Walmart Canada is making a $3.5 billion Investment to significantly expand its omni capacity, create “smarter stores” with new technology, build two new state-of-the-art distribution centres, and renovate 150 stores over the next three years.
WALMART CANADA IS RECEIVING A MULTI-BILLION DOLLAR INVESTMENT
The company said the multi-billion dollar investment over the next five years is aimed at significant growth and making the online and in-store shopping experience simpler, faster and more convenient for Walmart’s customers. It said the investment will impact every aspect of the business leading to a faster e-commerce experience, two new distribution centres to speed up the flow of products, re-invented and “smarter” stores, an enhanced omni experience and modern digital tools to ensure associates can best serve customers.
“The retail business is as dynamic as ever and this investment ensures we’re developing a supply chain that is the envy of the world. The better the supply chain, the quicker our customers can get the products they want. This investment will transform our supply chain and create hundreds of Canadian construction jobs along the way,” said John Bayliss, Senior Vice President, Logistics and Supply Chain, Walmart Canada.
“Canada for Walmart is really an important part of the Walmart international portfolio. Certainly before the pandemic we were pushing ahead with modernization efforts in how we simplify and digitize a lot of our business and also you would see innovations in our stores and just trying to raise the experience for our customers and also position us to win in what we call the omni or pick up, ecomm business which has obviously been a huge growth engine for us.”
COVID-19 HAS ACCELERATED CHANGES FOR WALMART
With the pandemic, this has become a key moment for the company to accelerate those changes and those programs to strengthen the business to meet a demand and need it thinks is here to stay for a longer term.
“Supply chain has been one of the backbones of Walmart’s success globally throughout its history. Over the last years, we’ve been looking at ways to really renew our backbone here in Canada to be ready for the next wave of growth which is really omni channel and ecomm,” said Bayliss.
“We thought now is exactly the right time with the growth and demand we’re seeing to start to accelerate some of those plans to step forward.”
Bruce Winder, author of RETAIL Before, During & After COVID-19 and President, Bruce Winder Retail, said these investments are necessary for Walmart to continue to compete with the ever-changing retail consumer that demands convenience, speed and value - especially Millennial and future Gen Z customers.
“Walmart sees Canada as a potential growth market as traditional brick and mortar discounter competition is less intensive - no Target or other large discounters. Having said that, they know Amazon is getting stronger here and has Canada in its sights to dominate,” said Winder. “This announcement also puts pressure on Loblaw, Metro, and Empire to see how they are upping their game as Walmart threatens them on food. Empire has already played its hand with the OCADO system at least from a grocery delivery standpoint - but what about in-store for all three?
“It would be interesting to see a five-year forecast from Walmart Canada that contemplates sales growth, margins, SG & A (selling general and administrative), EBITDA, and ultimately net income, with these new investments baked in. In other words, what will be the yield from these large investments versus a baseline scenario?
“These investments help to set up a legendary competitive showdown with Amazon Canada as they continue to invest through new infrastructure. The consumer could win from all of this as a result. This puts pressure on Canadian Tire as well to build out infrastructure in-store and through their supply chain to keep up. the bar has been set higher for legacy retailers."
Michael Kehoe, a retail real estate specialist with Fairfield Commercial Real Estate in Calgary, said the Walmart Canada announcement on the reinvestment in their stores and the Canadian construction and supply chain jobs that will be created is welcome news.
“The fact that one of the largest retailers in the country is doubling down on their bricks and mortar stores is proof that a physical store is the blue-chip workhorse of any retail strategy. The business of retail is a dynamic and ever-changing industry and firms like Walmart are constantly reinventing themselves,” said Kehoe, who has been a member of the International Council of Shopping Centers since 1982.
“The firm’s momentum in e-commerce and the grocery segment of their business provides a distinct competitive advantage in Canada and adds to their omni-channel retail capacity. In a time where many American retailers are shuttering their stores and retreating from Canada it is refreshing to see commitment to the customer experience from this major player.”
WALMART OPERATES OVER 400 STORES IN CANADA
Walmart Canada operates a growing chain of more than 400 stores nationwide serving more than 1.2 million customers each day. It employs more than 90,000 people.
Some of the key initiatives Walmart will launch with its $3.5 billion investment include:
Renovating over 150 stores over the next three years – over one-third of the store network. New investments are in addition to over $1 billion invested into remodeling and opening stores over the past five years;
Accelerating digitization to create "smarter stores", including: expanded electronic shelf labels, shelf scanners to monitor product volumes, robotics and computer vision cameras to simplify, minimize touches and maximize efficiency and accuracy. A new checkout experience to reduce touchpoints, including tap-to-pay, new bigger self-checkout and "Check Out With Me" mobile payment technology to allow associates to checkout customers anywhere in the store;
Expanding the full "Walmart Pickup" offering to approximately 270 stores – or 70 percent of locations – by end of 2020;
Piloting "hybrid locations" – supercentres with "micro fulfilment centres" in their backroom to increase the speed of fulfilment for pickup and delivery;
Investing in new technology to accelerate the pickup experience, including advanced notification and improve fulfilment centre operations to increase speed and trackability;
A next generation 550,000-square-foot distribution centre at 11110 Jane Street (400 Highway and Teston Road) in Vaughan, ON, slated to open in 2024;
New 300,000-square-foot distribution centre currently under construction at 19500 26th Ave in Surrey, B.C., slated to open in 2022;
New automated systems in an existing distribution centre in Cornwall, ON, to manage apparel, health and beauty, and other small general merchandise items slated to go live in early 2021. The systems will feature machine learning, Cobot Technology which can work in concert with associates to improve the accuracy and efficiency of operations;
New next generation warehouse management systems which are omni capable in meeting the future needs of both physical stores and e-commerce;
Investing in telematics and "internet of things" sensors across over 2,200 trailers to give real-time information around the quality and freshness of its deliveries;
Launching world-leading artificial intelligence software in partnership with o9 Solutions to more accurately predict and better plan volume to ensure Walmart's customers get what they want, when they want;
Scaling the blockchain transportation payments platform with Toronto based DLT Labs – the world's biggest blockchain solution for transportation payments system; and
Using new machine learning training software to support improved training and safety on the front lines of our distribution centre and fleet operations with Axonify, a Waterloo based micro-frontline learning company.
Bayliss said the ecommerce side of Walmart’s business has grown immensely since COVID. The crisis has simply accelerated existing trends that were in place in the last few years.
“We’ve had a track record of very strong growth in Canada from the day we hung the shingles over 26 years ago now. Especially as we look to the omni, ecomm, pick up side of our business, as well as continued real strength in our grocery side of the business, I do believe we still see continued growth and there’s reasons to believe that Canada is still a very attractive market for Walmart . . . We certainly see investment continuing into Canada certainly into the future.”