Modcloth has reportedly not paid off.
Decreasing Inventory
Too much inventory has been a major problem for retailers — with JCPenney and Macy’s among the stores to miss earnings expectations due to overstock.
Getting inventory levels down is necessary to prevent markdowns, but it’s helpful in other ways, says McMillon. The exec explains that cutting down overstock has helped make “the stores cleaner, neater, more presentable, and improve[d] the store environment.”
Amid a push for reduced inventory, Walmart has been among the chains to test out smaller format stores. Nordstrom, Kohl’s and Target have also opted for tinier locations, which can combat high rents.
Better Benefits
Employee retention is crucial in today’s job market — and raised wages aren’t the only way Walmart has invested in its workers. The chain announced in May that it would subsidize associate and bachelor’s degrees for employees at the low cost of $1 per day.
“We have seen retention improve, and we’ve also interestingly seen new jobs get created,” McMillon said of the college subsidization program. “There’s retail turnover…not everybody is going to stay with Walmart [and] we feel good about the fact that we’ve helped prepare those that might want to leave. But more people are staying and more new jobs are being created.”
In addition to helping employees pay for school, Walmart expanded benefits last year following President Donald Trump’s tax cuts, offering better parental leave and a $1,000 bonus to eligible associates.
Per McMillon, additional success for Walmart has come courtesy of its focus on learning/change for employees, as well as its investment in automation (like a shelf-scanning device that checks for price accuracy).
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