Two retail bellwethers provided updates on their digital and omni-channel deployments this week, as Walmart and Target reported mixed fortunes.
There was a time, not that long ago, when US retailer Target was looked upon as the go-to reference for omni-channel transformation. But that was then, this is now and the firm today gets more attention for the fact that it’s picked up a handy near-$1 billion in refunds relating to Trump 2.0’s unlawful import tariffs.
The $994 million pre-tax reimbursement meant that the firm’s second quarter number were topped up, such as that revenue came in at $26.5 billion, with net income of $1.88 billion, against $1.97 billion a year ago.
But while tech focus may not be as front-and-center as it was in days of old, it does remain an important strategic priority, according to CEO Michael Fiddelke:
To support this year’s ambitious agenda, we’re accelerating our tech capabilities to make every part of the business stronger from how we serve guests to how we equip our teams. We’re continuing to modernize our tech foundation while investing in new industry-leading capabilities that allow us to personalize experiences across stores and digital channels, strengthen one of the nation’s premier retail media businesses, help our merchants identify and respond to emerging trends faster than ever before and connect with both new and existing guests in increasingly relevant ways.
For its part, Walmart just turned in the smallest sales growth in the past six years, although Q2 revenues were up 5.9% year-on-year to $187.9 billion, with net income of $6.4 billion down on $7 billion a year ago.
But “the math isn’t simply one + one = two, suggests CEO John Furner and points to the undoubted success story of the firm’s e-commerce operation. After years of waiting to turn a profit here, the firm has now repeated the trick for several quarters.
A large part of this is down to Walmart’s celebrated physical proximity to most US shoppers, argues Furner:
Customers and members around the world are getting super fast deliveries of baskets that include pharmacy, fresh, frozen, fashion and general merchandise, often in under 30 minutes. Fast delivery in the US grew 48% for the quarter. Speed matters and we have a significant competitive advantage. Our physical footprint fulfillment infrastructure and local delivery capabilities allow us to move closer to customers while maintaining an attractive cost structure. We’ve now expanded sub-30-minute delivery into 38 markets here in the US, giving millions of additional customers access to faster fulfillment.
Speed isn’t simply a fulfillment metric, he adds, but a powerful acquisition tool:
Customers who use fast delivery shop with us more frequently, they deepen engagement with us, and they’re more likely to become Walmart+ members. The advances we’re making in speed of delivery create another reason for customers to choose Walmart for more shopping occasions.
That’s an important shift in how we think about growth. And as we become faster, we’re not simply taking share within traditional retail categories. We’re expanding the number of occasions where Walmart can serve customers like food delivery. In the past, customers may have thought about Walmart primarily for groceries and general merchandise.
Connections
As to that mathematical assertion above, Furner argues that all things across Walmart are increasingly connected:
Fast delivery, accuracy, flexibility, shopping in any way you want, they wouldn’t come to life without our stores. Now historically, if you go back a few years, we had a store channel, we had an e-com channel, they were independent. They were vertical. So you could look at where you sold the cost of each, we can measure profitability of each. But as we blended those together, what we’re trying to do is say, think of us in terms of the top line, the bottom line, we’ll manage the middle and we’ll be flexible for customers any way we can.
And then the way that these get categorized, it’s really where you decide to pay. If you pay on your phone for pickup, it’s an e-commerce order, and it’s not a store order, but the store does the work, the store fulfils it. A fast delivery under 30 minutes, what you’re actually doing is you’re paying on your phone and you’re having someone go shop for you and bring it to you. The store is fulfilling that inventory.
Today there is more volume going through stores than there ever has been, and it’s growing, says Furner, a former store manager himself:
I’m just in awe of all the things that the stores are doing to serve customers. They have so many things going on. They’re executing, they’re flexible, and it is a really important part of the overall business. We’ll watch all the channels. We’ll make sure the store experience is great. We’re investing in new stores, we’re investing in remodels and are investing to ensure that the stores are omni enabled so that they can be support and provide whatever we need for the e-commerce business.
AI, of course
Of course, AI is at the forefront of both firms strategies. To support its AI ambitions, Target has appointed a Chief AI Officer in the shape of Chandu Nair. He comes on board from Lowe’s, where he was overseeing data and AI innovation. It’s an important role. When Fiddelke stepped into the CEO role earlier this year, he identified AI as a tool to assist in the firm’s turnaround.
Early successes include Target Trend Brain, an gen AI trend intelligence platform which can sort through data from social media and fashion shows to help the company’s designers decide what is on trend. Fiddelke explains:
With better data and more flexible supply chain systems, our merchants can respond to trends quickly and bring the right mix to market faster and smarter. We are also exploring ways to identify emerging trends before they hit the mainstream.
Another AI tool comes in the shape of Joy, a vendor support bot to help third parties access answers 24/7. The tool supports partners globally by helping them navigate policies, workflows, and operational requirements without waiting for human support.
The retailer is also partnering with AI leaders. Fiddelke says:
Earlier this year, we became one of only a small number of retailers to partner initially with OpenAI, Google Gemini and other leading platforms to shape the future of agentic commerce. And while still small in total today, as more consumers begin to explore the benefits of agentic shopping, Target’s digital traffic sourced from external AI platforms is growing more than 3.5x the industry as compared to a year ago.
Meanwhile Target’s 18,000 staff now have access to ChatGPT, with around two-thirds said to be using it weekly. The new Target app in ChatGPT brings a curated, conversational shopping experience, allowing shoppers ask for ideas, browse and shop for fresh food, and check-out using their choice of fulfillment option.
Over at Walmart, the big success story remains Spark, the AI shopping assistant. Furner explains:
The number of customers using Sparky is up 70% from last year, and the customers and members who use Sparky for shopping been 40% more per order than others who don’t. Someone recently shared with me that they asked Sparky for a weekly meal plan of healthy foods with high protein options. Within a few seconds, Sparky shared recipes and meal kits with the ability to add all the ingredients they needed their basket with one click. Sparky recognized the ingredients they had recently purchased, both online and store, so they didn’t buy something they already had. It’s building trust.
My take
Not the best of times for either retail champion at present, but that’s as much down the wider macro-economic pressures as it is their omni-channel strategies. Both are keeping their corporate eye on the prize here. The only thing to do is keep on keeping on and hope for better economic weather to set in.
