Judith McKenna, President and CEO, Walmart International 
Interviewer: Beth Kowitt, FORTUNE

Most Powerful Women 2022 - Global Growth

the pandemic economic uncertainty, supply chain issues, inflation, changing consumer habits. It's a lot and it's all led to challenges for the retail industry, both here in the U. S. And around the world? It's part of what Judith McKenna is tackling as president and ceo of war Walmart International Judith oversees all aspects of Walmart's footprints outside the us and leads a team of 550,000 associates in 23 countries. It's a massive job and one that puts her in the 14th spot on this year's most most powerful women list, Judith joins Fortune senior editor and M. P. W. Summit coach. Er Beth co it to talk about innovation, consumer habits and leading $100 billion business towards growth and uneasy conditions. So please welcome Judith and Beth to the states Judith. Good morning. Hello, good morning, good morning everybody. Um so as up here you run a massive business like everything in Walmart, even the international businesses massive. 101 billion in sales around there. If it were a standalone company, it would be number 34 on the Fortune 500. It would massive company. Um but in the last year the size of the business is actually shrunk and that's been intentional on your part. Tell us a little bit about this refocus here. Yeah, so it's actually over the last few years we both we made a decision to really look at the business and to say are we a healthy business for the future And we have this really simple strategy which is strong local businesses powered by walmart. So we looked everywhere, we operate and ask ourselves, are we operating strong local businesses and what does that mean locally relevant and set up for long term and sustainable growth and powered by walmart, there is a unique advantage of being part of the wal mart family and some of the markets that we looked at, we realized we couldn't get to full potential. So we made the decision to divest of those markets and that was brazil, Japan, Argentina And astor. And in the context of our scale that's about 40 billion of sales that we divested of. Um and that sounds like quite easy when I say it but aster is where I grew up in the UK business. It was um kind of my home, it's you know my kids were born when I was there like all of those things and we divested of it so that there's this kind of It's the right thing to do. But it's also quite a big business personal challenge when you go through this kind of restructure and transformation that is left ear's now operating out six primary markets which we have regional proximity to which is how we get to the 23 markets. What it also allowed us to do is invest where it mattered. So we reinvested into India we bought a business called flip card. We made a $16 billion investment there to buy a e commerce business one of the world's you know fastest growing economies really nascent from an e commerce perspective. But growing fast. So reinvested, refocused made those changes growing nicely now. We just had a good Q. T. Results when we announced those what's next? Really is not only where do we operate but how do we do business? So we're doing digital transformation, we're thinking about new services such as financial services and healthcare. So you've got a geographic transformation and then you go business transformation as well. That's interesting. And flip cards a really good example there because you know, I think it showcases how you're thinking about things differently, right? You don't own the whole thing which is a change and also rather than physical stores, it's a digital business. I mean is this and also not just growth for growth's sake. Right? Like you are closing your closing markets has happened hard to kind of wrap your head around as an organization. I think when you like anything that you try to do with your significant change if you set out the Endgame and why you are doing it, it's way easier to take people on that journey. And and that's really we were very clear this was for a growth strategy, not a shrinking strategy and we were very clear why we were making the new investments we were making as well and some of those are into existing businesses like our Mexico business into becoming an omnichannel retailer and somewhere into new businesses like India into the flip card business as well. So we've been able to take people on that journey and that powered by walmart bit is the piece that allows us to stitch it all together, which also helps you know, we're talking way More about creating global platforms, shared learnings and this structure piece that you bring up which is what are the structures that we've got around the world. We run public companies, we have 100% owned subsidiaries, we have majority ownership with private ownership from other investors as well. The learnings we get from others as they help partner with us. It's probably been the best piece. So with your global purview, tell us what you're seeing in those markets that you're now really focused in and what is that telling you about where you see the global economy headed? Yeah. So I wish I had a crystal ball like doesn't everybody I said that probably for the last, I don't know how many years I've been in business but it's particularly felt that way The last few years and we serve 240 million people a week in Walmart. They come through our doors come online and shop with us and I think there are two things that we're seeing everywhere. Every geography is different. The economics of every geography are slightly different but there is definitely commonality around inflation and general uncertainty At the moment and inflation is really customers are feeling it, you know, you must have all seen as well. Real incomes are shrinking in many places and people are switching their spend into food and consumables and having less discretionary spend to be able to use that. We talked a lot in our Q2 results about and we're seeing behaviors where people thinking about buying private brands rather than necessarily just branded products. They're thinking about what pack sizes they're buying. So that behavior of customers is really fascinating to watch. The general uncertainty I think gives another dimension to this as well. And and what I would say is I don't know what the future's gonna look like, but what we've learned as walmart through the last few years in particular is staying agile, staying nimble. Having data. Really thinking about how we use that is critical and we're very much thinking on a short term medium term and the long term because when you've got these kind of economic environments and I, you know, was in the UK, I once, I was fortunate to be there when we went through a recession. They're in fact two of them and not only is what you do when you're in them, it's what you do when you come out of them when you also have to consider what you're gonna do longer term and if you lose that insight about what does your growth strategy look like? What are your long term investments need to be, don't be, you know what is it penny wise pound foolish like that kind of thinking that was my very british just coming out there um sent wise and foolish whatever way that goes around that is that is really important. So I don't know exactly what it looks like for the future. What I do know is the businesses that will do well irrespective of what sector you are in or what roles you are in. You will be nimble, agile. Thinking about the long term as well as how to manage the day to day. We know that some of the market's urine are very ahead of the US in terms of e commerce digital, what does that really indicate to you about where the U. S. Consumer is going or might go? Yeah I actually um the U. S. Is making leaps and bounds and like pretty much every market in the world. The pandemic change some of the digital trajectory that we saw. And the work that the walmart U. S. Team has done on grocery home shopping on marketplaces has been great to see maybe two things in two markets. It's worth highlighting best one is in e commerce delivery but particularly for groceries and the second is payments and digital payments. So in china that is probably the market that the highest digital adoption of any market in the world currently and even our business has a has about a 40% penetration to sales of digital business. So I think this e commerce the way that's going to continue customers are gonna expect and want convenience, they want good prices but they want good quality but they really want it whenever they want it in china. It's probably got the biggest digital ecosystem of anywhere. And we're seeing that play out. We've taken a lot of learning from our china market. The other one is digital pay me. We also when we did the flip Kite investment, we also invested in a business called phone pay. There are financial services and payments business and to give you an idea of scale and how digital payments in India is scaling and that has got about a population of 1.3 billion in India phone pay process is about 3.1 billion transactions a month. So the government made some changes that may you know really wanted to adopt a digital economy in India and made the ability to do digital payments on a set of guardrails and payment rails called U. P. I much easier. Phone pay is one of the leading businesses there in that and that has been fascinating to watch how if you go to in there have been there a few times this year and the Q. R. Codes absolutely everywhere like on everything everywhere street vendors. It's all there and that digital adoption of the way to pay it's safe. It's secure, it's easy there, it's all connected to a mobile phone number I think is another one for the future. And you know, in walmart us we have warm up pay and then Mexico we have a similar kind of tool called Kashi, slightly different at the moment. Not externalized phone pay you can use in over 30 million merchants, but I do think that's another trend we're gonna see more of. I want to open it up to questions and in just a second here. But first you mentioned earlier this idea of sharing between markets. Yeah, it's really hard to do. How have you figured out how you solved that problem and or our markets to local at this point where it's actually not all that helpful actually, the reverse of that, the way we think about local versus global is the closer to the customer you are, the more local you've got to be, that's where you need your tailoring. The more back end to everything, the systems that you have, the processes that you have, the more global learning that can be applied. And I think that is really helped to start to figure out global leverage. I've been part of international, been at walmart 27 years that I've been part of the international business for about 20 years when walmart bought our business in ASta and I've seen everything tried, I've seen portals playbooks like you name it, I've seen it, the single biggest factor is having the right people having the right conversations and having the right technology that people see the advantage of when you bring those things together, you don't know, you no longer have to push leverage. It's a pull and we're seeing it between markets across regions with suppliers as well legally, but in the way that we do business with them and sharing of how technology is working and shaping businesses. So I this powered by walmart piece of the strategy, I'm really excited about what we can leverage of that for the future. Do we have any questions for Judith in the audience here? Take a look. Okay. Um then I want to ask you about global sourcing that falls under you massive piece of the business as well. What do you think in terms of the supply chain, are things getting cleaned up a little bit? What what can we expect to happen? Yeah, our our walmart sourcing business is really interesting. Also does made in America program as well, which is really important because domestic sourcing is our number one priority. And then we think about how do we globally, there have been huge shocks to the global supply chain over the last 3, 3.5 years, it has been seismic to watch what that has happened. I've mentioned a few times the need for partnerships that supply partnerships around the world have been an incredibly valuable part of that journey for us. That same principle that talked about being agile, flexible and using data to how we think about those supply chains is equally important. We're also thinking about how we source, we, I talked about India and domestic sourcing, we have the business in India and we just launched this 10 year commitment to source out of India. So we are, we're excited about that, I think there's still a lot to learn, I think working together, working in partnerships, working in collaboration and we don't have time for it today, but we could have a whole different topic on sourcing and supply chain about regeneration as well, which is going to be important. Tell us quickly, just we have one minute left, tell us tell us about that, what do you think is gonna happen? I do think that the focus, you know, people are going to care more about where they get their products from, how they're manufactured and where they're sourced from and I think there is more that we can do and continue to do in the supply chain. I just came back from Vietnam and Thailand and talking to suppliers there about regeneration. How do you make it way more circular on things like waste and waste products from anything that you produce, use them back into sourcing in different products and in different ways and I I think this is going to be something where businesses can shine in the future by truly caring about it and it's one of the reasons I Of what I do is that we have 240 million customers who all have really high expectations and it makes us think differently. And the commitments that we're trying to make around regeneration, I think, are probably some of the most impactful things that we'll do in the future, too, and it applies absolutely into sourcing Judith. Thank you so much for joining us talking about your $100 billion business. Thanks for being here. Thank you very much.