In a call with investors on Friday, executives at the retail giant revealed how the business is benefiting from a flywheel effect between three major trends.
The first element is inflation — both the lasting impact from the past few years as well as the slight uptick in the latest numbers.
US households across income brackets have come to Walmart seeking refuge from high prices elsewhere.
“During inflationary periods, we want to try to be the last to go up,” Walmart US CEO John Furner said. “We want to remain low price for the customer as long as we can.”
And a growing number of customers are also choosing to shop online. More customers and higher sales give Walmart the flexibility to lower the relative cost of offering goods and services. That plays into the second trend: lowering e-commerce fulfillment costs.
“Densification has been a big piece of that,” CFO John David Rainey said, referring to the efficiency of delivering orders to more households in a given route.
Furner added that other “bifurcated” customers are increasingly placing an order online to pick up in-store, then buying more when they’re in the shop getting their goods — and those fulfillment costs are negligible.
Walmart can then reinvest some of those savings into the third element: price cuts. Furner said there are currently some 7,000 items with reductions, or about 45% more than this time last year.
Those discounts (paired with improvements in the store fleet and a sharp merchandising strategy) bring in still more customers, the execs said, and the cycle repeats.
Taken together, that’s a recipe for winning — and keeping — new customers, especially during a period of uncertainty in the consumer economy.
