By the summer of 2016, it had become apparent the U.S. retail terrain had shifted beneath Walmart Inc.’s (NYSE:WMT) feet. The brick-and-mortar model it dominated for decades had already begun to lose momentum. As traditional retail was descending, e-tail was thriving, dominated not by Walmart but by Amazon.com Inc. (NASDAQ:AMZN)
Walmart had nearly 4,600 U.S. stores but no coherent online strategy. It didn’t offer free deliveries for any online orders. It had a 2.6% share of U.S. e-commerce retail sales, compared with Amazon’s 31.5% share, according to research firm eMarketer. Walmart had become a square peg in a round retail hole, and it needed to pivot fast.
The pivot took the form of hiring Marc Lore, a superstar e-commerce executive with a penchant for thinking big. Walmart paid dearly to get Lore, forking over $3.3 billion in September 2016 to buy Jet.com, a 30-month-old startup founded by Lore. Walmart didn’t necessarily want Jet — it would absorb the company and shut down the brand four years later — but it coveted Lore, his cadre of top executives and Jet’s information technology.
Nearly five years later, the great experiment has come to an end. Lore, who committed to Walmart for a minimum of five years, will leave his full-time role as head of U.S. e-commerce at the end of January, a number of months earlier than planned. Effective Feb. 1, Lore will become a strategic adviser to Walmart. In an interview with technology publication Recode where he disclosed the news, Lore, 49, said his next mission is to build a “city of the future” that will combine the best qualities of global cities and nations, and be supported by a “reformed version of capitalism.” He didn’t offer details in the interview, which ran last Friday.
Brittain Ladd, an e-commerce consultant who has known Lore for years, strongly hinted that the project will involve a wholesale transformation of the grocery and restaurant industries, which, despite some progress in embracing digital processes, operate in much the same way they have for decades.
“Marc understands better than most people that the grocery stores and restaurants operating today were built for another era,” Ladd said in an email earlier this week. Lore, Ladd said, “has the ability to design a business model that aligns technology and infrastructure to accelerate commerce to meet customer demand, reduce costs and complexity, and improve the customer experience.”
Walmart President and CEO Doug McMillon confirmed Lore’s departure in an email last Friday, telling employees the company was fine with the accelerated exit because the structural changes Lore championed had mostly been completed. Perhaps the biggest change was the combination last year of Walmart’s e-commerce and physical store divisions into an omnichannel model led by U.S. CEO John Farmer, who will assume Lore’s current role. The project, developed by Lore, was the culmination of a multiyear effort by Walmart, and would not have been broached until the company had properly scaled its e-commerce business, McMillon said.
Lore leaves Walmart with a solid track record but with unfinished business that, given his entrepreneurial bent, will have to be completed without him. Lore is credited with laying the groundwork for a sustainable e-commerce business that wasn’t there when he arrived. Walmart’s share of U.S. retail e-commerce sales more than doubled to 5.8% as of September 2020, according to eMarketer. (Amazon’s market share stood at 39% in September, according to the data).
Lore shepherded a service, called Walmart+, offering free unlimited same-day deliveries of groceries and next-day and two-day deliveries of general merchandise for $98 a year subscription, a lower price point than Amazon Prime’s $119-a-year fee. Walmart expanded the program last September to offer free next-day and two-day deliveries of general merchandise regardless of the order’s cost. The $35 minimum order charge was retained for grocery orders.
During Lore’s tenure, Walmart began to leverage its 4,748 U.S. stores for fulfillment operations. It expanded its online product assortment to 80 million items from 10 million. Walmart today offers a portfolio of same-day, next-day and two-day delivery service. Four years ago, it didn’t offer free two-day delivery. Lore also took steps to grow Walmart’s online share of its grocery business, where much of its current online growth lies. Not every grocery venture went smoothly, however; according to Ladd, Walmart killed Lore’s pet project of delivering online grocery orders to the residence with no one home.
Walmart also blocked Lore from moving forward with an ambitious plan to erect a network of online shopping warehouses to better compete with Amazon.
Marc Wulfraat, founder of supply chain research and consultancy MWPVL International, agreed that Walmart needed brand-name leadership to gain e-commerce traction at a critical time. However, Wulfraat said the $3.3 billion price tag for Jet.com was too steep, and the results under Lore’s stewardship were inconclusive. “For the same money, Walmart could have opened 11 or 12 $300 million automated fulfillment centers in major U.S. cities and it would have had something concrete to show for their investment,” he said.
Ladd said he would give Lore a “B” grade for his efforts at Walmart. The company still significantly lags Amazon in market share, Ladd said. In addition, acquisitions of online-native digital brands like Bonobos, ModCloth and Eloquii took Walmart in the wrong direction of focusing on niche markets, he said.
Ladd, whose mindset falls into the “go-big-or-go-home” category, said a blow-doors move is exactly what Walmart should pursue in a post-Lore world. Acquiring online grocery picker, packer and delivery firm Instacart should be considered, he said. Partnering with delivery giant FedEx Corp. (NYSE:FDX) to acquire Canadian online platform Shopify (NASDAQ:SHOP) should be looked at, as should a merger with home improvement behemoth Home Depot Inc. (NYSE:HD) to create a massive network of e-commerce fulfillment sites, he said.
“Walmart must still make a big move in e-commerce,” Ladd said. “The fact that Lore is gone doesn’t change that.”
Satish Jindel, founder and president of logistics consultancy ShipMatrix, said Walmart should feel fortunate that a successful serial entrepreneur like Lore stayed as long as he did given Walmart’s deeply entrenched corporate culture. “He laid the foundation,” Jindel said. “Now it’s up to the company.”