Live on Bloomberg TV

00:00Oh this is Leadership Live. I'm David Rubenstein. And every week I try to come to you with some CEO who has been managing through the coded price process. And this week I'm very fortunate to have Doug McMillan the CEO of Wal-Mart the world's largest retailer here. Doug thank you very much for coming on our show today. Thanks Tony. So many companies have been hurt in the cove in 19 crisis particularly retailers. But it seems as if Wal-Mart has done pretty well. You've hiring more people than you're laying off. Is that correct . Yes. We've hired a lot of people in the U.S. alone since the middle of March. We've hired over 4000 people. Now why are other retailers not able to get street traffic and you are getting I guess street traffic. Or is it somewhat on line kind of sales. They are doing well in our case. I think it starts with the fact we sell food and consumables and things people really needed during this crisis. So our form of retail was deemed as essential here in the U.S. and in countries around the world. So we've stayed open mostly throughout the crisis selling food consumables and other things that people need in stores and also online. And you're right. I think you're alluding to the fact that e-commerce is really grown during this period of time. And that's certainly been the case with us for everybody who's watching how many total stores those Wal-Mart have . Around the world eleven thousand four hundred and eighty four here in the US we've got around 40 700 stores that are Wal-Mart supercenters and neighborhood markets and then we have another 600 Sam's Clubs here in the US. And you've got two point four five million employees or associates as you called Korans. And your revenue is about 500 billion dollars or so a year a little more more than that. OK. So do you expect to hold on to all these employees or you think there will be a decline in sales after we get past the Copa 19 situation. Well what happened is as we started into this this covered period we created a leave policy for our associates that needed to stay home if they had a family member to take care of or they had some sort of concern . We created this three tier leave policy and hundreds of thousands of our associates that needed to or wanted to stay home have. And so we had a need for a lot of people to run the stores serve as it relates to e-commerce and also respond to the demand that's gone up. About 60 percent of the 400000 that we've hired since the middle of March are temporary in nature . So we'll retain a big portion of them but certainly not all of them . And when you look at the sales of your products what has been the most demand. Is that food. It's been the number one thing in demand. One of the things that are let's say dry goods or other kinds of things. What has been in greatest demand . Sanitary hand sanitizers facemask things like that. One of the interesting things to watch and it played out somewhat consistently around the world. But if I just take the U.S. for example Americans seem to somewhat move together David through phases of this experience. So certainly in the beginning people were looking for hand sanitizer sanitizing wipes paper goods . We all know about the shortages of toilet paper. It didn't move to stocking up. And things like shelf stable food really took off. We had a period of time where there was a lot of pressure on beef and pork and things like that. But then this realization that they needed to educate and entertain their children and themselves led to a big increase in things related to entertainment at home. And we saw categories like puzzles sell out. We have we hadn't sold out of puzzles in a really long time but we saw that kind of behavior then spread into things related to do it do it yourself at home and things related to home categories. So you can imagine if you're in your living room or in your home office or even in your backyard you see things since you're stuck at home you're in this period that you want to improve. And we could see the country kind of move together in these phases and by the same category somewhat together. At the same time we've sold out of things like buy cycles. We've had a really difficult time staying in stock on adult bikes these past few months. And if you and I went to a store right now and walked around we would see far too many out of stocks relative to what you'd normally see in a Wal-Mart store. So what what year was Wal-Mart started. 1962 . And Sam Walton just had one store in Bentonville and what did he do that made it possible to grow into this big empire. Sam started in Rogers Arkansas that year and he had this mentality . He'd been in retail before been a franchisee of Ben Franklin and had his own kind of five and dime business and learned retail and wanted to try some things differently. And he wanted to sell you know a broad assortment of merchandise at an everyday low price. And he wanted to serve small towns. They didn't have access to quality merchandise at a value. And in the beginning people told him he was going into towns that were too small to support the kind of store that he wanted to run. But he proved them wrong. And then he grew with that general merchandise business. This was before we had food. And he figured out that to really serve its customers well and keep his stores in stock he needed to own distribution. So he borrowed money and went into the warehousing business and started buying goods in bulk and running his own logistics business at a really early phase which was unusual for retailers at a time. At that time most of them purchased through distributors. So you were the only fifth CEO in the history of Wal-Mart is that right . Yes. And you work out Sam Walton's old office . I do his office along with our home offices here were put on the very front of our first distribution center which has now been taken over with office space and there's an office out on the front near the parking lot. That was his when when he led the business. And I'm blessed to be able to be in that office today . I assume it's a very plush office with lots of any room . It's the opposite . It's the humble office that you would expect . So the great decision that somebody made I guess was David Glass was to go into food. If you Sam Walton hadn't gone in the food himself. So food has really been your biggest best you're the biggest food retailer in United States is that right. We are handy and I think David deserves most of that credit. There was obviously a team that helped pull that off but we started in the late 80s with this format that we called a hyper market which was copied off of these big stores in Europe. And they were too big and they didn't work. Fortunately we didn't do very many of them. But David and the team just kept working on how to find the right size store with the right assortment that eventually became the Wal-Mart Supercenter really in the early 90s is when we started to get some traction there. And then from there on it's just grown into this business. That's part food and consumables and part general merchandise including apparel. And that that's what we offer today in stores. So you've perfected it seems to me the idea of a global supply chain. You're getting products that are low cost and let's say in Asia you bring them over you're selling at a low price. United States is the global supply chain changed very much since October 19 . Were you able to get all the supplies from China or Asia or other places that you wanted. And are you going to change your global supply chain. Could you're dependent on things made in China . Here in the U.S. about two thirds of what we sell is made here in the United States . But even those goods that are made here in the U.S. are grown here or produced here. The protein beef categories that I mentioned earlier many of those have been stretched too. So it's not just that the supply chain will stretch from a global perspective. It was stretched locally as well around the world in the countries where we operate. The percentage that we sell that's sourced domestically is even higher because those businesses businesses are even more of a food business. Do I think things will change. We've had a multi-year plan in place to buy more locally made in the USA for our U.S. stores and that push will continue . I think in the case of personal protective equipment things like mask for example we've been pushing hard these last few months to find even more production coming out of the US. And I think some of those trends will continue . The theory behind the global supply chain is you're getting things made at a relatively lower cost and could be made let's say in the United States. And therefore you can sell things at a lower cost if you produce more in the United States or have less of a supply chain. Well that inflate your prices a little bit or you're not worried about that . It could in some instances. We obviously try to offset that with using the latest automation and other tactics to keep that costs down . Also true that wage rates in Asia including in China have been going up . When you buy goods outside of the home country you have longer lead times and other challenges. So they're there puts and takes as it relates to where you buy from . Ideally we would buy for our U.S. stores as much as we can in the U.S. . Same thing for our stores in other parts of the world. Buy locally because you get Leslie time. The customers that you want to shop online or in stores have great jobs in the whole the whole system works together. But there are times when when importing is the most economical way to get a value for customers. So Kobo 19 have you been running the company remotely from your home or have you been able to come into your office . I'm out in stores distribution centers and clubs pretty frequently. Beyond that I'm at home working from home on Zoom . Like most people that are in kind of an office job. And then every once while I'm up here in the office for a few meetings . But the most memorable part of this experience so far is what's happening when I visit stores clubs and distribution centers and seeing our associates that you know are stepping up and coming to work every day serving the public. Adapting with the use of facial coverings and washing their hands and maintaining social distancing. You've probably been watching it but we've done a lot of different things like reduce our store hours for extra cleaning at night. We limit how many customers can come into a store. There are markings on the floor showing how far it is to be separate from someone's six feet. There are plexiglass shields up at the checkout stands and in pharmacy and our associates have been dealing with and coping with all of that change. Trying to do the best job they can of keeping each other safe and customers safe. And that's what I'm going to remember from this whole experience. It's the time out with them rather than living on Zoom. So your associates have many of them contracted Cope 19 or not that many. We have had cases as you would expect with any hotspot. What we're experiencing is our stores that are in hotspot areas have an increase in cases and we have some additional steps that we take to try and make sure that they are kept safe so far. On a per capita basis both in case count and fatalities were well below the numbers that we're seeing at state county or national levels. If I go to a Wal-Mart this afternoon will I be required to wear a mask if I go in to shop . You would be in about thirty seven hundred of the locations where either governor or someone else has mandated it. We don't currently as we're doing this interview mandate that in our other stores. That's obviously something that's on our minds . And let's talk about your own background for a moment . Did you go to a fancy Ivy League business school. Did you work at a fancy consulting firm private equity firm. How did you get this job at that to be the CEO of Wal-Mart . I grew up in Arkansas and I went to the University of Arkansas and then a little later went to the University of Tulsa to get my MBA and through much of that experience I got to work for Wal-Mart. I started as a as a teenager in a warehouse unloading trucks ended up working in a store while I was in graduate school and then came into the home office. And it's been twenty nine years since since that happened. So I'm I'm educated by Wal-Mart mostly . And when you go into a Wal-Mart store everybody knows who you are or that people don't know you are . The store management team will almost always recognize me but many of our associates wouldn't. It's fun. You know I go to stores almost all the time unannounced. I want to see what customers see. So when I show up in a community I'll just walk into the store and start walking around talking to customers and our associates. And it usually takes a few minutes before the store management team figures out that I'm there. So any customer ever said you know what this place isn't so good and this is what I think they should do better. And what do you say to them. I'm the CEO and I'll fix it. Or what do you say. Yes sometimes. I mean I'm. I am. I love talking to customers. So I'm out at the grocery pickup area which is one of our growing parts of our business asking how are things going. What can we do better. And they tell me you know and sometimes I'll tell them what my job is. Sometimes I don't. It just depends on the circumstance. Now there's a myth. Maybe it's a myth that the most important thing that people really want is the lowest possible price. Is that true when they stop at Wal-Mart or is it the quality of the product. What are the people really most want. Yeah they definitely want value which is a function of both price and quality. People don't want poor quality and if we sell poor quality they wouldn't come back. So it's got to start with that item spec. But then once we've got the quality right we're obviously trying to sell it for the lowest possible price that we can in manage the mix of the business across the entire store. But they also want to get in and out. And and you know that's why e-commerce is growing. That's why our mobile apps are doing so well. That's why our grocery pickup and delivery business is growing as fast as it is. It's because everybody's busy. And in October 19 world they obviously want to touch less things and be out less. So we've seen really strong growth in our ecommerce business whether that's an item delivered from an e-commerce fulfillment center or an item delivered from a store or picked up in a parking lot in addition to the volume increases that we've seen in store. So you bought a company called dot com to help you in the e-commerce business . I think recently you said well you don't really need the name yet. That comedy works as Wal-Mart. So you're happy with that acquisition or not. We are would definitely do that all over again. We saw an acceleration in our e-commerce business as we brought Jett into the company and the team in. And basically what we did is we started integrating the back end very quickly doing shared fulfillment shared technology. And our plan was when we started that the jet brand name would be used in more urban markets more fluent customers maybe younger customers and Wal-Mart would be the lion's share of the business across the rest of the country. And what we found over the last few years is that Wal-Mart's working everywhere. It doesn't matter where you live. And the assortment that was on Jet is now available on Wal-Mart. And we've been adding so many brand names to Wal-Mart dot com that customers have accepted the accepted that brand. So now we just don't need to put the marketing dollars behind supporting a second brand. Now we talked earlier and you carry around on your I guess portable phone the list of the top 10 retailers in every decade I guess it is from the last century or so. So in the early part of this century or last century guys from Sears was the leading retailer for much of the century . But your point is that retailers tend to go out of business and they have to be very nimble. So what you do to make certain that you're not out of the top 10 list at some point in 10 years or 20 years down the road. Yeah part of the DNA here that we inherited from Sam Walton is a DNA that includes change. And so if I were with you in front of a group of our Wal-Mart associates and we were talking about the company I could say something like other than our purpose and the values of the company the only thing that's consistent at Wal-Mart is and the group will respond back change which gives you that opportunity which is so important in business and certainly important in retail to decide what what needs to change to serve the customer better in the future. And you don't get married to things that you've done in the past. And that's really true here. And it gives us a shot. And the reason that that we focus on retail history is just to remind ourselves it doesn't matter how big you are. You can go away and you can go away quickly if you're not moving to where the customer wants to be served in the future. So what we're trying to do here is to get people to be really open to embracing what's next. And in some cases those things that that need to be built are less profitable than the things we used to do. So in recent times the launch of our grocery pickup and delivery business in the beginning is detrimental to earnings in terms of mix. But over time ensures the viability of the company. And if you've got the customer and you can grow the top line then you can figure out a way over time to generate a return for shareholders. Now walls around the United States are hard hit by Cope. At 19 people don't seem to want to go to malls. All that much and a lot of retailers that are anchors they are like J.C. Penney have gone out of business or gone bankrupt. How have you avoided the problem of people not wanting to go out. Is it because your pickup service or people are still willing to go into your stores because you're so unique and on the many things you have in them . I think it's mainly that we're carrying the things they need every day. So this food and consumables Mrs. Business that we spoke about earlier certainly important. We're also really close to customers where within 10 miles of 90 percent of Americans. So we're fairly easy to get two broad assortment . You can come in and knock out a lot of different items that you're looking for in one stop which is a form of convenience . And I think that combined with the efforts that we've made in digital with our app and with the pickup and delivery business has helped have helped customers stay in our brand. So your biggest competitor in the online business is obviously Amazon . I assume that correct. It is. And what have you here in the U.S. and what have you learned from Amazon. Did they teach you certain things inadvertently teach you certain things that would make your your online business better or you've done some things that they wish they had done . Well whether it's them or others I think the goal is to learn from them and apply what you know should be applied and definitely the customer is spoken. They want convenience and a broad assortment and timely delivery. So in some aspects we're trying to do the exact same thing that they're trying to do. In other respects we've got a set of assets that are unique to Wal-Mart and we're trying to put them to work. So maybe one of the big differences as it relates to kind of a digital view or e-commerce view is how we're using our stores and the fact that you can go on your app and and purchase items or reorder items that you bought before and swing by the store later that day and open up the trunk and somebody will drop it in there for you is super efficient. And Americans in particular really liked that service. So there are unique aspects to our strategy and I think the stores underpin most of those. It's been rumored that you're going to announce some type of crime kind of equivalent for Wal-Mart. Wal-Mart plus I think it's called. Is that going to be announced sometime soon or you can't say. Well we have a membership that we've been testing called Delivery Unlimited . And the speculation that you're referring to is that we're going to launch a more robust membership called Wal-Mart plus. And the common theme whether it's delivery unlimited or Wal-Mart plus may mean in the future is that this grocery consumable delivery really delivery from the supercenters which can include back to school items or even apparel items done in a really fast manner as part of a membership program is something that we think is going to be compelling for people. And based on the success we've had with this pilot of Delivery Unlimited. We've we've got some confidence that people do want a membership from us. And when you think about it there's a delivery cost of picking an order and delivering an order to someone's home. And basically what the membership is fundamentally in the beginning anyway is an ability to buy in bulk. Those deliveries at a discount in the form of an annual fee. And that's that's the form that we've taken. So it's also rumored that you're getting into the health insurance business and you're gonna become a maybe a health insurance provider or something like that. Is that true . We have an aspiration to make a difference in health care. Our customers won't surprise you day to day. They tell us we're not pleased with the experience we're having. It costs too much . I'm not having enough access to high quality preventative care . And so we've started a health and wealth wellness initiative which includes opening health care clinics. They're called Wal-Mart Health. And we've now opened for the first two were in Georgia and they are preventative in nature with a medical doctor and other health care professionals that enable you to have an exam. You get X-rays done you can get blood work done you can get your teeth cleaned there. There are dentists there that are cleaning teeth and doing other things. We have a hearing service optical and vision along with our pharmacy. And the price points are really affordable and accessible for people that are cash paying even for those that may have higher deductibles. And we think that that physical presence those clinics combined with digital capabilities in the future will enable us to lower the cost of health care. Again preventative high quality accessible health care for Americans. And there may be other bolt ons to that including some forms of insurance that we could offer that would help make that more effective for customers. When people come to Wal-Mart they check out in a regular counter. What percentage actually use cash and what percentage actually use a credit card or a credit card equivalent. I think we're still in the neighborhood in the US of about 20 percent cash . And let's talk for a moment about what you're doing in that in the various areas and where you have stores. Have you been making contributions to food banks or other things to take care of people who have been laid off and just don't have any ability to really buy food or what have you been doing philanthropically in that area. Yeah you know we don't ever want to throw away food if we don't have to. In our stores selling as much food as they do. Do you have times when we can donate food. And I think we've done something like the equivalent of four billion meals donated in terms of food donations these last few years and that's certainly continued during COBRA 19. In addition to some cash contributions that we've made now in the ratio area you've made a 100 million dollar contribution to deal with racial inequalities as I understand. Is that right. Yeah we're doing a number of things. One of them is we create we are creating a center for racial equity. And we committed one hundred million dollars over five years to help fund initiatives that are successful in local communities. So your own workforce . What is the racial composition of your workforce and your executive team in terms of diversity and racial composition . Yeah in the US a little over 20 percent of our associates are black or African-American. I think the number as it relates to people of color. The US is something like 44 percent and when you come up the company those ratios don't play all the way through as you would guess with any company like ours. We've had a focus for a long time on diversity and inclusion. We have a lot of diverse officers but we're not as diverse as we want to be and aspire to be. And that's something that we're working on . So you are now the chairman of the Business Roundtable which is a leading group of CEOs United States from the biggest companies. And their mission is generally to affect policy in Washington to some extent. So what is your biggest initiative that the Business Roundtable is pursuing right now . Well there's a lot of work going on but the two big themes as you would guess are related to code 19. How do we safely get our economy moving with emphasis being on safety. And then secondly these gosh more than a month now I guess we've been really focused on racial equity and we've set up different teams within BRT to focus on different complex systems related to racial equity on the criminal justice system policing police reform in particular the health care system the education system and the financial system. And they're different CEOs that have taken leadership roles to go look at these complex systems with a racial equity lens in particular and bring back recommendations that our own companies can act on as well as what the government federal government state governments can do to help create a more equitable country . So at Wal-Mart what is the most popular thing that you sell. I mean I think I once a few years ago I think you said bananas or something like that. But I mean what is that the most commonly bought thing at a Wal-Mart store. It still is still bananas . We sell billions of bananas. Yeah it's funny that you bring that up because the other day I was in a distribution center and I got to go into one of our banana ripening rooms. We've got these rooms and these food distribution centers where the environment's controlled in a way that the banana ripening process is more predictable so that we know we're getting the bananas to the stores at the right time. And I learned it smells really good in these banana ripening rooms. If you ever want to go to one else. I'll take you. It's pretty fun some day. So tell me what keeps you up at night. You must know you don't have any gray hair. You seem like your break calm . You're very placid person. You don't have any worries I guess but you have anything that keeps you up at night . Hmm I sleep pretty well but obviously there are things that we worry about in this this time period has been incredible. My I find it hard to describe briefly but I'm sure it's the same for you. There've been times these last few months when I've been inspired by other people and there have been moments when I've been deeply concerned. And I think we've got a lot of challenges in front of us. So if we were out in the sunlight right now you'd see there's gray hair emerging all over this head. This is gray hair that you don't have any gray hair . So today your biggest single competitor around the world is Amazon or in each country it's different. Would you say each country it's different . Yeah. We're we're in twenty seven different countries around the world now and they're unique competitors all over. And today is your business in strong. Outside the United States where where are you strongest . Strongest strongest in Mexico and Central America. There's a public company that we own the majority of based in Mexico called Wal Mex which is a fantastic business. We're really large in Canada and in the UK. We are pretty big in China . We've got our 400 stores there and maybe more recently we made a really large investment in India to buy an e-commerce company called Flipkart which has a phone pay business which is a financial services and payment business. It's also really important in India. So today you are still a very young man. By certainly my standards. You're very young. You've been doing this for six years . Can you see doing in another six years. And even then you'd still be very young. Do you have any aspirations to do anything like go on a government run for office the governor senator or president anything like that. Just focused on what I'm doing right now. David which is plenty. I don't know how long I'll get to do it but it really is a blessing. I've been with the company now for over twenty nine years and love it here and I'm really enjoying what I'm doing. So when you go into Wal-Mart stores and you see like say something's on the floor something you tell somebody to pick it up or do you pick it up yourself pick it up pick it up. Pick it up. Yeah. You know back to culture and values. Sam Walton was a servant leader. We we don't ask people to do things we're not willing to do. So I'm I'm habitually picking up trash out of the parking lots where I see it or anywhere else. And it's even hard to not pick it up when I'm in a competitor's location. I think retailers probably share that. We were always picking things up off the floor so regularly. You have to buy various things that you go to Wal-Mart regularly with your your wife or your family and buy stuff like anybody else. And you stand the same line as everybody else. Of course. Yeah . Increasingly though I'm buying pickup and delivery orders you know especially in a 19 environment. I'm going to stores to visit stores professionally. And I'm probably in one of our stores every week or two or a Sam's Club. But I'm I'm an omni channel shopper which which is I think where most of America ends up in a lot of America's already there. There are times when you order on your mobile app for delivery. There are times when you want to go by and pick it up. There are other times when you want to go in the store. And now these days we all do that subconsciously all after this interview if I want to go to a Wal-Mart . What would be the best value I could get. Works which other than bananas I already have enough. But is there something else that you think is the best value at Wal-Mart . You can't go wrong David on anything. We sell everything as low as we can get it. OK. Now you don't sell certain things anymore. You don't sell Confederate flags anymore. Is that right. Correct. Yeah. We stopped a few years ago. And what about guns. Do you still sell guns or ammunition. There's that CAC. Yeah we sell some. You may remember last summer we announced a decision to cut back our ammunition assortment and reduce further our rifles. We don't sell things like a AR 15s . We do want to serve hunters and sportsmen and sportswomen. And so we carry some shotguns and a 22 and some ammunition like shotgun shells that would support that kind of activity. And do you think the United States is pretty much now out of the recession or we're we're above where we were before but you think we'll be back to where we were before in a year or so or how long do you think it will take before we get back to where we're pre Kobe. Well obviously the vaccine and the timing of vaccines has something to do with that. But this the shape of this thing does look like. As other people have said more of a jagged swoosh than any other shape that I can think of. I think it's going to be volatile and this is going to take some time and we're all going to have to work together whether it's the private sector government and everyone else to work our way out of this issue that we've got now which is significant if we get a vaccine. Somebody has to distribute it. You anticipate you'll have vaccines at Wal-Mart stores as a way to get people to get them. Yeah. We'd like to. We're participating in testing now and hope to not only have diagnostic testing as a capability but hopefully antibody testing at some point then eventually vaccines. And right now you can you'd get testing at a Wal-Mart store. You don't have tests for me to test whether they actually have it. We do. You can come into some of our locations and get a test . We've got these neighborhood markets that are kind of like supermarkets around the country and many of them provide that testing capability. Now for a while we had drive through testing stations and still have some scattered around the country. I think the total so far is that more than one hundred and thirty thousand people in the U.S. have been tested about coming to a Wal-Mart store or a Wal-Mart parking lot. OK. Well I mean I'll go there and get tested. So Doug I want to thank you very much for an interesting insight into what you've been doing and keep the prices down. And I'm going to go there and buy some something something later this afternoon. No doubt . OK. Thank you David. Appreciate it. Thanks a lot .

No schedule data available.

Leadership Live With David Rubenstein: Walmart CEO Doug McMillon

Walmart Chief Executive Officer Doug McMillon talks with Carlyle co-founder David Rubenstein about how America's largest retailer is navigating the challenges of the Covid-19 pandemic on "Leadership Live With David Rubenstein." (Source: Bloomberg)

Bloomberg Technology
The only daily news program focused exclusively on technology, innovation and the future of business from San Francisco. Hosted by Emily Chang.
More episodes and clips