Walmart to consolidate department managers in some stores
Walmart is creating "several hundred new e-commerce assistant manager roles" in stores for general merchandise in-store pickup and online grocery pickup. At low-volume stores, just one person will oversee both pickup operations, a Walmart spokesman told Retail Dive in an interview and confirmed by email on Wednesday.
The retail giant is also eliminating department managers in mobile sales departments, bringing in staff from wireless companies, the spokesman said. The entertainment department manager will now be responsible for the wireless area and pick up a few additional tasks, he said. Those who decide not to remain with the company will be offered severance (and job placement services, pending eligibility) over a 60-day transition period, he said in an email.
The Walmart spokesman also disputed a report from The Wall Street Journal Wednesday, which described the move as part of a cost-cutting effort. Rather, it's a realignment of resources, the company said. Most of the affected employees are hourly workers overseeing departments and not store managers, and would likely find similar work elsewhere in the store or at nearby locations. The spokesman didn't say how many stores or employees would be affected or where, noting that the assessment is "dynamic" and emphasizing that such workers have typically gone through the retailer's new training "academy" and have specialized skills that are valuable to the company.
Walmart is facing rising costs after a commitment to raise wages and amid an e-commerce revamp that is shrinking margins, but so far isn't shrinking its physical footprint all that much. Early last month the company announced plans to increase the starting wage for all hourly employees in the U.S. to $11, including at Walmart stores, Sam's Clubs, e-commerce operations, logistics and the company's headquarters.
"Retail is changing rapidly and over the past two years, we’ve been transforming too. We want to serve customers seamlessly, however they want to shop — in stores, online, from their mobile device or through pickup or delivery," the Walmart spokesman said in an email. "Our associates are fundamentally important to this effort, and success depends on having the right people in the right place at the right time. That means creating new roles while consolidating and redesigning others. We’ve undertaken this exercise at every level of our organization and will continue to do so as customer expectations transform what it means to shop in America."
The retail giant, which for half a century has perfected the logistics of offline retail, may also be overwhelmed by the costs of online retail. While its digital business is growing rapidly, margins are suffering amid the inefficiencies of e-commerce: Net e-commerce sales in the third quarter rose 50% and gross merchandise volume rose 54%, but gross profit margin declined 29 basis points, due mostly to price cuts in certain markets and the mixed effects of the growing e-commerce business, the retail giant said in November.
"They are likely losing a fortune supporting their e-commerce Walmart.com/Jet.com ramp up in volume," Mark Cohen, a former retail executive and now director of retail studies at Columbia University's Graduate School of Business, told Retail Dive in an email. "Unlike Amazon which has an AWS profit machine behind it, Walmart relies solely on their stores' base to drive their cash flow and profitability."
Walmart is becoming a cloud giant in its own right, using its proprietary cloud to power operations and drive customer data analysis. (The company has also reportedly pressed technology suppliers not to use Amazon’s cloud services, telling them to run their applications with another provider if they want to do business with the retail giant.)
Still, the reality is that any level of increased efficiency is valuable to Walmart, despite its insistence on Wednesday that the store restructuring through consolidation of department-level management is not driven by expense cuts. As with Amazon, which earlier this week announced the layoffs of several hundred employees, Walmart is a massive company that from time to time needs some slimming down. Earlier this year, Walmart said it would be cutting 1,000 corporate jobs (half have already occurred), on top of "a few dozen" last year), and last fall the company said it would restructure its U.S. store operations, including reductions in its divisions and geographic regions that entail eliminating positions.
The retail giant in the past has hurt store operations by eliminating store management, warned Cohen, who said it's not a good area to target when a retailer is in cost-cutting mode. The Walmart spokesman on Wednesday stressed that the department managers affected by its new effort are hourly employees and not management.
"Cutting store management positions as a result of improvements in policies and processes is an 'in the normal course' action and makes good sense. Cutting these positions just for the sake of reducing expenses is a fool's game, however," Cohen told Retail Dive in an email, adding that it's difficult to know which applies to Walmart right now.
Over a decade ago, after cutting night manager positions, Walmart instead locked in overnight workers, which invited lawsuits and loads of bad press, Cohen noted. "They certainly are devoted to improvements in operating efficiency, which leads to lower operating expenses," Cohen said. "They have in the past overplayed this hand though. But they've raised base wages throughout the enterprise, which may not be delivering the kind of productivity improvements that they expected."
- Wall Street Journal Walmart to Trim Store Management Ranks
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