KELLY MCEVERS, HOST:
Walmart's warehouse chain Sam's Club is closing 63 of its stores from Alaska to Puerto Rico. The company says about 9,400 employees will be affected. Many of them only learned about the closures yesterday when they got to work. Here's one Tampa area worker, Christopher Holloway, talking to the local ABC station.
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CHRISTOPHER HOLLOWAY: I thought it was a joke. Honestly, I thought someone was messing with me when they first told me. And after that, I just - I didn't know what I was going to do, didn't know where I was going to go.
MCEVERS: Business Insider senior correspondent Hayley Peterson broke this story, and she's with us now. Welcome.
HAYLEY PETERSON: Thanks for having me.
MCEVERS: So what is the company telling you the reason is for the closing of all these stores?
PETERSON: The company says that the reason for closing these doors is that there's just not a lot of traffic coming to these stores. It seems like maybe some nearby stores were stealing some traffic from the ones that are being closed. And also, they said that population growth wasn't as high as they were expecting in some of the areas where they built these stores.
MCEVERS: As we just heard, these closings came as a surprise to the people, you know, who work in these stores. How many jobs will be lost? I mean, will some people be transferred to other places?
PETERSON: Walmart is going to try and transfer some of the affected employees to nearby stores. But it's not clear how many employees will be able to have that opportunity to get transferred.
MCEVERS: You reported that 10 of the stores will actually turn into e-commerce distribution centers. The company said this is because of an increase in online shopping. Does competition with Amazon have anything to do with this?
PETERSON: This is all about competition with Amazon. This strategy is indicative of where customers are shopping and Walmart's growing emphasis on e-commerce after buying jet.com and a number of other digital companies. Walmart is doing everything in its power right now to compete against Amazon online. It needs to offer fast, free shipping and ultimately same-day shipping on tons of products. And one way to make that happen is with more distribution centers.
MCEVERS: And just to be clear, when we talk about these distribution centers, I mean, these are places that employ far fewer people than an actual store.
PETERSON: That remains to be seen. You know, it's hard to say. It's hard to say. Distribution centers do use a lot of robots and sort of computer technology, so it's possible that they will employ far fewer people. But that remains to be seen.
MCEVERS: You know, this all happened at the same time that Walmart said it was going to raise starting wages for hourly workers and that it would expand family leave and offer cash bonuses to staff. The company said the new U.S. tax law had created some financial benefit. I mean, how do you square these two decisions coming at the same time - right? - closing these stores and affecting 11,000 people while also offering raises?
PETERSON: It's a very odd timing of the two announcements, especially because the first announcement, the one about the wage increases and the benefit expansion, that was trumpeted early in the day and nothing was really said about these closings. A press release wasn't sent out about them until much, much later in the day, hours after we had broken our story on the closings. And so - and it's highly unusual for companies as big as Walmart to not give employees notice about store closings.
But the strategy makes sense. What Walmart is doing is strengthening its e-commerce operation while it scales back a little bit in its physical stores. Many other retailers that are growing are following this strategy of closing stores and opening new distribution centers. Physical retail will always matter, and it's a big part of what gives Walmart an edge over Amazon. But for many years, retailers grew far too fast in terms of new stores, and now they are paying the price.
MCEVERS: Hayley Peterson, Business Insider's senior correspondent, thank you so much.
PETERSON: Thank you.
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