Retail giant Wal-Mart Stores Inc. will shutter 269 stores worldwide and invest the savings in its giant "superstore" shopping format and a renewed push toward e-commerce, the company said today.
The total number of closures included 154 U.S. store locations, composed mostly of the company's smallest-format shops, called "Wal-Mart Express." Launched in 2011, these 102 convenience store-sized outlets were intended to offer walk-in locations for urban shoppers.
Reversing course, Wal-Mart instead will focus on strengthening "supercenters," optimizing midsized "neighborhood markets," growing the e-commerce business, and expanding in-store pickup services for customers, the company said in a release.
Legendary for cutting operating costs and squeezing suppliers to provide cheaper goods, Wal-Mart could gain considerable savings from the move, with a planned 16,000 retail employees losing their jobs worldwide, including 10,000 U.S. workers.
Despite these large numbers, the company insisted the change was just part of fine-tuning its strategy, since the closed stores represent less than 1 percent of its 11,600 worldwide store network, measured either by square footage or revenue.
"Ultimately, this is in the best interest of our company and reflects the priorities of our growth plan," Wal-Mart president and CEO Doug McMillon said in a blog post on the company's site. "That plan is focused on winning with stores, deepening our digital relationships with customers, and enhancing critical capabilities through technology and data, a next-generation supply chain, and talent."
The move was a smart one, since Wal-Mart quickly learned that its low-cost philosophy did not help it win competitions with small, brick-and-mortar convenience stores, said John Santagate, research manager for supply chain execution at consulting firm IDC Manufacturing Insights.
Instead of continuing to compete at a losing game, Wal-Mart decided to return to its original strategy. From a supply chain perspective, the company will probably find savings in slashing redundant overhead, since 95 percent of the closed U.S. stores are within 10 miles of another existing Wal-Mart location.
With alternative stores in such close proximity, Wal-Mart will probably not see any omnichannel losses from the move, since online shoppers who want to pick up their products in a store will not balk at driving another 10 miles, Santagate said.
Gartner, Inc.
