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Is Marc Lore a Walmart Dilemma?

In my article in July of this year, I opened with a question, “Is Doug McMillon, CEO of Walmart beginning to buckle under the pressure from last century’s comfortable mindsets and a culture that has succeeded by doing the things they’ve always done, but just doing them better? Are stakeholders pushing back (the board included) on the radical transformation McMillon has set forth? Further, is he caving in under the relentlessly demanding Wall Street “short-termers?” Even though Walmart won’t get an Amazon-like pass, in our opinion, McMillon must continue his bold charge forward to transform Walmart.”

The reason for the question was that even as Walmart’s e-commerce sales increased by 40 percent last year, and its stock price is up 53 percent since acquiring Jet.com compared to a 38 percent increase for the S&P 500, Walmart expects an e-commerce loss of $1 billion in 2019 on sales of about $22 billion. This loss caused internal tensions, political infighting and even pressure from CEO Doug McMillon and the board of directors on Marc Lore, President and CEO of Walmart’s e-commerce to cut the losses.

When Jet.com, along with its founder, Lore, were acquired by Walmart in 2016 for $3.3 billion, Lore was given a long runway to build out the entire e-commerce ecosystem. The strategy also included acquiring exclusive digital native brands to expand a long tail distribution model. Undoubtedly, there was a tacit understanding between McMillon, the Board and Lore that billions of dollars would be needed to invest for these types of acquisitions, along with distribution centers, supply chain logistics and infrastructure, the organization, technology in general and innovation, including its incubation arm, Store #8, which was also Lore’s brainchild.

The Drip, Drip, Drip Before the Flood?

So, between 2016 (the arrival of Jet and Lore and 2019, after billions of dollars have been invested in all of the above, and billions more required for the future, with losses mounting on Lore’s side of the business, only offset by a fairly healthy cash flow from the legacy side, it is not surprising that it’s Rolaids time in the Board room and on Wall Street, migraine time for Doug McMillon, and potentially harakiri time for Lore.
Beyond the seemingly endless list of innovative tests throughout the entire enterprise, from robots to in-home delivery to AI, and on and on — some higher profile investments were made in acquiring the digital native brands, Bonobos, ModCloth, MooseJaw, ShoeBuy, Hayneedle and Eloquii. Furthermore, one of Lore’s first new models, hatched out of Store #8, was JetBlack, a text-based concierge shopping service for busy, high-end urban families. At 50 bucks a month for the service, one wonders if this model is just too far removed from Walmart’s DNA to even operate separately under the Jet brand.

In fact, along with putting money-loser ModCloth on the sale block (the other natives, also likely losers, may not have a long shelf life either), it has been reported that Walmart is entertaining acquisition or partnership offers for JetBlack — or considering spinning it off.

In my July article, I also mentioned the reported internal tensions between some of the leaders of the legacy business and Lore. Other reports stated that Walmart is reorganizing to bring the money-losing e-commerce business under its U.S. stores division (which delivers most of Walmart’s profits) for tighter control.

A Long Runway or Leash?

So, has McMillon given Lore a long enough time and investment runway to turn the mounting losses into long term profitable growth? Has he given Lore enough time to develop a dominant enough digital and physical platform to be Amazon’s biggest headache? Or has he just given Lore a long enough leash to hang himself with?

Or, maybe, Marc Lore was the wrong acquisition? As a serial entrepreneur, does Lore have the ability to implement his visionary strategies for Walmart? Does Ron Johnson of JC Penney infamy come to mind: great vision, disastrous implementation? If so, is it time for McMillon to move Lore aside into some C-level entrepreneurial role to continue his ideation and replace him with a C-level business manager and leader to implement the transformation? Or, maybe, is it time for Marc Lore to leave?

An over-arching, long understood notion that is being proven as fact in this hyper-innovative technology revolution, is that great entrepreneurs who are magically creating new business models on a daily basis, need to turn over running the business to, well, business experts who understand how to profitably scale the unique models that the entrepreneurs created.

We and Uber are major examples of two entrepreneurs who stayed too long and lost billions along the way before being eased out. News is also surfacing that Rent the Runway has hit a major operational speed bump under the leadership of one of its entrepreneurs. And as I observed in a blog a year ago, investors are tossing billions of dollars at tech-driven startups, nine out of ten of which are losing money. However, with a casino-like mentality, they are hoping the one out of ten will be another Facebook or Amazon.

At the end of the day, the good news is that there are super entrepreneurs who are creating a whole new world. The bad news is that they, or their investors, too often don’t know when to bring in business leadership to instill operational discipline and strategies for long-term profitable growth.
Is this the dilemma now confronting Walmart as the investor and Marc Lore as the entrepreneur? Or, should McMillon and the Board give Lore a longer leash? Frankly, I’m glad it’s not my decision.

However, as I have stated many times about McMillon’s epic moves to blow up and transform Walmart’s old-world model to serve a new-world, tech-armed consumer, he should not buckle or cave into pressures from inside or out. He should stay the course to fulfill his vision, which I still believe is possible.

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