How Does Walmart Measure Performance?

Walmart, the world’s largest retailer, is renowned for its efficient operations and commitment to customer satisfaction. But how exactly does this retail giant measure its performance? In this article, we delve into the various metrics, initiatives, and technologies that Walmart employs to track its performance and maintain its industry-leading position.

Key Performance Indicators Used by Walmart

Walmart uses a set of key performance indicators (KPIs) to monitor its operations and ensure adherence to its stringent performance standards. These KPIs, updated biweekly in the Seller Scorecard, include:

1. Cancellation Rate: Walmart expects its sellers to maintain a cancellation rate below 2% of total orders. A low cancellation rate indicates efficient order processing and customer satisfaction.
2. On-Time Delivery Rate (OTD): Sellers are expected to deliver at least 95% of their orders on or before the Expected Delivery Date. This metric ensures timely delivery and enhances the customer experience.
3. Refund Rate: A measure of the percentage of orders that result in refunds. A lower refund rate suggests fewer issues with products or services, indicating higher customer satisfaction.
4. Valid Tracking Rate (VTR): This metric measures the percentage of orders with valid tracking information provided to customers. Walmart expects a VTR of 95% or higher to ensure transparency and accurate delivery information.
5. Seller Response Rate: This KPI gauges how quickly and effectively sellers respond to customer inquiries and issues. A higher response rate indicates better customer service.

Leveraging Technology in Performance Measurement

Walmart heavily invests in technology to enhance its performance measurement. From using data science and analytics for decision-making to deploying artificial intelligence (AI) for improved customer and employee experiences, technology is integral to Walmart’s performance measurement strategy.

For instance, Walmart uses audio surveillance technology to monitor employee productivity at checkout counters. It has also patented a virtual reality system to assess employees’ potential for promotions by testing their knowledge and reactions in simulated environments.

In its supply chain, Walmart employs technologies like radio frequency identification (RFID) for real-time inventory tracking and automation for efficient warehouse management. The company even developed in-house technologies like Mobius, a digital clone of the supply chain for improved logistics operations.

Measuring Individual Store Performance

Walmart doesn’t just look at the big picture; it also drills down to the performance of individual stores and departments. It uses similar metrics as those for Marketplace sellers, such as cancellation rate, on-time delivery rate, and seller response rate.

Additionally, Walmart evaluates its suppliers using the Supplier Performance Scorecard. This scorecard grades suppliers’ performance from Walmart’s perspective, including store metrics associated with various stores and other critical metrics that suppliers should monitor.

Monitoring E-Commerce Growth

Walmart also closely tracks its online performance and e-commerce growth. Metrics such as e-commerce sales growth, the increase of active digital users, and e-commerce sales as a percentage of total sales are key indicators of Walmart’s online performance.

For example, in Q2 of fiscal 2024, Walmart’s U.S. e-commerce sales grew by 24%, and active digital users grew by 20%. These metrics allow Walmart to assess its online performance, identify areas for improvement, and make informed decisions to drive e-commerce growth.

Comparing with Other Major Retailers

While Walmart’s performance measurement methods are unique to its marketplace sellers, other major retailers use more general metrics applicable to various aspects of their businesses, such as Sales per Square Foot, Gross Margin Return on Investment (GMROI), Average Transaction Value, Customer Retention, Conversion Rate, Foot Traffic, and Inventory Turnover.

However, all these metrics, whether specific to Walmart or common to the retail industry, aim to optimize operations, improve customer satisfaction, and drive growth and profitability.

In conclusion, Walmart employs a robust and comprehensive approach to performance measurement, leveraging technology, data, and various performance metrics to drive its operations. Whether you’re a seller on Walmart Marketplace or a retail business aiming to improve your performance measurement, there’s much to learn from Walmart’s strategies.