Walmart is flush with cash while smaller rivals still struggle during COVID-19

Click to play video: 'Walmart closing 6 Canadian stores, upgrading half of its remaining locations'
Walmart closing 6 Canadian stores, upgrading half of its remaining locations
Walmart Canada announced Monday it would close six stores and spend $500 million on upgrades to more than half of its remaining locations, in an effort to enhance its online business and improve the “look and feel” of its stores – Mar 16, 2021

COVID-19 pandemic restrictions have been a boon to Walmart, which, despite backlash, was able to stay open during lockdowns because of its grocery offerings. Now, the world’s largest retailer is preparing the next phase of its Canadian strategy by closing six stores and investing half a billion to revamp more than 400 stores across the country as well as improve its online shopping experience.

Retail expert David Soberman, who holds the Canadian National Chair of Strategic Marketing at the Rotman School of Management, says Walmart is gearing up for a battle against another multinational that has also reaped record profits during the pandemic: Amazon.

“They’re the major competitor to Amazon in many areas. If they facilitate online pickup for customers in certain urban centres, this allows them to gain an advantage over Amazon which doesn’t have brick-and-mortar locations,” he told Global News.

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Walmart is in a unique position among retailers in Canada because it can afford to make sweeping changes while its rivals struggle. Deemed an essential service, it was never forced to shut down during the pandemic. Business boomed and the U.S.-based company raked in record profit like many big box stores in 2020. This is in stark contrast to many small and medium-sized businesses that have been hit with periods of closure and restrictions, bringing many to the brink financially.

Flush with cash, Walmart announced a five-year $3.5-billion plan to expand in Canada, “transform” the customer service experience and create “smart stores.”

The company handed out $120 million in cash bonuses to 75,000 employees through its annual incentive program Friday. The value of this year’s payout is 30 per cent more than last year’s and is based on sales and customer service targets.

Click to play video: 'Walmart closing 6 stores across Canada'
Walmart closing 6 stores across Canada

The six locations to be shuttered are Edmonton, Calgary, Mississauga, Hamilton, Kitchener and St. John’s. Walmart Canada spokesperson Adam Grachnik told Global News in an email that employees of these stores would be offered employment at neighbouring stores. The shutdowns are in areas where there are several other locations. For example, the Edmonton area has 15 other Walmart locations while Calgary has 11.

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“We are on a mission to modernize all aspects of our business … stores are pillars in the community and we want them at their best — especially as we serve our customers in more omnichannel ways,” Walmart Canada president and CEO Horacio Barbeito said in an email statement to Global News.

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“Omnichannel” is corporate jargon for one-stop shopping, and to that end, Walmart is increasing its offerings through its partnership with Ghost Kitchens, which will allow customers to get takeout and pre-prepared food as well as groceries. Brands on board include Quiznos, The Cheesecake Factory Bakery and Beyond Meat. The takeout and food delivery initiative has begun in Ontario and is set to open in Quebec next. Soberman said Walmart’s ready-to-eat food offerings pit it against local restaurants at a time when the restaurant experience is suffering. He says Walmart is ahead of the curve with this strategy.

“Many supermarkets have counters where you can order prepared pizza, chicken wings but it’s relatively undeveloped. But if you go shopping and you’re hungry, there’s an opportunity because the restaurant experience is vastly reduced because of the pandemic,” he said.

Walmart’s “modernization” efforts include automation though the company says it will be hiring more associates, in addition to the 20,000 new positions created during the pandemic.

Soberman says for a retailer like Walmart, workforce reduction will come as it ramps up its e-commerce offerings.

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“As industries move online, there are employment reductions,” he said. “Think of the music and video rental industry. People used to be employed to sell records, CDs, videos at Blockbuster and the like. Now there’s very little employment there because people get movies and music through Amazon and iTunes.”

By Soberman’s calculations, the addition of things such as self-checkouts though don’t necessarily mean significant job losses.

“At most Walmarts, they still have staff to help when there are problems scanning or the bar code gets read twice,” he said. “Self-checkouts aren’t as efficient as we would like.”

As we shift into economic recovery mode, which remains dependent on the vaccine rollout and our collective ability to limit new case counts and hospitalizations, the retail landscape is increasingly dominated by big-box stores like Walmart and Costco.

Mom and pop shops have not similarly benefited from COVID rules. According to a recent report by the Canadian Federation of Independent Business (CFIB), rotating lockdowns and ever-changing rules have hammered small- and medium-sized retailers.

On Tuesday, CFIB president Dan Kelly tweeted that “as further evidence of the impact of the pandemic on small business,” membership took its biggest tumble in the past year — to 95,000 from 110,000 pre-Covid.

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Soberman says the retail landscape will look different in months to come, with less small, independently owned businesses that won’t survive. But there will be opportunity for new types of enterprises that can capitalize on a more conscientious consumer, and the new availability of cheap retail space, perhaps a legacy of COVID-19.

“People want to support local, they like local produce and they’re more concerned about the environment and there will be sectors where small, independent retailers will be able to innovate and thrive,” he said.

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