Walmart: A Pivotal Shift to Digital


Technological innovation has been a substantial catalyst for change over the last decade and has disrupted every major industry group by revolutionizing how individuals interact with businesses, one another and the world around them. Providing convenience, influence and personalization to consumers, technological advancements have disrupted the retail landscape and forced giants like Walmart to adapt. Undoubtedly, the most prominent trend within consumer retail has been the growth of e-commerce and the sharing economy, which has been at the heart of Amazon’s business model. Driven by its ability to create exceptional customer experiences, leverage its impenetrable moat within logistics and shipping operations, and diversify its revenue streams, Amazon has experienced strong growth and has found itself increasingly competing with Walmart, which is currently the largest retailer in the world. Both retail giants hold strong market positioning within the consumer retail market with differing business models, but recent developments suggest competition amongst one another is intensifying. Given Amazon’s current trajectory, it is set to overtake Walmart as the king of retail within the next decade, unless Walmart makes a concerted effort to defend its market position through changes to its corporate strategy.

To defend its title as the king of retail, Walmart must further develop its omni-channel grocery model and drive growth within the healthcare industry. Walmart’s key competitive advantage over Amazon is its vast brick and mortar footprint of 10,526 store locations and operations within 24 countries. Furthermore, 90% of Americans live within 10 miles of a Walmart store, which provides additional customer interaction opportunities for the retailer. Combined with the capabilities of its Walmart+ membership, the retail giant needs to further develop a medium between its digital and physical offerings and employ a stronger omni-channel approach to grocery and healthcare. In addition, there are accessibility issues within the healthcare industry in the United States, as over 35 million Americans are without health insurance and 17% of Americans have expressed financial barriers. With the company’s “everyday low price” strategy, it can cater to this market to expand its presence within healthcare.

Omni-channel Retail & Walmart+

E-commerce sales are the fastest growing segment within Walmart’s business, registering an average annual growth rate of over 40% in the past 5 years. The COVID-19 pandemic was a major catalyst for the growth of Walmart’s e-commerce segment in 2020, as lockdown measures increased digital sales, expanded Walmart’s online marketplace, and led to the release of Walmart+. The Walmart+ membership was launched to rival Amazon Prime through providing members with unlimited deliveries on orders above $35, fuel discounts at Walmart and Murphy stations, and access to a mobile scan-and-go feature for in-store shopping. Modifying Walmart+ and optimizing its omni-channel approach can nurture Walmart’s growth within two key disciplines: expanding its online grocery segment and furthering its penetration within the US healthcare market.

Industry Leading Supply Chain Efficiency

Walmart currently provides unlimited free deliveries on orders above $35 and same-day grocery delivery through Walmart+. It has also been able to better streamline the process by allowing consumers to order their grocery items and other products in one checkout. In addition, Walmart provides a more affordable grocery experience with a 2-hour delivery option that does not include an order minimum. From a supply chain perspective, Walmart is an industry leader with its in-bound logistics and saturation expansion strategy, which makes it possible to drive from a distribution centre to each of its associated 150 to 200 stores within 24 hours. As a result, Walmart’s distribution and logistics infrastructure has allowed the company to continue to operate using a “Loss Leader'' pricing strategy for 85% of its total merchandise, which involves selling select retail products below cost in order to entice customers to buy a higher volume of products overall. In addition, Walmart has saved on transportation costs by 2-3%, maintained relatively stable operating margins between 4 and 5% and experienced a competitive advantage over Amazon with higher margins, economies of scale and more flexible e-commerce and delivery operations.

Walmart’s Grocery Operations

Amazon has increased its efforts to rival Walmart’s 26% market share within the United States grocery market through its acquisition of Whole Foods, launch of Amazon Go and expansion of its online grocery segment. It is imperative for Walmart to defend its market position within this sector, as grocery accounts for 56% of Walmart’s revenue and is the company’s primary revenue segment. Although there has been a trend of decreasing margins within the grocery industry, grocery is the largest segment within food sales, which are the third highest type of annual expenditure for US consumers, and the essential nature of grocery as a consumer staple contributes to low revenue volatility.

The future of grocery relies on retailers like Walmart supplementing their strong in-person experience with digital offerings, maximizing value to consumers, and effectively integrating technology to further support a hybrid retail model. In addition, shifting consumer preferences towards healthy, organic foods and a focus on value and convenience are critical to success within the grocery industry. Although Walmart is positioned well for in-person grocery as a result of its vast product offerings, curb-side pickup options, and exceptional value, they will need to create better experiences for consumers in order to continue its success. Its pricing strategy as an “everyday low price” retailer has been effective, but additional value can be created for consumers through in-person shopping experiences like educational workshops on healthy eating and sample tastings. Similar to Amazon’s cashier-less checkouts at its Amazon Go stores, Walmart must also integrate innovative technologies for in-person shopping in order to create a more seamless experience for consumers and increase operational efficiency.

The digital segment with online grocery will have the most impact on the future of the industry. With the online grocery market projected to grow by 17% to surpass $38 billion by 2023, there is a sizable opportunity for Walmart to establish itself as the preeminent leader within the space. The COVID-19 pandemic accelerated the adoption of online grocery shopping among consumers, as a result of social-distancing and lockdowns. Although many grocers were not prepared for the increased order volume and surging demand for online grocery services, Walmart was able to provide a seamless experience for consumers and deliver in as little as 2 hours because of its close proximity to consumers, while also effectively managing operating margins. With 75% of online grocery shoppers still shopping with their first-ever online grocery provider, companies best equipped to handle high order volume and build reliability are likely to be the most popular services post-pandemic. In addition, online grocery adoption is projected to reach 55% of US consumers by 2024, which makes the next few years critical to Walmart’s success within this segment.

Walmart is well-positioned to capitalize on the growth of online grocery through its distribution and logistics network, vast brick-and-mortar footprint, and Walmart+ segment. Walmart’s same-day delivery will also be attractive to digital native Generation Z consumers. In order to further expand Walmart+ and Walmart’s online grocery operations, the company should further cater its offerings to Generation Z consumers, as they will make up the largest component of the company’s consumer base in the future. Walmart’s digital offerings will need to provide increased personalization, which the company can integrate through incorporating data analytics and artificial intelligence into a “suggested products'' list within its online grocery platform. In addition, order tracking, delivery-slot notifications, online and in-store order price parity, and expanded assortment can all further improve Walmart’s e-commerce operations, both in online grocery and general retail.

Meal Kit Partnership

A unique strategy Walmart can take to further expand its online grocery business is to partner with a prominent meal kit company. Meal kits have become increasingly popular in the last 5 years, as they’ve created a medium for customers to enjoy the experience of cooking, while making the delivery of ingredients convenient. Meal kits run on a subscription model and provide customers with the instructions and ingredients required to cook meals of their choosing. Meal kits are also aimed at being value-based in terms of pricing, as they only deliver the ingredient quantities consumers need to cook the dishes they order. The COVID-19 pandemic has accelerated the growth of the meal kit industry, with market leaders like Blue Apron reporting an increase in first-time customers and subscription re-activations in the second quarter of 2020, with revenue growing by over 75%. The industry is projected to grow to nearly $20 billion by 2027 at a rate of 13%. Incorporating meal kits into the Walmart+ subscription offering would be a strategic opportunity mutually beneficial for Walmart and the prominent meal kit company they partner with. First, the partnership would help Walmart grow its subscription revenue from Walmart+ by acquiring additional subscribers and incrementally increasing the price of the service. Meal kits will also appeal to GenZers, and help improve Walmart’s brand recognition, while the retailer's economies of scale can accelerate the growth of its meal kit partner by further decreasing prices and making them more competitive. Walmart’s close proximity to 90% of the American population opens doors for meal kits to reach a larger consumer base and Walmart’s strong in-person grocery operation and supply chain efficiency allows for higher margin revenue within the meal kit subscription model.

Walmart’s Healthcare Segment

Furthermore, Walmart must use Walmart+ to diversify its product and service offerings by further penetrating the healthcare sector to compete with Amazon Care, which is a telehealth service Amazon provides through employee-sponsored health plans. In addition to being the largest grocer in the United States, the company is also one of the largest pharmacy chains in the nation behind only CVS Health and Walgreens. Walmart’s Health & Wellness segment currently contributes to 10% of Walmart’s overall revenue, through providing pharmacy, optical and hearing services, as well as over-the-counter drugs to consumers. However, Walmart has begun to rebrand its healthcare arm into Walmart Health, which will further expand the company’s Health & Wellness offerings through providing primary care services, dental exams, x-rays, laboratory tests, and mental health counseling. The company launched its first of a kind, doctor-run clinic, called a health supercentre in Georgia in September 2019 and now has a total of 15 locations across the United States. Walmart, similar to its competitors, is trying to gain market share within the United States healthcare industry, which is valued at $1.3 trillion and is an essential service that provides recurring revenue.

With rising healthcare costs, the number of uninsured Americans is increasing, which provides an opportunity for Walmart to target more than 35 million Americans without health insurance through its “everyday low price strategy”. Within the consumer healthcare industry in the United States, there are currently several issues with the primary care market; pricing is not transparent, there is a lack of customer service and there is a lack of accessibility in many rural areas within the United States, where there isn’t access to primary care doctors. As a result, there is a significant opportunity for Walmart to capitalize on these inefficiencies. Walmart’s key advantages over competitors are its “everyday low price strategy”, convenience and highly skilled healthcare staff. Walmart’s prices are significantly lower than competing brands, with a primary care office visit costing $40 and an adult teeth cleaning costing $25, regardless of insurance status in the United States. Walmart is also very accessible to the vast majority of Americans, as 90% of the US population lives within 10 miles of a Walmart store. In addition, expanding its healthcare services makes Walmart a one-stop shop for many essential products, which also increases convenience for consumers. Walmart's reputation as a retailer that specializes in high quantities and low prices may harm its brand with regard to healthcare services, as they consist of several intricacies and require a more personalized touch. However, its highly skilled healthcare staff consisting of primary care physicians, dentists, audiologists, optometrists, and mental health counselors ensures the retailer will still be able to provide high quality services. Furthermore, Walmart health clinics are doctor-led, which is not a value proposition competitors are able to offer.

Telehealth & Telemedicine

However, the retailer faces major hurdles to successfully scale Walmart Health, including a lack of personalized services with Walmart’s mass-scale operations, high labour costs, as a result of high healthcare salaries, and a lack of reputability and trust due to Walmart’s reputation as a discount retailer. Although 75% of the US population had a primary care physician in 2015, there is a decreasing trend of Americans moving away from primary care physicians. In addition, the future of healthcare is being driven by the emergence of telehealth, which must be at the core of Walmart’s healthcare strategy going forward. Telehealth allows individuals and physicians to conduct appointments online and arrange healthcare services through the use of digital applications. With 61% of patient appointments being conducted online right now, and 19% expected to be conducted online post-COVID, there is a large opportunity for Walmart to penetrate the growing market. Furthermore, there is incredible expected growth in telehealth, as highlighted by a forecasted CAGR of 28% with the industry projected to reach a value of $300 billion by 2028.

Telehealth and telemedicine will allow Walmart to develop a unique omni-channel healthcare model and supplement its in-store offerings with a digital presence. Furthermore, telehealth is the optimal solution to increase the personalization of Walmart’s healthcare offerings, as it allows the company to gather additional patient data, which can be used to cater future healthcare products and services to individuals. In addition, data collection will also improve disease detection and monitor patient health through the digital platform, which will improve the quality of Walmart’s healthcare offerings with regard to preventative treatment, which is the focus of healthcare going forward. The digital nature of telehealth also contributes higher margin revenue to Walmart’s business, as there are lower overhead costs and limited capital expenditure, which offsets the higher operating costs of in-person healthcare services. Further, Walmart can build reputability and trust with consumers by highlighting a physician’s background and pairing the digital platform with in-person treatment. By incorporating healthcare into Walmart+, the retailer can also increase its subscription numbers through acquiring telehealth platform users.

Walmart’s unique value proposition within telehealth and telemedicine lies in the retailer's omni-channel model, vast brick-and-mortar footprint and supply chain efficiency. Currently, the two biggest concerns among consumers that inhibit industry growth are the lack of personal contact with doctors and the absence of immediate treatment if necessary. However, Walmart is best-positioned to address these concerns, as they are able to pair the digital telehealth platform with in-person treatment to further personalize services. Also, since 90% of Americans live within 10 miles of a Walmart, the retailer is able to provide a higher level of accessibility to immediate treatment. In addition, Walmart can provide high margin drug delivery unrivaled by competitors. Through Walmart’s acquisition of MeMD in May 2021, they have acquired a platform that provides on-demand, online care for common illnesses, injuries and behavioral health issues to 5 million consumers and businesses across the United States. Walmart’s next steps will be to further develop the platform by applying data analytics capabilities and integrating the platform with telemedicine delivery and in-person healthcare services.


Although Walmart may not be able to build an e-commerce operation at the same scale as Amazon, it doesn’t necessarily need to. Amazon has been on the attack with its efforts to gain market share within grocery, through the launch of its Amazon Go stores and the acquisition of Whole Foods, and healthcare, through the development of Amazon Care, because of the attractiveness of these two industries. However, as long as Walmart has a brick-and-mortar presence that is supplemented by digital growth, Amazon will not be able to compete with Walmart’s robust hybrid retail model that provides additional touchpoints, unrivaled convenience and a unique, seamless experience for consumers. Although the grocery and healthcare industries are set to experience disruption, they aren’t going anywhere, as their products and services will continue to be essential to consumers. By utilizing digital offerings like meal kit partnerships within grocery and telehealth platforms within healthcare, Walmart will be able to complement its in-person operations to foster the growth of an impenetrable omni-channel business model and retain its title as the king of retail.