Tuesday, September 28, 2010

Duke: Wal-Mart Still Has Much to Learn

Believe it or not, Wal-Mart Stores Inc. remains a work in progress, both domestically and abroad.

Mike Duke, who became the company’s CEO early last year, made it clear Tuesday at Wake Forest University that Wal-Mart has much to learn and can only get better, particularly when it comes to global expansion. Though recent growth has largely been an international story, Duke refrained from declaring victory while stressing that achieving full competence abroad is a work in progress.

“We need to be much better at leveraging and learning,” he told a standing room only audience of 120 people, while another 50 watched through videoconferencing equipment. “Many of the best ideas out there don’t come from the United States.”

(Wal-Mart operates in 15 countries, and international markets contribute to 25% of the company’s $400 billion in annual sales. Foreign markets made up 60% of new store square footage in the first quarter.)

While he did not highlight specific business practices, Duke touted the competitiveness of smaller retailers in many foreign markets. “Local competitors around the world tend to be very good,” he said. “They are outstanding because they can relate to the local customer.”

Another key hurdle internationally is distribution, given infrastructure challenges that impede transportation of goods. Emerging markets such as India and sub-Sahara Africa serve as particular examples. “We’re not into building roads and ports, so we’ll have to find ways to get products to customers,” perhaps by more “primitive” means, Duke said.

“We’ll solve those problems market by market,” he added. “There is no standard answer.”

Another big challenge is e-commerce, though Wal-Mart is set to pilot a new ordering system where customers can place orders online and then pick up items from a nearby store within four hours. It greatly benefits the company that it has 8,000 locations across the U.S. to serve as points of distribution.

Duke quickly conceded that more must be done with e-commerce, particularly the company’s website. “We’re not where we want to be today,” he told an audience that filled the lecture hall and two spillover rooms. “We need to be more timely, more personal, and more connected with you.”

Other interesting nuggets from Duke’s presentation:

· Wal-Mart expects total employment to grown 25% over the next five years, to 2.5 million employees. That equals 100,000 new hires per year over that period.

· The company is seeing success mentoring and training managers in foreign markets. In China, for instance, roughly 1 in 5 senior executives, and every store manager, is from the host country.

· More than 200 million customers visit Wal-Mart every week. “Every single one is important and you can’t lose one of them.” Duke visited local Wal-Mart stores while in Winston-Salem, engaging one customer about the lack of a specific brand of green chili peppers. “I assure you by the end of the day we will find a brand we carry that measures up to the one they wanted,” he said.

· Technological evolution is an ongoing concern. “If we can see more than 12 to 24 months out in the area of technology, then we’re doing pretty good,” he said.

· Duke believes the store will succeed at keeping the more affluent customers who started shopping at Wal-Mart due to the recession. “Everyone wants to be considered smarter” in terms of shopping habits, he said. A bigger concern is for Wal-Mart’s “core” customers since lower-income segments have felt the harsher blow of unemployment.

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