Dive Brief:

• At the same time that it’s dedicating resources — both energy and cash — to revamping its digital teams, Wal-Mart is making a multi-million dollar move to remodel between 400 and 640 physical stores, according to a report from MLive Media Group. 

• Changes to stores include physical alterations like widening aisles; improving sight-lines by lowering shelves and boosting signage; moving pickup service locations to the front of stores and creating lounge areas for those picking up online orders. The investment also includes merchandising changes like expanding produce, deli, bakery and baby sections; and offering more fresh and organic choices, MLive reported.

• The retail giant has completed remodels of 95 stores globally, and in the U.S. has expanded its in-store pickup of online grocery service to nearly 670 locations, executives told analysts last week according to a transcript from Seeking Alpha. 

Dive Insight:

Wal-Mart Stores Inc. U.S. President Greg Foran has been talking about improvements to stores for several years now, but the pressure is on as consumers and retailers alike have blurred the lines between e-commerce and brick-and-mortar shopping.

Wal-Mart isn’t the only one moving forward with a major physical transformation: Target executives in March unveiled a series of initiatives designed to reverse the big box retailer’s same-store sales declines, including an investment of more than $2 billion of capital in 2017 and more than $7 billion over the next three years. Target will use about $1 billion of operating profits this year to improve brick-and-mortar and digital operations. 

Traditional stores like Wal-Mart and Target have good reason to make major improvements to their physical stores. Superior experiences and ease of shopping can not only entice more customers to visit, but research shows stores also enhance e-commerce sales. In a report last year, Moody's Investors Service cautioned that closing a physical location reduces a retailer’s presence in the market area, noting that online sales often decrease in zip codes surrounding a shuttered store.

While e-commerce is generally viewed as a space that has matured since Amazon’s entry two decades ago, omnichannel efforts from brick-and-mortar retailers are ensuring that e-commerce remains in a state of disruption, Moody's contends. Stores are key to success, by serving as logistical fulfillment hubs and by associates sealing the deal on the sales floor, according to Moody’s.

Last week, CEO Doug McMillon outlined ways that improvements to stores can do just that. Associates are using mobile devices in stores to work more efficiently and spend more time serving customers. “I’m really encouraged by how our store and club associates are embracing change,” he said, according to a transcript of a recorded call for analysts from Seeking Alpha. “We’re creating new solutions to help us run the business better in addition to creating a better experience for the customer in stores and online.”

In a blog post last week, Wal-Mart also said that it’s experimenting with tech-enhanced 'Next-Gen' stores in Tomball, TX, and Lake Nona, FL. The new layouts bring services like beauty salons and tech repair near relevant merchandise. Health and wellness departments are consolidated, and baby, toys, kids' apparel and kids' shoes “form a single destination to ease mom’s shopping journey,” Jeff Muench, senior director of Business Development, wrote in the blog post.

The stores also include Wal-Mart’s revamped “Scan and Go” checkout technology, which works with smartphones and handheld devices provided by Wal-Mart. Plus, interactive information projected onto tables and walls allow customers to learn about connected devices like Google Home, Apple TV, Nest, baby monitors and connected thermostats. Interactive screens also provide an “endless aisle,” featuring items available online but not necessarily found in stores, according to the blog. Customers can also page store staff via WiFi-connection buttons throughout the store.