Korn Ferry

Wal-Mart’s Surprising Digital Agility

The eyes of Wall Street and the consumer retail industry will be on Wal-Mart when it reports its third-quarter earnings Thursday. In a dismal year for the sector, the original big-box retailer has surprised industry watchers and investors as it has made aggressive bets to digitally transform pay dividends.

In fact, according to Craig Rowley, Korn Ferry Hay Group’s senior client partner for the Consumer sector, other legacy retailers can learn from Wal-Mart’s big moves. “The lesson for other retailers is that the transition to a sustainable digital company requires not incremental change, but substantial and meaningful change,” Rowley says.

It’s a lesson the consumer industry must learn before time runs out—that is, if it hasn’t run out already. Despite rapid adoption of digital supply chains, online shopping, social media, customer service and more, the consumer sector is still at a crossroads when it comes to digital sustainability.  “Many consumer companies are still playing catch-up rather than anticipating what customers will want next,” says Rowley. “Leaders need to look way beyond the now.”

After all, that’s what investors do when evaluating a company. They consider not just if a company is growing, but also how it is growing and, most importantly, what is the potential for future growth. In the consumer sector, growth is all about convenience, inventory, and price. And in today’s world, offering the widest array of products at the best value in the most convenient way possible is all about digital. Part of the reason the industry has had such a dismal year is because the belief, if not necessarily the truth, among investors is that no legacy consumer company can transform its talent, culture, and operations quickly enough to out-Amazon Amazon.

Put another way, legacy retailers have been hindered by a lack of enterprise agility, or a way of working that hastens decision-making, increases innovation, and adapts to change seamlessly. That means breaking down silos, taking more risks, improving the customer experience, and developing a tolerance for ambiguity, which is particularly hard for an industry that measures performance on a daily per-store sales basis.

Over the last two years, Wal-Mart’s moves have checked all these boxes—from shrinking delivery time to match Amazon’s two-day promise to providing retraining to employees to making aggressive acquisitions like Jet.com. On Tuesday, for instance, Wal-Mart announced a deal to provide Lord & Taylor dedicated space on its website in a bid to attract millennial customers to Wal-Mart.com with more premium product offerings.

Total retail sales across the globe are still growing, topping $22 trillion in 2016, up 6% from the previous year. Total retail sales will top $27 trillion in 2020, according to industry forecaster eMarketer. Legacy retailers can learn from Wal-Mart’s example and capture some of that growth by investing more heavily in their digital operations and developing more innovative ways to become more customer-centric. Their digital sustainability—and survival—depends on it.

 

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