Retail’s Next Operating System

Retail is quietly undergoing a structural reset, and the numbers finally make the picture snap into focus. We break down Walmart’s latest results alongside Target, Costco, Kroger, Ahold, and leading players across Europe and Asia to reveal the model that’s defining 2026 and likely the rest of the decade. The signal is clear: omnichannel has become the operating system of modern retail, and the winners are wiring every part of the business to serve one customer across every channel.

We dig into why retail media is now the new margin engine, showing how ad platforms like Walmart Connect and connected TV can fund low prices, automation, and better digital experiences without sacrificing merchandise margin. From there, we explore automation as true operating leverage: automated DCs, robotics, and microfulfillment that permanently lower cost to serve while improving delivery precision and speed. It’s the playbook that turns fast fulfillment from a loss leader into a scalable advantage.

Data-led merchandising and inventory get the spotlight next. Growing sales faster than inventory at enterprise scale signals AI-enabled forecasting, real-time visibility, and smarter markdown optimization that set leaders apart. Then we examine membership as the fresh loyalty battleground. Paid programs like Walmart+ are shifting behavior across income brackets, creating a durable flywheel that points, coupons, and generic rewards struggle to match.

Tie these threads together and you get a new retail operating system: unified commerce, retail media profit, automation, marketplace breadth without inventory risk, AI-driven forecasting, membership-driven loyalty, and price leadership powered by productivity gains. If you’re a retailer, supplier, or brand leader choosing where to invest, this framework becomes a practical roadmap for resilient growth and durable share. Subscribe, share with your team, and tell us: which capability are you building first, and what’s blocking your path?

Chapters

• 0:00 Setting The Stage: Earnings Review
• 0:49 Omnichannel As The Core Engine
• 2:04 Retail Media Becomes The Margin Driver
• 3:14 Automation As Operating Leverage
• 4:12 Data-Led Merchandising And Inventory
• 5:09 Membership As Loyalty Flywheel
• 6:11 The New Retail Operating System
• 8:07 Closing Thoughts And Roadmap

Transcript

SPEAKER_00: 0:08

Well, hello everyone, and welcome to Scott's Thoughts. I'm Scott Benedict. You know, this week I have been digging into Walmart's most recent earnings results and comparing those results to what we have seen from Target, Costco, Kroger, Ahold, and several other global retailers across Europe and Asia. And in reviewing these reports side by side, the message, in my view, is unmistakable. The future of retail is becoming increasingly clear. And Walmart is showing us the model that will define 2026 and perhaps the rest of the decade. Here's why I think that. Let me break it down for you. One, omnichannel is no longer a strategy. It is the operating system of modern retail. Walmart delivered another quarter of impressive U.S. comp growth, but what really stands out in those results is its omnichannel engine. U.S. e-commerce grew 28% year over year. Globally, e-commerce grew at 27%. And marketplace categories like toys, apparel, consumer electronics, and auto grew 40% or more. And delivery under three hours, where a customer has paid extra to get a delivery faster has jumped 35%. And that isn't a side business anymore. It is, in fact, a center of gravity. Globally, retailers like Tesco, Sainsbury's, Carfour, Aeon, and Reliance have doubled down on unified commerce and real-time inventory visibility. Customers are omni-channel by default, not just here in the US, but in other places around the world. And retailers who treat digital and stores as one seamless integrated system are the ones that are really gaining share. Second big thing that came out of these results is that retail media is now the new margin engine. This is one of the biggest takeaways from Walmart's recent results. Walmart Connect grew 33% year over year. And when you include Visio's Connected TV platform, global ad revenue was up 53%. Unbelievable numbers. Most importantly, ads and membership now count for one-third of Walmart's operating income. That is a structural shift in the makeup of their PL. Other retailers are certainly investing in these areas, and with good reason. Retail media is allowing them to keep prices low, reinvest in automation, and improve digital experiences without sacrificing profit margin. The Walmart's combination of marketplace scale, connected TV platform, the partnership with Visio, and first-party data puts them well ahead of most of their competitors here in the U.S. and in other markets around the world. So that's kind of big impression out of those results, number two. Number three is the realization that automation is moving from kind of a future state into the real operating leverage of successful retailers. More than 60% of Walmart's U.S. stores now receive freight from an automated DC, and over half of their e-commerce fulfillment is automated. Now, this matters because it permanently lowers the cost to serve. It improves the precision of deliveries at the same time. Globally, we're seeing some other retailers make these moves as well. JD.com, Alibaba, Akado, Aeon are rapidly deploying robotics and microfulfillment. And so the message from those actions, those activities, those investments is clear. You can't scale omnichannel profitably without some degree of automation in your business. The fourth major uh takeaway from Walmart's quarterly result is that data-led inventory and merchandising are becoming key differentiators. Walmart grew U.S. sales by over 5%, but their inventory only grew by 2.6%. That's incredibly difficult to do if you're a company of Walmart's scale. And it's a sign of sophisticated forecasting, replenishment, and markdown optimization that others haven't been even able to copy, certainly at that scale. Now, retailers like Costco, Ulta, and others are showing similar patterns, but I think the key takeaway is that AI-enabled forecasting and real-time inventory visibility are no longer what you would call innovation projects. They are becoming quickly table stakes of success in modern retail. Fifth major takeaway that I got out of this week's results is that membership is the new loyalty battleground, if you will. Walmart Plus hosted the strongest net ad uh quarter ever. In other words, adding more members faster, net net than any that they lose. And that that that addition, that growth in membership was across every income bracket. Meanwhile, loyalty programs that are not subscription-based, like Target Circle, simply don't have the same behavioral lock-in. They don't change a consumer's behavior in profound or long-lasting ways. So if you're looking at where uh customer lifetime value is headed in the next few years, it would appear that membership ecosystems are going to be one of the defining levers of success in that aspect of retailing. So, what does all this mean for for next year, for 2026 and beyond? I think when you put all these pieces together, omnichannel, retail media, automation, data-led merchandising and membership, you get what I believe we should think of or refer to as the new retail operating system. This is the model uh that retailers that are going to have to have to build towards what they want to be in the future and how to be competitive in modern retail. And some of the elements that are key to success in my mind are unified commerce, omnichannel is absolutely at its core. Automation, wherever it can be used to reduce the cost to serve, is table stakes. Retail media is a profit stabilizer, allows you to invest in other areas of business because you've got the safety of the profit that comes from that program. Marketplace assortment is something that you can do to grow the breadth of your offering without inventory risk, which is kind of neat if you're the retailer. Real-time AI-driven forecasting is key. Membership is a key loyalty flywheel for your business. And price leadership sustained by productivity gains, where you've gained that either through other innovation or investments in technology, are really key to sustained success. Now, some retailers are already on this path. Others are treating some of these as isolated initiatives instead of core elements of their business. So that's what stood out to me about this quarter. Walmart isn't just outperforming, they're showing us what the next decade of retail is really going to look like. So if you're a retailer, a supplier, a brand leader trying to figure out where to invest, the roadmap, in my view, is right in front of us. Thanks for listening. As always, we appreciate your listenership. And that's Scott's thoughts for today. I'm Scott Belledate.