The 'backbone' of Walmart's business is fading - but it was likely an inevitable shift for the retail giant
- Walmart is opening fewer supercenters than ever before.
- But the shift isn't unexpected, according to analysts and industry experts.
- Walmart's supercenters will play a major role in the retailer's push to fulfill online orders.
Walmart's iconic supercenter format is going through a slowdown.Walmart's standards, that's "virtually nothing," according to Morgan Stanley executive director Simeon Gutman.
"The growth engine of this company was opening big, 200,000-square-foot boxes," Gutman told Business Insider. "That era is over."
But Gutman also told Business Insider that the decline of new supercenters is "not unexpected."
In the United States, Walmart operates 5,358 retail units. A whopping 3,565 of those stores are supercenters. Gutman pointed out that there are more supercenters that counties in the US, which boasts 3,142 counties and county-equivalents.
"They've filled out their footprint," Gutman said. "They don't need more. In the US, we don't really need more physical boxes from almost any retailer."'
Industry experts have seen this supercenter saturation coming for a while. In the 2012 book "Walmart: Key Insights and Practical Lessons from the World's Largest Retailer," authors Natalie Berg and Bryan Roberts predicted that while the supercenter was the "backbone of Walmart's business," markets like the US could only support so many new supercenters opening going forward."For the American supercenter, time is quickly running out," Berg and Roberts wrote.
However, according to Gutman, that fact that Walmart isn't opening a ton of new supercenters doesn't mean that its array of supercenters are becoming irrelevant to its business. He dubbed the supercenter Walmart's "center of gravity," saying that the massive big-box stores would provide crucial infrastructure for Walmart's expanding click-and-collect program.
"We think the foot traffic to these big boxes will likely decline, and therefore there's got to be better ways to use your space," Gutman said. "As the shift to online continues, then using your physical space to supplement your e-commerce business is probably the right strategy."