More framework and less freedom is how Walmart International president and CEO Doug McMillon described the subtle shift occurring within a $126 billion division where he is looking to drive improved performance with a “powered by Walmart” approach.
“There are things that need to be unique in each market,” McMillon noted during the retailer’s annual international conference for investors held Thursday in Toronto. Being relevant to shoppers in individual countries requires speed of decision-making, which is how the philosophy of “freedom within a framework” originated. “We like the freedom, but we don’t get as much benefit of being part of Walmart as we like.”
Therefore, the company is looking to ratchet up leverage on common operating principles in pursuit of global mission of saving people money so they can live better. Some of the details of those common operating principles can get a bit arcane, such as when McMillon describes the process of assortment optimization, facings and holding capacity of shelves and how those variables feed into replenishment considerations and even front-end scheduling. The import of such details may not be fully appreciated by analysts, but they should appreciate McMillon’s familiarity with the intricate details of the business as a key to improved performance is leveraging global best practices and applying a higher degree of uniformity to operations.
Walmart’s global goal of saving people money so they can live better get’s McMillon “fired up,” and he’s convinced the Walmart U.S. productivity loop model of every day low costs as the enabler of every day low price, which leads to increased sales and further price reductions will work everywhere in the world.
Accordingly, the international division is looking to, as McMillon puts it, walk countries across the bridge of EDLP. Some are further along than others with such countries as the United Kingdom, Japan, Canada, Mexico and Central American nations already across the EDLP bridge. Others such as Brazil are in the process of crossing. Those planning to begin the process include China, South Africa, Argentina, Chile and India.
Adherence to EDLP as a business philosophy and broader application to all markets will drive Walmart’s international results, according to McMillon, but it requires a more consistent application of best practices from the common operating model. Individual countries aren’t losing control of decisions that need to be made locally around assortment, marketing decisions and customer service, but as McMillon looks across the expanse of international operations, the primary driver of growth in the coming years is expected to be the improved productivity of existing selling space as measured by same-store sales combined with aggressive expansion that now exceeds that of the United States.
Walmart international this year will add 30 million sq. ft. of selling space, well ahead of the 23 million sq. ft. added in 2011, 21 million in 2010 and 20 million in 2009. Another dimension of international growth relates to e-commerce as Walmart now operates 26 global Web sites, four mobile apps and seven facebook pages.
Last on the hierarchy of global growth platforms are acquisitions. Walmart will do them, according to McMillon, as a means to acquire capabilities, increase share in existing markets or if the right opportunity presents itself in a large high growth market where the company doesn’t have a presence.