2011 Power 50: No. 1 Mike Duke

Mike Duke's strategy for Wal-Mart Stores may seem like a page out of the past, but he's focused clearly on the future.

In remarks at the company's annual meeting in June, the chief executive officer of the world's largest retailer detailed his vision for reaching a “next generation customer.” By this, Duke meant more than just an Internet-savvy shopper — though that too matters — but consumers worldwide whom he sees aspiring to afford the things Wal-Mart can provide best for them.

“Our next generation customer will include millions who are striving to join the emerging global middle class. They're from the countryside in Punjab, the blue-collar suburbs of Sao Paulo, Brazil. They're in the big cities — from the wards of Chicago to the boroughs of New York City. They're connected to the world through smartphones and social media. They're in charge of when they shop and how they shop. And, believe me, they know who has the lowest prices.

“They don't want to have to choose between products they can afford and products that mean a better life, like sustainably grown fruits and vegetables. They have higher expectations for the role of business in solving problems. Saving people money so they can live better earns trust.”

Much of what Wal-Mart is trying to accomplish today under Duke is encapsulated in his description of the next generation customer, including efforts in the U.S. to reestablish strengths in everyday low price and assortment that deteriorated to a degree in recent years, and a plan to do so with a variety of shopping options including digital ones.

Duke has served as Wal-Mart's CEO since February of 2009. He joined the company in 1995 and has at varying times led the logistics, distribution and administration divisions as well as Wal-Mart U.S. From 2005 to 2009 he served as vice chairman with responsibility for Wal-Mart International before succeeding Lee Scott upon the latter's retirement. He is a Georgia native who began his retailing career with Federated and May department stores.

Will he go down in history as the man who saved Wal-Mart?

“I don't know if we can say so yet,” Neil Stern, a senior partner at McMillan Doolittle, Chicago, told SN. “What he has done is articulated a plan that involves an expansion of the store footprint, particularly into small and medium-sized stores, which is a fairly direct threat to the supermarket industry.

“But while he's playing around with what their real estate expansion plans are, they also are challenged with fixing the current business. Frankly, unless you get the current business going you can't really expand into other areas. That's a dual challenge Wal-Mart faces, and it's considerable.”

Wal-Mart's issues with its supercenters are well documented. A move toward culling selections and renovating stores under the Project Impact strategy backfired when cash-strapped shoppers turned away from Wal-Mart when they couldn't count on finding the products they wanted. In the meantime, those shoppers found more retailers able to deliver low prices, often in more convenient locations.

This phenomenon prompted Wal-Mart under Duke and Walmart U.S. President Bill Simon to work hard on developing more convenient shopping vehicles, including revamping the Neighborhood Market grocery store — now called simply Walmart Market — so that it can deliver returns to rival those of supercenters. That store, along with a newer and smaller vehicle called Walmart Express, will see more aggressive rollouts this year.

In supercenters, products are returning to shelves and Wal-Mart is making a strong new commitment to the everyday-low-price mantra of its past. Officials say the strategy is taking root, with a plan to return U.S. stores to positive comps — same-store sales had declined for eight straight quarters — by the end of year.

“Adding back SKUs is a short-term thing,” noted Stern. “The strategic issue is what Wal-Mart's position in the marketplace will be from a pricing standpoint and whether EDLP — which admittedly took them pretty far — is still the formula for success in the future against increasingly sophisticated supermarket chains that have a lot of data, analytics and software at their disposal, as well as new competitors that Wal-Mart didn't have in great quantities 20 years ago like dollar stores and hard discounters like Aldi and Save-A-Lot. It worked in 1990, but will it work in 2011?”

Elsewhere, Duke is leading Wal-Mart to further expand worldwide. The company this year won approval to acquire its first stores in Africa with the acquisition of Mass-Mart of Johannesburg. And its plans in the digital space appear just as ambitious. Wal-Mart's digital division made a key purchase this year of a Silicon Valley startup named Kosmix that can give the company a platform to build a sales effort around social media. And it moved to become a leader in the emerging Internet shopping channel in China, acquiring an Internet company there.

“With our stores and low prices, we can really take advantage of mobile technology and this era of price transparency,” Duke said last month. “We can combine our stores, our systems and our logistics expertise into one continuous channel to drive growth and serve the next generation customer around the world.

“Let me by very clear — in global ecommerce, we will not just be competing. We will play to win.”

Duke's other priorities for Wal-Mart are to improve the retailer's development and acquisition of talent throughout the organization and to lead an effort to “broaden and accelerate our work to make a difference on big issues.” These include a commitment to sustainable agriculture, participating in hunger relief efforts and providing more healthy foods.

Richard George, a professor of food marketing at St. Joseph's University in Philadelphia, said he wouldn't bet against Duke. He described first encountering Duke while addressing Wal-Mart executives at a function several years ago and coming away impressed with Duke's passion for the business.

“At the meeting I stood up and said, ‘I'm from the Northeast, and I have to say, your stores up here are god-awful,’” George related. “Next thing I know I was getting applause, and Mike Duke was at my elbow. We talked for 45 minutes. He said, ‘We haven't figured out the Northeast yet, but we will.’ And it was that tenacity, and his excitement for the business, that really showed through.

“I think Mike Duke really understands it,” he added. “Many people would deny they ever had a problem. His attitude was, ‘Let's fix it.’ He's a preacher of vision and a lover of change. A lot of companies like to pat themselves on the back. But I've been to enough Wal-Mart meetings to know this is a company that spends a lot of time on the correction of errors.”