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Suzy Davidkhanian: Hi, everyone. Today is Wednesday, November 4th. Welcome to EMARKETER’s weekly retail show, Reimagining Retail, an EMARKETER podcast made possible by AI Digital. This is the show where we talk about how retail collides with every part of our lives, and I'm your host, Suzy Davidkhanian. On today's episode, we're turning our attention to Walmart, and joining me are two podcast regulars, analyst Rachel Wolff, here with me in the studio.

Suzy Davidkhanian: Hi, Rachel.

Rachel Wolff: Hi, Suzy.

Suzy Davidkhanian: It's so nice to have you. Excited to be here. And principal analyst Zak Stambor joining us from Chicago. Hey.

Zak Stambor: Hi, guys.

Suzy Davidkhanian: How's it going? [00:01:00]

Zak Stambor: It's really nice outside. Mm. Really nice fall weather, so I'm feeling pretty happy.

Suzy Davidkhanian: That's so great. I'm very excited about this episode. Walmart reports earnings on November 19th, and there's certainly no shortage of things to watch for, from its growing e-commerce and advertising businesses to its push into AI shopping, faster delivery, and an expanded membership offering.

Suzy Davidkhanian: Walmart is looking increasingly to be different from the retailer many of us grew up with. And so to scale so quickly, it's pretty remarkable. We expect Walmart Inc. to account for about 11% of US e-commerce sales this year, and while Walmart and Amazon together will capture more than three-quarters of the online grocery market.

Suzy Davidkhanian: So rather than trying to cover everything that they're doing, we thought we'd try something a little bit different today. Each of us has brought two big questions about Walmart's future. We'll put them on the table, debate what matters most, and then at the end we'll narrow it down to our three biggest questions for Walmart ahead of their earnings call.

Suzy Davidkhanian: But [00:02:00] before we dive in, I have my usual question for you. What's the last thing that Walmart did that made you think, "Oh, that's pretty cool"? Rachel.

Rachel Wolff: I kinda feel like this might be signaling what what I'm gonna be talking about later. But, um, I've been really intrigued by some of their fashion releases recently.

Suzy Davidkhanian: Oh, we might

Rachel Wolff: have the same question after. What about you, Zak?

Zak Stambor: Oh, I, well, uh, this is also a, a look into my question. But I thought this bundling of the Sam's Club, um, Plus membership and Walmart Plus was super fascinating.

Suzy Davidkhanian: It is definitely fascinating, and I guess my question was not great, 'cause cool could be good or bad, so I, I don't know.

Suzy Davidkhanian: It sounds like for you the membership bundling is cool good.

Zak Stambor: Yes, 100%.

Suzy Davidkhanian: Interesting. You could tell what, what I think about that, or you could've listened to Jeremy's pod where we talked about it. Okay, so let's get started. Who wants to go first with their question?

Rachel Wolff: Um, so my first question is [00:03:00] actually very similar to what you just asked us, which is can Walmart become cool as a retailer?

Rachel Wolff: Um, and I think, you know, from a personal standpoint, I've been seeing a lot more influencer content plugging Walmart fashion, especially usually with, you know, the messaging of like, "Look at how cheap this is, and how cool, and can you believe I got it from Walmart?" Um, and you know, I've seen over the past few years the company really make a big push into fashion and home goods, and to become essentially what Target was about a decade ago.

Rachel Wolff: And so, you know, the question is will Walmart ever be that place where people go to to discover, you know, a cool new accessory or be excited to go there specifically for the purpose of getting a, a fun outfit?

Suzy Davidkhanian: Um, I love that. Mine, which wasn't about cool, 'cause I don't know if Walmart ... I don't know. It's an interesting

Suzy Davidkhanian: Should w- should we even maybe attempt to answer that, or should we do it together with mine?

Rachel Wolff: You can combine them

Suzy Davidkhanian: This is a very democratic process today. And today. [00:04:00] Usually, usually it's not. I think we'll combine it 'cause it kind of goes together. Mine was like what if Walmart could become a real fashion destination, which I think is part of that, for me at least, that cool factor.

Suzy Davidkhanian: Yeah. Like, can you be a credible fashion destination and set the tone, and not just a place to replenish basics? And we know that apparel, accessories is a really important component, um, for the cool factor, and it also drives bigger baskets, and it gives people a reason to come and shop beyond groceries, typically higher margin in those categories.

Suzy Davidkhanian: And to your point I think maybe did you say how they're starting this new style strategy business unit?

Rachel Wolff: I did not mention that, but we could talk about it.

Suzy Davidkhanian: So, uh, apparently Walmart is thinking about bringing together ... We, you guys remember when they hired a fashion executive to come and sort of- Yeah

Suzy Davidkhanian: help several, several years ago to try and help with, uh, the fashion business. So now they're moving multiple units into one, trying to really lean into that [00:05:00] style component, the more impulse, which ties back to your cool.

Rachel Wolff: Yep. Yeah, and I think they are really trying to get people to go from, you know, buying T-shirts and socks there to buying- Yeah

Rachel Wolff: cashmere sweaters and, you know, fun jeans and that sort of thing. Um, and at least from my Instagram feed, it kind of looks like it's working. I don't know. We'll find out, uh, when they report whether that's actually moving the needle or not.

Suzy Davidkhanian: It might be too early maybe to see if it moves the needle, but they also just, I don't know if you guys saw the, they launched a private label brand called Scenario to try and also be a little bit more fashion-y, sort of Bohemian-like brand to give another reason for shoppers to come into their store.

Suzy Davidkhanian: And we know private label really helps drive traffic to your store.

Rachel Wolff: Yeah. What I found interesting about that is that it's taking up space that was, uh, reserved for another private label, which was a $2 billion business. So it is a pretty big bet for them, that if they can't get the style right, and they, you know, start selling, you know, less of the basics, then, [00:06:00] you know, they might find themselves in a muddle.

Rachel Wolff: So it's a fine line for them to try and- Yeah. And, yeah. Zak, what say you?

Zak Stambor: Yeah. I, what I think is so interesting about the strategy is it's so different than the strategy that they had about like a decade ago when they were acquiring Bonobos and, um, Shoe Buy, and a whole bunch of these like- relatively small digitally native brands to try to get people to rethink how they thought about Walmart and the Walmart ecosystem.

Zak Stambor: This is far more organic, and I think that's a better way to go because it doesn't have that dissonance between, like, why is Bonobos in bed with Walmart? Th- this just kind of, through influencers and, like, authentic-seeming content, delivers a, a far more authentic-seeming message to me.

Suzy Davidkhanian: And I think it's the way that they're talking about it.

Suzy Davidkhanian: It feels like a much sharper, to your point, a much sharper focus on this idea of fashion. [00:07:00] And if you are like me and you think, like, good, cool fashion equals cool vibes for the brand itself, what I don't know is if consumers will be willing to accept that, and can Walmart deliver that cool factor at this, what it's known to be value pricing?

Zak Stambor: I think the proof is in the pudding. I mean- Yeah ... you know.

Suzy Davidkhanian: To, to your point.

Zak Stambor: Yeah. I mean, things don't seem possible until they happen. Yeah. And like Target, it didn't seem possible that it could be Target and seem cool until it, it started forming these partnerships- Yeah ... and had br- had, uh, goods that people really wanted.

Zak Stambor: And then once they started not having goods that people wanted, it lost that luster. So I mean, it all comes down to execution, which is like-

Suzy Davidkhanian: Yeah ...

Zak Stambor: the obvious point, but it's, it's obvious because it's true.

Suzy Davidkhanian: Execution and, and I would also add the competitive landscape. Department stores are not, you know, necessarily performing...

Suzy Davidkhanian: I mean, I think they're [00:08:00] performing really well. Some of them are doing really well, but we're also seeing a lot of them leave, kind of. The, like, there's just less department stores now than there were 10, 15 years ago. So this multi-category approach for Walmart to move beyond replenishment to more cool, fashion-forward might work.

Zak Stambor: The other thing I would say is that, like, a lot of people ha- a, a lot of people who are, like, my age, like middle-aged sort of people, have a real, like, notion of what Walmart is because they think of the Walmart store. But as Walmart's e-commerce operation has grown so fast and large, a lot of younger people who have not grown up going to Walmart just have a completely different sense of, like, what Walmart is.

Zak Stambor: And so that could give them inroads to, like, get people buying some of these things.

Suzy Davidkhanian: Yeah. I love that. What's your question?

Zak Stambor: So my question is, can Walmart accelerate Walmart+ and Sam's [00:09:00] Club membership? Um, so that gets to, like, what I talked about initially that I thought was cool. They for- they have this bundle that I think is actually really interesting because it doesn't really require much of a, a trade-up for, um, Sam's Club+ members.

Zak Stambor: It's, like, literally just you also get Walmart+ membership. Um, and it's a tiny little trade-up for Walmart+ members. And the thing that I think is interesting is, yeah, I, I actually hadn't noticed that Walmart+ membership has been ... The growth has been slowing over the years. And it's not like it's slowing because it's w- like Amazon Prime membership where it's just like everybody's a Prime member.

Zak Stambor: There's still a lot of white space for Walmart to grow. And it's so ... It's, it's really important because, you know, the more members they have, the more people who [00:10:00] consolidate their spend with Walmart. And so I think this is a really interesting move. The question is, does it actually deliver on that promise?

Suzy Davidkhanian: I was on the Rethink Retail podcast talking about this, so I have lots of thoughts. So I'm gonna let you go ahead- Okay ... Rachel.

Rachel Wolff: Well, as it happens, I did write an article for a briefing about this very topic. Um, but I think, you know, it's an interesting point. Walmart+, I feel like a lot of the initial growth was due to the fact that Walmart essentially gave the membership away for free, right?

Rachel Wolff: And so now they're looking for that next phase, and certainly adding more benefits onto that, such as a bundle with Sam's Club, would do that. Now, could you get those free customers to pay more for that membership? I'm not sure. And so then it becomes a question of, like, are you really unlocking growth, or is this just, you know, a, a marketing tool?

Rachel Wolff: Um, but yeah. I'll let you ...

Suzy Davidkhanian: I mean, I, we could spend a whole 30 minutes on this. So, uh, my only thing, I think my biggest thing on this is that the overlap, [00:11:00] according to research, the overlap between the two members- membership programs is 10%. So in essence, it's not saying you're gonna get something for free or you're gonna spend $22 to get something else.

Suzy Davidkhanian: It's saying, oh, for an extra $100, you can be a member of both. And I think that's a pretty big uphill battle given how important Costco is in the world of, um, you know, bo- like, big box sort of retail and club sort of retail. I do think it's a data play. Like, understanding what these two distinct ... 'Cause now we know there's not an overlap, but we can do a lot of lookalike modeling to try and understand, how do we intensify the retail media arm?

Suzy Davidkhanian: So, like, that ... I think in that way it's very clever. On to the next one. Rachel.

Rachel Wolff: Okay, so I'm gonna move on to agentic shopping. And so my big question is, will Walmart's agentic initiatives give it an edge over Amazon? Uh, because, you know, as has been in the news very often, these two companies have very [00:12:00] different approaches.

Rachel Wolff: Walmart has been, I would say, you know, very welcoming to all of these different agentic partners, whether it's Muse or ChatGPT or Gemini, whereas Amazon is really closing off its site, essentially like building a, I'd say like taking a Great Wall of China approach, right? Like trying to keep all these third-party agents out, you know, with varying degrees of success.

Rachel Wolff: Um, and I think by being more open and being clear, especially about how customers can use agents to shop on its site and what, you know, guardrails are in place, I feel like Walmart has put itself in a position to benefit should agentic shopping gain traction. Zak, what do you think?

Zak Stambor: So I think that last part is, like, the gazillion-dollar question.

Zak Stambor: Like, if agentic shopping gains traction, and if it gains traction in the form that we think it might possibly gain traction, which I don't [00:13:00] know. Um, I think it's really interesting to just open your door and say, "Please come on in," because it does give you a lot of opportunity to test, learn, experiment, tweak, evolve.

Zak Stambor: Um, and Amazon is just doing the entire-- the, like you said, the exact opposite approach. And so it could certainly give Walmart an edge. And help it gain better relationships with retailers as well, because the Amazon approach, where it is closing itself off to these agents while also, like, bringing, um, retailers onto its site with its Shop Direct program without necessarily their knowledge of that, is not making a lot of retailers happy.

Rachel Wolff: Yeah. And I think to Walmart's point, right, it's not that it necessarily anticipates that [00:14:00] agentic shopping will be the future of how everybody makes a purchase. It's just preparing itself in the event that there are some people that wish to shop that way. Yeah. Um, and I think that that positioning is really important because, you know, Amazon's positioning is like it d- doesn't matter what you wanna do, it's, you know, we want you to shop the way that we want you to shop.

Rachel Wolff: Yeah. And that's the only option.

Suzy Davidkhanian: I think for me that idea of, like, opening the door is an interesting one because I imagine Walmart is saying, "Open, I'm opening the door for you," but it's not anticipating that anybody's gonna steal something from... Like, and by anybody steal, it's the tech companies creating the agents.

Suzy Davidkhanian: It's hoping that working together it'll have a stronger way of showing up. I think we're definitely a long ways away from autonomous shopping, but I am hearing more and more- Sort of like, I don't know about m- I don't know if I'd call them middle-age, but like 25 to 35-year-olds that are talking about using an agent to sort of build baskets and do [00:15:00] things.

Suzy Davidkhanian: And if more and more people are doing that, and if you think about the fashion arm that Walmart is trying to build probably tailored to that group, then it kind of makes sense.

Zak Stambor: Yeah, I think the big thing is the loss of control that this could potentially lead to. Like, that's the challenge. Yeah. That's why Amazon doesn't want to open its door, as in is building walls instead, is Amazon wants to ensure that it controls the customer journey so that it, if people are unhappy, they can deal with it.

Suzy Davidkhanian: Yeah.

Zak Stambor: Walmart is taking a very different approach. And, you know, I think largely that should benefit it, but it does carry some risk.

Rachel Wolff: Yeah. Yeah. And I think where Amazon has the other advantage is that there are people who will just go to the website, and they know what they want, and they just, you know, enter it in the search bar and, and so on.

Rachel Wolff: But Walmart needs to be part of that discovery journey, right? Right. So they need to be visible on platforms like ChatGPT and Gemini.

Suzy Davidkhanian: I almost think that ... And then we can, we can go on to the next question. But I almost think that this [00:16:00] idea of lack of control is even more when you don't partner with them because not g- opening your door and sort of being collaborative means that you either are not gonna show up, or the, the risk is that people love you so much, Amazon in this case, that they're just gonna come straight to you and not worry about it.

Suzy Davidkhanian: And, and we know that that isn't always possible or the case, or you can fall in and out of favor very quickly, so you have to offer different reasons to come to you versus someone else. What are you, what's your next question, Zak?

Zak Stambor: So the other one that I have is can Walmart reignite store growth?

Suzy Davidkhanian: Oh.

Zak Stambor: Because when we look at their earnings, there's like a lot of positive stuff to see in it. The e-commerce growth is pretty strong. The, uh, retail media business, also strong. The store business is just kind of muddling along. And so what can Walmart do about that? [00:17:00] If I go to a Walmart, I have to pass several Targets along the way, as well as many, many other retailers.

Zak Stambor: So it's not very convenient for me to go to a Walmart store. They've tried various different approaches to try to address that challenge with, uh, urban formats over the years, smaller formats, all different sort of things. But nothing has really worked. They've tried to refresh the stores. Um, but the last time I was in a Walmart store it seemed pretty much like a Walmart store that I was in a few years prior to that.

Suzy Davidkhanian: I, I had never really thought about this, but, uh, it's true that the stores are multi-functioned. And I don't know how Walmart does its accounting, but there are other retailers that if you buy online but pick up in store, online gets the credit. I don't know how Walmart does that, and that's a point of contention for some retailers 'cause the inventory's coming from one group.

Suzy Davidkhanian: So they might have fixed all that stuff. My, [00:18:00] my knowledge is a little bit dated, and omni-channel is so prevalent, and all channel is so prevalent that maybe that's been fixed. But I wonder if that's something that's old school legacy that Walmart is doing. I, I don't know, but I do wonder if the idea of the fashion, and maybe they'll start merchandising slightly differently so that it's like outfits.

Suzy Davidkhanian: A little bit like- Yeah ... a Primark, right? Outfits together, and maybe that'll help drive growth.

Rachel Wolff: Yeah. That was kind of one of my corollary questions, of like what does the future Walmart store look like? You know, will they lean more heavily into using them purely as fulfillment centers, or do they become more like showrooms to showcase, you know, the latest fashion, home, you know, like those types of goods.

Rachel Wolff: And I think that is the question for Walmart. H- what role does the store play in, in the experience?

Zak Stambor: The w- which do you think it is? I kinda think the fulfillment center. Like, the stores are located, you know, not great for me to drive to, but great for them to deliver-

Rachel Wolff: Yeah ...

Zak Stambor: stuff to me.

Rachel Wolff: I would say that, you know, given the growth of their [00:19:00] third party marketplace especially, I would say more on the fulfillment side because that is just, you know, a huge area for them to increase their retail media revenues and third party services.

Rachel Wolff: So if you really focus on that e-commerce side where there's a lot more profit potential versus the store, like it just makes sense to go in that, in that direction.

Zak Stambor: And the store f- the store fulfilled delivery end of their business is booming. It's strong. I mean, yeah, it's very strong, in part because of the grocery business.

Suzy Davidkhanian: Yeah. Well, and it's interesting 'cause my question was not store-related, but kinda store-related I guess in some ways 'cause mine was more around, I know we're, we know that they're trying to do drone delivery. And to your point, Zak, like there's no Walmart near Rachel and I here in the city. Right. But is there a world where Walmart could figure out quick commerce in cities where it doesn't have a store so that you think about shopping from them versus shopping from Amazon or Target or whoever else?

Zak Stambor: Right, that's why the store is so important. I, I [00:20:00] suppose a drone could kinda sorta maybe fulfill some of that need, but I am very skeptical about drones. Um, so keeping Walmart top of mind is, is a real challenge

Rachel Wolff: I mean, I think like going back to the first question of can Walmart become cool, I think if they were maybe to have a showroom, kind of like what Target is doing with their new Soho store, and have, you know, that be the entry point into people thinking about fashion, apparel, whatever, and then potentially also using those stores as staging, um, centers or fulfillment, that could be an avenue forward.

Rachel Wolff: But as Zak pointed out, they've tried various, uh, methods in the past, and that ha- hasn't always worked out for them. So I guess we'll see.

Suzy Davidkhanian: Well, we could keep talking about this, but I want us to narrow down to what are the three things we're gonna be listening for in the investor, upcoming investor call.

Suzy Davidkhanian: So we had, uh, I'm paraphrasing all the questions, can Walmart be cool? Can it [00:21:00] be a fashion destination with their sharper focus on some of these categories? Is the membership tie-up going to help them with growth? Is Walmart's openness to AI and AI agents gonna be helpful? Is the store ... Is there an avenue for store business to grow?

Suzy Davidkhanian: And is there a world where quick commerce can happen in urban areas where there is no Walmart? What are you gu- what are you guys thinking? I think the cool one has to be. Like the fashion cool sort of all we did was talk about that in different ways.

Rachel Wolff: I also think the question about the role of stores in Walmart's growth is an interesting one, and definitely one that we'll be looking at for sure in their earnings.

Zak Stambor: The other thing I am very interested to hear them talk about is AI, and AI with agentic shopping, but also with Sparky. What, what's going on with Sparky, what Sparky's doing for them, and whether that's delivering actual growth.

Suzy Davidkhanian: Okay, we've spent a lot [00:22:00] of time talking about the different questions we have for Walmart.

Suzy Davidkhanian: Let's pick our top three. Rachel, what's yours? So my top

Rachel Wolff: question is what role stores will play in Walmart's future

Suzy Davidkhanian: growth. What about you, Zak?

Zak Stambor: Is AI delivering growth for Walmart, both on the agentic commerce end, but also like its own, uh, Sparky, uh, shopping tool.

Suzy Davidkhanian: And mine is can Walmart become a real fashion destination and make it cool?

Suzy Davidkhanian: That's all the time we have for today. Thanks so much for joining us, Zak.

Zak Stambor: Yeah, happy to be here.

Suzy Davidkhanian: And thank you, Rachel. Thanks for having me. And thanks to our listeners and to our team that edits the podcast. Please leave a rating or review, and remember to subscribe. I'll see you for more Reimagining Retail next Wednesday.

Suzy Davidkhanian: And on Friday, join Marcus for another episode of Behind the Numbers, an EMARKETER podcast made possible by AI Digital.