Wal-Mart Stores began a round of some 1,000 layoffs at its corporate headquarters, with most cuts targeting the retailer's supply chain operations, The Wall Street Journal reports.
The cuts come amid other belt-tightening and executive shuffling initiatives in the service of bringing together Wal-Mart's stores and online leadership roles as well as expanding its e-commerce operations in the wake of its $3.3 billion acquisition of e-retail startup of Jet.
Last week Wal-Mart touted the addition of some 10,000 retail jobs created through the opening of 59 new, expanded and relocated Wal-mart and Sam’s Club facilities as well as expanded e-commerce services. The company estimates 24,000 construction jobs will be supported through the opening of those facilities.
The shakeups, which have been expected, suggest that Wal-Mart is willing to undo much of the work in its existing e-commerce operations in favor of Jet’s signature pricing and fulfillment algorithms, which reward shoppers in real time with savings on items purchased and shipped together, in turn reducing supply chain and logistics costs — tech singled out by Wal-Mart CEO Doug McMillon as a decisive factor in the decision to acquire the startup.
But the dent in its supply chain ranks could undermine one of Wal-Mart’s core strengths: Its highly efficient brick-and-mortar-based distribution system. And it signals that Wal-Mart sees little growth for its brick-and-mortar operations, Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive.
"Wal-Mart clearly has decided at the board level that their growth prospects as a brick-and-mortar retailer are over — and when you decide that, you move to cut costs," Egelanian said. "They’re a very low-cost operator to start with. There's probably some excess, but this informs me that they don’t think they’re going to grow, because their core strength is their supply chain. They can put product on the shelves for costs that are 2% to 5% less than anybody else in retail — that’s how they beat Kmart. This is history repeating itself, and this is what happens when retailers are done with growth schemes. It's a bad strategy followed by bad tactics."
And while Wal-Mart sorts out which jobs to cut and which to create, archrival Amazon has announced it will add some 100,000 full-time, full-benefit jobs in Texas, California, Florida, New Jersey and other states over the next 18 months. KeyBanc analyst Ed Yruma said last week that a "significant and unexplained gap” in Amazon's hiring numbers indicates that its need for more workers may mean it plans to further expand its physical stores, suggesting Amazon's competitive pressure on Wal-Mart to boost e-commerce may soon extend to brick and mortar as well.