[MUSIC]
Really happy to have Greg Penner today,
the chairman of Walmart,
in conversation with Professor Hau Lee.
Professor Lee is an expert
in global supply chains.
He teaches a global supply chain class.
And I think it's a great combination for a
conversation with the chairman of Walmart.
So this is our second kind of big retail
after hearing about Whole Foods and
I hope you all enjoy the session, Hau?
>> Thank you, Brian,
and good day everyone.
It really is our pleasure to be able to
have a conversation with Greg Penner.
Greg is a very successful venture
capitalist, also chairman of Walmart.
But he's also on the board of many,
many multinational companies like Baidu,
Hyatt, etc.
Today, we want to talk to Greg
about the situation that he
learned about from
the Walmart perspective.
One thing I should also mention,
we're very proud that Greg is a GSB alum.
So good day, Greg.
>> It's great to be here.
Thank you both to Brian and Hau for
the opportunity during interesting times.
>> Thanks, I think most of us are very
dependent on retailers like Walmart
are now supporting our daily lives
these days in shelter in place.
I'm very curious and some students
have sent me questions ahead, that how
could Walmart sustain itself during
this very difficult time in COVID-19?
Like maintaining health for
your workers who are at the store,
as well as making sure
that supplies keep coming.
We heard about this toilet
paper shortage a while ago.
So how can you sustain Walmart
to be able to provide great
customer service at this time, Greg?
>> Well, I mean, first of all,
I'd say, we're actually incredibly
fortunate to be in a business that's
doing well during these times.
When you look at some other industries
that have just gotten decimated and
we've had a long history of doing
well during periods of crisis.
So it's sort of part of our culture and
DNA and
I'm proud of how we've
executed through this.
That being said, it's hard and
we're in a really difficult period.
You mentioned the supply chain.
I mean, just to give you some sense
of what we've been dealing with.
When consumers first started
hoarding middle of March products,
in ten days, we basically sold
our entire year supply of water
bottles that we had expected to sell.
We've sold over 100 million extra eggs.
In a five day period,
we sold enough toilet paper rolls for
everybody to have their
own roll around the world.
The statistics are pretty astounding.
So in terms of the challenges,
obviously keeping the supply
chain running is a challenge.
We're learning to work in a different
way just like with Zoom calls.
So our executives are all working
from home, which is different.
We operate in 27 countries and
we're finding that there are obviously
some similarities across markets but
also some differences with how
every country is dealing with this.
We've been working closely with with
the White House and the administration,
as well as at state level, on how to
help with testing and other things.
But specifically your first question was
on our associates and that's what we call,
we don't actually call our employees
employees, we call them associates.
It goes back to when Sam
founded the company.
I mean, we look at all the people that
work in our businesses as partners.
So with our associates,
that's actually our first priority,
is how do we keep,
we have 2.5 million people that work for
us around the world, and
how do we keep them safe?
And so we were one of the first companies
to implement new PTO policies.
So we pay out, we actually have
three tiers of paid time off policy.
One is just for people who don't feel
comfortable working in this environment.
We have a set of ways to handle that.
We've got a second level which
are people who have been exposed or
worried about the need to be quarantined.
And then we have a third level
which are actually associates who
have tested positive for the virus.
And at each level,
we've got policies to address that so
that we can keep our workforce going and
keep the stores open,
but make sure that folks feel safe.
And that's been our top priority.
>> Thanks, Greg, yeah,
I'm delighted to hear that.
And we count on you and Walmart to have
a very great shopping
environment to support us.
Now you talk about the water being sold,
one year's supply in ten days.
That's hopefully a transitional time and
you're able to catch up
with the production and
catch up with the supplies so
that we don't have sustained shortage.
A lot of times, people worried
that will we have a sustained
shortage of these crucial materials.
We hope that this is
a short-term disruption.
Is that the case, that you're seeing
more and more normal supply back and
resuming, hopefully then more and
more of the standard situation?
>> Yeah, it's actually,
it's interesting, yes and no.
So yes, the items that consumers
were initially hoarding are now,
the supply chain is catching up with that.
So that's hand sanitizers are coming back,
toilet paper, water, all those things.
People can only buy so
much and use so much.
So those items,
the supply chain is catching up.
There's a second level, which are items
that with Chinese manufacturing
being down for a period of time,
there's certain categories.
Patio furniture and some other things
that just weren't manufactured that
are more seasonal, but for
a lot of those categories, demand is down.
And then there's a third category
which is the one that we're more
focused on right now and
concerned about, which is fresh meat.
And the issues which I'm sure you
all have read about in the press.
Because those fresh processing
plants are having issues,
this isn't us specifically,
this is Tyson, Smithfield, and
others that are having a real challenge
with their meat processing plants and
safe environments and
controlling the virus.
That's really the area that we're probably
most concerned about at this point.
>> Thank you, yeah.
Well, you talk about making sure the
supply line is also continuously flowing.
In these days, we read, this is mostly
public press that some students have
raised the issue is that well, we
>> Working on
preserving cash companies,
not just Walmart.
But in general, retailers.
Wanting to have a conservation
of cash should add
a payment to suppliers or
don't pay them and so on,
which would hurt the long-term
viability of the supply line.
I wonder if you can just have
a quick comment on that.
>> Yeah, I'll comment on one specific
thing and then then talk more generally.
I know there was an article in
the Financial Times, maybe a week ago or
two weeks ago which was really an earnest
report that we were doing some things
that were affecting our suppliers and
Bangladesh that didn't seem fair and
that's just not it's just
not an accurate article.
I mean, if we have any with any
of our any of our supply chain or
both private label as well as
CPG companies that we work with,
if we've got something that's
in production, in process,
we don't cancel those orders
unless there's some problem.
There will be down the supply chain.
I mean, there are certain categories
where demand is going down and
that will impact manufacturers across the
globe which we're going to see everywhere,
but we wouldn't be backing out
of contracts that we had signed.
At a general level, it's a good
question which is during these times,
do you focus on cash?
Do you focus on broader
stakeholder values?
Again, I think it really depends
on the industry you're in.
I mean, if you're running a hotel
lodging business right now or
an airline, I mean, you're focused
on trying not to go into bankruptcy.
Again, we're a bit more fortunate
in that your businesses
pretty strong,
although it's different by category.
But also as I mentioned at the start,
we've got a long history and
culture of when things get difficult.
We say, what is the right thing to do?
We did it during Hurricane Katrina and
we've done a deal with the Houston
flooding, and all of that.
And so all of our board
conversations have been around.
Let's make sure we do the right
thing right now and and
that's taken care of our associates,
and our customers.
And if there's some hit cash flow,
we can withstand that.
A good example is we came out and
we paid special bonuses to
all of our associates in
the US which average $300
an associate right away
when the crisis hit, and
then we accelerated bonuses as well
from that was supposed to be paid.
And actually early May,
we accelerated those to end of March and
we didn't we need to do,
either of those things.
But our view was our associates were
going to be hit pretty hard and
we wanted them to try, and
blunt some of that impact if we could.
>> Thank you for sitting.
That's a good example of being
a company that commit and
dedicate associates to
stakeholders in the supply chain.
Let's turn around and
talk about going forward.
I think some countries are perhaps
planning to get out of the COVID-19,
it's worse situation.
We hope that California and
the rest of the country we also start
talking about the recovery phase.
Many people have said the retailing
would never be the same.
Given that we have
experienced COVID-19 episode,
which all look at the future of retailing.
>> Well, but actually before we
get to that, I think you and
I talked before this class.
I think there's a middle step right.
But before we get to
talking about the future,
I think the question is how do
we come out of where we are.
And as you'd expect in my role,
I talk to a lot of political leaders,
business leaders, academic leaders and
I think part of the challenge
our country is is in right now and
other countries are in is.
This has become somewhat of a binary
question of do we stay shelter in place or
do we reopen?
And our view at Walmart is that we need
this conversation should be more nuanced.
There's not one right answer.
I think it's going to be
dependent on geography or
in what demographic you're in?
Are you an at risk group?
We obviously need testing,
that's the most critical thing and
that's we believe that's coming.
But we think we as
a company can help lead and
this is one of the things we've been
working with the White House on, and
our CEO actually chairs
the Business Roundtable, and
we're working on what's the right plan
to emerge from this in the right way.
And again, some of the PTO policies.
Providing the right PPE, so that people
feel comfortable in the workforce.
Having special hours when seniors might be
able to shop that don't feel comfortable
normally going to the store.
So anyway, put that aside and I'll go
back to the question that you asked.
So yes, I think there will be some more
permanent changes that come out of this.
But I think there were changes
that were already coming and
this has accelerated that.
So our business has been for
the last decade is has gone
through dramatic changes and
the whole digital
transformation is significant,
and has impacted all retailers.
What's happened is since the virus
a lot of those trends have accelerated,
dramatically.
So we start first with
we've actually got a large
business in China with almost 500 stores.
And so we saw with our stores there which
was we've got a large part of our business
is actually grocery pickup where you can
place an order on an app on our website,
and pick it up, and
in certain cases have it delivered.
And those types of ordering spiked
dramatically first in China and
then we're seeing that in
other parts of the world.
And in that, we think that
transformation was going to happen.
It's just happening.
Basically, what happened in a month was
what people were expecting to happen over
the next three or four years.
And some of that will ease
off obviously once some
of the concerns around the virus lessen,
but
the transformation itself is
going to be a permanent one.
>> Well, thank you, Greg.
So it's important for
us to know that Walmart is leveraging
to perhaps convening power
to work with the government,
to work with other groups, to help us
get out of this first situation, right?
So then after that going forward
to ever get a new retail format,
yes, but Walmart is already
doing a lot with walmart.com.
And so do you see that, that's maybe
an expanded version of walmart.com.
But what would happen to the brick and
mortar stores more forward looking?
>> Yeah.
I mean, we think there's always going to
be a place for physical stores.
There's a community aspect to it there's
a lot of people they'd love to go to
our stores it's personal physical touch
points which seems strange right now but
in normal times for a lot of people
that that's something they really enjoy.
A lot of people like picking out
their own produce and fresh foods and
those types of things.
But our focus has been, well we've
got a pure e-commerce business our
long term focus has been on how
do we leverage our 11,000 stores
around the world provide added touch
points and experiences for our consumers.
And, we think these worlds are going to
blend with Whole Foods on the phone
last week that's Amazon now and
Amazon we're sort of approaching
Amazon's world from our
physical stores perspective and
Amazon is coming from the digital side and
physical stores.
And we believe long term customers are not
going to want to have to choose exactly
how want to they shop,
they're going to shop multiple ways, and
that can be ordering in the store and
having it delivered to home.
If it's out of stock,
it could be on an app but having it,
driving by their store and picking it up,
so we think there's always going to be
a role for physical stores to play.
And part of that might be that they become
almost more like part of the supply
chain as mini-depots where they're
almost like a fulfillment node,
that's part of the broader
supply chain network.
And then we think stores they'll
likely become smaller over time and
the even though we're we're
not building many big super
centers anymore we're relocating some but
not many new ones.
But the footprint that when we are doing
them now their footprint is smaller
than it was when we were building a lot
of super centers, 15, 20 years ago.
>> Thanks Greg, I know that that
Walmart has always emphasized
on ensuring that the supply
chain is sustainable.
Whether it's environmental responsibility,
or
whether it's social labour compliance for
to Walmart has always been a champion.
Would COVID-19 currently under
stressful times that you may say well,
we cannot push this as hard as we used to,
or
this is a chance for you to,
say hey, you're not on board.
You, won't be a continue
to be our supplier, so
is this something Walmart is concerned
with when you have so many fires?
It's so
many things that you have to take care of.
>> Yeah, it's interesting,
I am I think it's, for
us it's really no change,
I mean I think if we had sustainability
efforts that we were doing to enhance
the reputation of the company
then I think during this time
we would back off on those.
But everything we're doing around
supply chain we think makes us a better
company around sustainability in
our supply chain specifically,
we think makes us a better company and
more efficient over time.
So, we've got really broad goals
around emissions reductions,
becoming a zero-waste company,
improving labor standards,
and none of those things are changing, and
I don't see us taking a step back
at all during this time period.
There might be some minor things there
are some municipalities in places where,
they're not allowing people to bring for
example their own shopping
bags into the stores.
And we've been trying to
eliminate plastic shopping bags
over time that are a huge amount of waste.
And there might be some things like that,
that that are temporary setbacks but
there's nothing within our broad
goals that we're changing or
reducing it at this point.
>> So at a high level, which is something
that you would never compromise, yeah.
>> No.
>> Greg I think the supply chain is
going to be continuing to be global,
but yet there were a lot of caution,
within even though
politicians that says that we
should bring more jobs back.
Whereas, look what happened when our
masks were mostly produced tighter and
we don't have enough masks,
we don't have enough protective gears,
right bring more back and
this could be a tariffs thing.
It could also be a sentiment of security,
is Walmart really
thinking about your global
sourcing strategy at this time?
>> Well, first of all on
the tariff question, I mean,
we're big believers in
we're against tariffs,
we think protectionist measures
end up hurting customers.
I think facing a significant
global recession like we are right
now would be the worst time to put in
place higher levels of tariffs and
any protectionist measures.
because it's going to end up
hurting the customers, so
we'd be against that,
we'd be vocal about that.
In terms of our supply chain
we're always reassessing where
we're buying goods from and
it's constantly shifting,
we don't do it at a macro level.
So we don't sit around a few of us in
a conference room and say we want to x
percent that come from China and
this percent come from Mexico and
this percent come from the US that's
really not how we make sourcing decisions.
It's at a buyer an item
level where they're trying
to figure out how can we offer
the best value to our customers.
And so because decisions are made at
that level, it's constantly shifting.
And there's certain products
like consumer electronics that
are almost exclusively manufactured
in China at this point, and
that's the best place to source them from.
So anyway, we're constantly surveying
the world looking for the best place
to buy things, we still source around
two thirds of our goods in the US.
So that's still the predominant
share of our sourcing but
we're not making any decisions
at a high level to say,
it should be more from this country or
less from this country at this point.
>> Well, thank you Greg.
I wanted to raise a question
to some of the students have
just mentioned to me the other day,
saying that MNEs
perhaps cheap stage a lot of
retailers very tough positions
given that the not as well
endowed compared to Walmart.
Or maybe their business model
is such that they cannot open
during this time,
now would this be an opportunity for
Walmart to have some [LAUGH]
two passes to pick up or
do you think about them in
a different way as a company?
>> Yeah, I think the answer is maybe,
in the US it'd be really difficult for
us to do any kind of large acquisition
that involves physical stores.
Just because of antitrust and
competition, and all that.
But we're always evaluating the landscape.
We tend to prefer more
sort of components of our
business model, or
strategy that we're missing.
And we go find a great team with
a great product or technology.
We tend to prefer those
types of acquisitions.
But if we're behind in certain areas,
we're open to making acquisitions.
That's what led to the jet
acquisition a few years ago,
which really accelerated
our e-commerce business.
We didn't have a meaningful
presence in India, and
we made the Flipkart acquisition
to really spur our efforts there.
So we're always surveying the landscape,
but I'm not sure.
If there's a physical retailer
that's going out of business,
I'm not sure that's something that
that's going to be appealing to us.
>> Thank you.
Yeah, I have a personal question for you.
>> Sure.
>> Personally,
as a chairman of such a big,
giant company,
how much time do you need
to worry about execution
[INAUDIBLE] mostly focusing
your time with the directors,
or the leadership on the big picture?
How do you expand?
Or how do you manage sustainability,
versus very detailed?
because I heard that Walmart also is
a very [INAUDIBLE] very good at execution,
very good in operation.
>> Yeah.
>> So
this is a very interesting
balance as a chairman.
Do you also sometimes get
dragged into issues like
what is operating plant in the factory,
or warehouse at time?
Yeah, this is a personal question.
>> Yeah, no, it's a good question.
And the chairman role at companies
differs pretty dramatically,
depending on the company and
the individuals involved.
For us at Walmart, we've always
had a Walton family member chair.
So I'm the third.
I'm married to Sam Walton's granddaughter,
and I'm the third chairman in our history.
And we've always had a professional CEO
that's outside the family since Sam,
so Ron, our fifth CEO now and
Doug McMillon.
And then we've had a great tradition of
our chairman working closely with the CEO.
So my office in Arkansas is right next
to his, and he and I talk every day.
I tend to play a more active role,
probably than most chairman.
But that's part of that's
the history of how we've operated.
And I like to stay focused on
the big picture strategy M&A,
capital structure, significant
executive hires, those types of things.
That's where I know I
can add the most value.
But because of how our company operates,
which you mentioned,
if you don't understand
the detail of how we're working,
it's actually hard to add value
on the bigger picture questions.
So we've got something
we call meeting week,
once a month, where we bring all of our
senior executives from around the world.
Make sure everybody's in Arkansas for
that week at our headquarters.
And that's when we have our
finance meeting, or M&A meeting,
or officers meeting, real estate meetings.
And so we have a series of meetings during
that whole week that I attend as well.
And that's where I'd make sure I really
keep my pulse on what's happening in
a more detailed level that then
enables me to add value on the bigger
picture questions.
>> Well, thanks, Greg.
I think I want to use the remaining time
to have students ask
you questions directly.
>> Jenna is here.
So Jenna, can you start?
>> Hi, are you able to hear me?
>> Yes.
>> Okay, wonderful.
Thank you so much for being here, Greg.
You've mentioned already
the stakeholder view,
and the business roundtable pledge
that Walmart had been a signatory of.
I was curious for a little bit more
insight into how that pledge affects
conversations at the board level, and
with shareholders during this time.
>> It's interesting.
Companies probably view that pledge
in different ways for us that pledge,
because that's how we've always operated.
Fr us, it didn't make a significant
difference in terms of how we act.
So when we're having board conversations,
or Doug and I are making decisions,
we don't ever really think
about the pledge specifically,
because it's so ingrained in our culture,
and how we we operate.
So I'm just
thinking about recent conversations when
we've had to make trade off decisions.
Let's just say it's a cash
decision versus reputation, or
treating our associates right.
I mean, and
our board is in alignment with us on this.
We always come back to the question more
around what's right for the long term.
So something's the right decision for
the next six weeks, or eight weeks, or
ten weeks, but
it's not going to be good a year from now.
We never make that decision.
And it gets to another topic, which is,
is it good to have a shareholder like our
family that owns 50% of the business?
And I'm a strong proponent of I think
it is, because it allows the management
team and the board to have
the confidence to make decisions that
might not be right for a quarter,
but are right for the long term.
And a lot of companies talk about that.
But when you get down to it, and
how decisions are actually made,
a lot of times,
the incentives gets skewed a bit.
And we're fortunate to be in a position
where we don't have to make that
trade off of sacrificing the long term for
short term gain.
>> Good, thanks, Jenna.
And thanks Greg for
answering Jenna's question.
I see Lorenz next.
>> Yes, thank you very much,
Greg, also from my side.
My question was around
purchasing patterns, and
how you think that you might change for
the average American consumer, as a result
of this not necessarily in the short term.
So while COVID is happening, but
what might this do to what people buy,
how much they spend,
how much they'll be saving?
And I'd love to also understand how you
as a business, and as a strategy team,
think through a question like that,
what sort of data do you use?
Who do you engage to have
come to a conclusion on this?
>> So on the latter question, I mean,
we've always had incredible
data around purchase behavior.
We've tended to have less customer data,
which may sound like
kind of an obvious thing.
But a lot of companies have
really good customer data.
We've always had really
good purchase data,
just based on how our
systems work in transactions.
But anyway, so we would look to that data,
and then it's really close partnerships
with our suppliers, is how decisions
are made around categories shifting.
It's interesting.
At this point, I don't know that
there will be any dramatic shifts
in categories based on this.
I mean, there'll be some
As we talked about earlier,
I think there will be behavioral shift,
in terms of how people purchase.
But I'm not sure there will be
significant category shifts
based on this,
at least not ones that we're seeing yet.
But yeah, that could change, I mean,
we're going to have a period
of much lower demand,
just because of the unemployment levels.
And so you'll see the impact of
that with discretionary items, but
that'll be a short to
medium-term phenomenon.
>> While we are on the subject of patching
and purchasing, I think that, Mehmet,
you have a question that was also related
to a particular food, really, Mehmet,
can you jump in?
>> Yeah, yes, actually,
I had two questions.
One of them is, bearing in mind
the fact that the hospitality and
the restaurants are closed right now.
So the portion of the food industry that
was catering to them, to a certain extent,
is not accessed.
How long do you think,
for food retailers, or
bigger retailers such as yourself, for
them to be able to capture that market?
Are you expecting inflationary
movements in the food sector, overall?
And my third question is,
because of this COVID crisis,
do you expect a move to,
do they expect the change in formats?
Meaning, do you expect more people
will be going to formats such as Aldi,
will you be considering
shifting your size?
How are you going to be, do you think this
is going to be part of your strategy or
decision-making, post-COVID?
>> Yeah,
I'll address them in reverse order.
So on the format question, I don't think
it's going to lead to new formats.
But as we talked about,
I think it will accelerate certain trends.
So another trend which I
didn't mention earlier is,
department stores have been struggling.
And this is going to be really difficult,
for
those types of retailers to survive
what's happening right now.
And because we're going into a recession,
the discount,
low-cost retailers,
like in Aldi, Lidl, ourselves,
Dollar General, they will naturally
do better during this time period.
And in terms of inflation,
we're not seeing it yet.
But this is such a crazy time,
and things are moving so fast.
I mean,
you saw what happened with oil this week.
I mean, who knows what's
going to happen next week, and
where the shortages might happen.
If all of a sudden,
all the meat plants are down,
you might see some spikes there but.
But we're not seeing anything
dramatic at this point.
And then for restaurants,
there had been a shift to
more ready-made meals,
another long-term trend
that had been happening.
It's interesting, because part of this
accelerates that, which is eating at home.
But part of it is actually a negative,
because now, if you go to a grocery store,
there are no ready-made.
People aren't doing those types of things,
where you pick up prepared food anymore,
from grocery stores, because those parts
of the stores are all bare and shut down.
So I don't know how that,
I don't know whether this accelerates or
decelerates that that trend over time.
>> Okay, thanks, yeah,
maybe we'll take the last question, Izzy?
>> Yes, and thank you so
much for taking the time, Greg.
I was wondering, you talked about
that middle step that needs to happen
before we reopen the economy properly.
And given that there seems to be
a somewhat disjointed approach on this,
some states are opening up right now,
some are not.
How is a company like
Walmart navigating this?
And what sources of
information do you rely on and
trust, in terms of formulating
your policies about this?
>> So the answer, yes, we've had to
essentially formulate our own policies,
and then a lot of the retail
industry has followed that.
So our policy around leave,
we were the first ones to provide PPE,
the protective equipment for folks in
the stores, then the CDC mandated that.
We started the social distancing and
marking the stores,
now other retailers are doing that.
So everybody's learning at the same time,
and we're reading as much as we can.
We're talking to as many people as we can,
we're talking to our suppliers.
We're out in the stores,
I go visit stores,
all of our executives are visiting stores.
Talking to customers, talking to our
associates, and it's again how we learn.
And then we have weekly meetings where,
right now they're virtual, but typically,
we come together every
Friday in an auditorium.
And we talk about what we're seeing and
hearing, and
then we make decisions from there.
And so our processes right now
are just iterative, based on that.
But we don't have one, frankly,
nobody knows exactly what's happening.
So if you read anybody who says,
I know the answer?
They don't know the answer, because nobody
knows exactly how this is going to roll
out, nobody has perfect data.
You've seen all the models,
all the predictive models out there, but
they're predictions based
on very limited testing.
And I think we're going to see,
we've got case studies of how different
countries are approaching this.
Different states will approach
it in varying ways, and
we're just going to continue to learn and
adapt as quickly as we can.
But we don't have a blueprint yet for
exactly how that's going to work.
>> So I hope you all feel like
joining me in thanking Greg for
spending time with us, so
we really appreciate it.
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