Is Innovation The Best Way Forward For Walmart?

As it looks to strengthen its position in the U.S. retail market and compete strongly with Amazon, WalMart (NYSE:WMT) is looking at innovative ways to attract customers and improve customer satisfaction. A patent report suggests that the company is looking to develop motorized self-driving shopping carts which can be summoned by consumers using their smartphones at a Walmart store.  The cart will be capable of navigating the store using its sensors, making the offline shopping experience more convenient and quick.  As Walmart seeks to meet the challenges of Amazon, it will work hard  to improve the shopping experience for both online and in-store customers.  Innovations such as the driverless shopping cart will provide the latter customers with better services and more convenience. Time saving is one the key factors attracting consumers to online shopping.  If Walmart can make its offline store experience quick and easy, it can improve store efficiency and drive growth for the company. Easier shopping, online and in-store,  will be the key for its growth in the long term.  

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Convenience A Key Factor In Grocery Shopping

In a 2015 study by British shopper marketing agency Savvy, convenience emerged as the main driver for the increase in online grocery shopping in the U.S. As consumers look to save time on household errands to devote more time for their families or hobbies, online shopping is an easy answer. However, Walmart is now looking to provide a similar convenience while shopping for products at its stores, with groceries accounting for more than 50% of its revenues. Its self-driving carts will be able to roam stores, fetch products and herd themselves to the parking lot. Another feature of the carts would be that the centralized system on receiving requests for different items will be able to send the motorized carts to the shelves in the store to see if the product is available. Consumers will be able to control these carts through an app on their smartphones.  These features can reduce the store shopping time for consumers significantly and make it easier to search for products. The shopping experience can become less exhausting as consumers need not search for products or walk long shopping bays to pick up necessary items. This innovation can improve store traffic at Walmart, as it will lead to shorter shopping times.  The convenience factor will attract more users as well. Higher store traffic will improve Walmart’s revenue per square foot, impacting its valuation positively. According to our estimates, Walmart’s US revenue per square foot will increase gradually from around $440 in 2016 to nearly $480 by the end of our forecast period.

There can be an upside to our price estimate if this number increases significantly over our forecast period.

The retail environment in the U.S is getting increasingly competitive, with Amazon threatening the revenue of Walmart and others.  We believe the company’s effort to leverage innovation in gaining customers is the right strategy for the future.  Walmart has a number of initiatives to increase consumer convenience in addition to self-driving carts.  These notably include its partnering with Uber and Lyft for last mile grocery deliveries and convenient store pick-up options.  In this context, self-driving carts, once they have been launched, can become a huge convenience factor for consumers.  This also demonstrates Walmart’s intention to adapt to changing consumer preferences to grow its business. We believe constant innovation — in terms of products, services and consumer satisfaction — will be a critical factor for Walmart’s growth in future.

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