| Marketing Research and Data Analysis | |||
| E-Commerce Project Description
WALMART |
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EXECUTIVE SUMMARY
Walmart is the largest retailer of the world. In 1991, it expanded its business out of the country by opening Sam’s Club in Mexico. Walmart has the ability to provide required retail products to different markets in different regions by taking into consideration the needs, interests and customs of the local community. Today, Walmart is operating around 11,500 stores under different banners in 27 countries.
The major strength of the Walmart is its ability to maintain stable growth while offering products at low prices. To remain a successful business, it considers different factors that may determine its success in the market. It also has to face intense competition with other brands in the e-commerce segment. Some of its major competitors are Amazon, Kroger Company, Costco etc. It has been also working on its strengths and weaknesses while also maximizing the opportunities and minimizing the threats.
Amazon is the top leader in online shopping. Although started its operations around 30 years later, Amazon today is at par with Walmart. According to some researches, Amazon has owned around 40% of the online retail. While Walmart accounts for hardly 5%. Improving the e-commerce activities by Walmart will lead to the interactive interface, increased user experience, excellent logistics for quick and free delivery, improved customer satisfaction, increased sales and competitiveness in the online retail segment.
Walmart did not felt the e-commerce value at appropriate time and continuously funded its supply chain and logistic network. Its efforts have not started paying off as required. To leap forward in the race of best e-commerce retailer, Walmart should grab every opportunity, make strategic partnerships, invest in standalone logistic services, remain one-step ahead, consider Own the home strategy, focus on food, healthcare, major markets, Apparel segment, and new technology to improve its competitiveness.
Contents
Market Analysis
Walmart is the largest retailer of the world. In 1991, it expanded its business out of the country by opening Sam’s Club in Mexico [1]. Walmart has the ability to provide required retail products to different markets in different regions by taking into consideration the needs, interests and customs of the local community. Today, Walmart is operating around 11,500 stores under different banners in 27 countries [2].
Marketing Environment
The major strength of the Walmart is its ability to maintain stable growth while offering products at low prices. It is continuously working towards improvement by setting goals for international people, products, waste, energy etc. To remain a successful business, it considers different factors that may determine its success in the market. These factors can be best understood using PESTEL model of analysis [3]. The factors analyzed using this model are political, socio-cultural, economic, ecological, technological and legal aspects that also change with time. These factors related to the marketing environment are discussed here briefly.
Political factors: Government policies and other groups that are politically active are the significant players in the political environment. External political factors related to macro environment of Walmart are demand for higher wages, political stability, and support to globalization by political groups. Walmart has to maintain balance between higher wages demands and minimization of cost to remain competitive.
Economic factors: These are factors that are related to the economic stability of the major countries, economic growth of developing countries and low level of unemployment in US and other developed countries. All these factors provide opportunities to the Walmart to expand its business around the world especially in the developing countries that have higher retail goods demands.
Socio-cultural/Social factors: Socio-cultural factors influence the preferences and perception of the consumers. Migration of people to the urban areas, diversity in culture, and people following healthy life style are the external socio-cultural factors that present opportunities to the retail brand. Walmart can grab these opportunities by increasing the variety and amount of healthy products to satisfy the needs of people related to different cultures.
Technological factors: Being innovative and adopting new technologies are the major factors that influence the competitiveness of the brand. Some of the external factors related to the technology providing opportunity to the Walmart are increased usage of smart phones by consumers, implementation of automation in business activities, and utilization of big data or business analytics.
Environmental/Ecological factors: Conservation of environment is one of the major factors that gives shape to the policies and objectives of the business. Walmart can improve the efficiency of operations to maintain stability in the business. To achieve this, it should take help of innovative technologies. Ecological factors can also be addressed by improved standards and policies on the products.
Legal factors: When operating in an economy, Walmart has to follow rules and regulation, guidelines, and laws of that economy. One of the threats that influence the marketing environment is tax reform when higher taxes are imposed. On the other hand, regulations on employment and food safety standards and regulations provide opportunities to Walmart to improve the standards of quality and practices related to human resource management respectively.
Customer Market
In last 50 years, Walmart has grown from a single discount store to around 11,500 stores globally. Around 265 million members and customers visit these stores per week. It follows the idea of selling more for less [2]. The majority of Walmart customers belong to lower to middle income group. However, in recent years there is decrease in the percentage of these customers among total customer base. Now, new affluent customers are shifting to the Walmart from other brands.
Marketing Mix
Being the largest retail company of the world, Walmart employs the marketing mix to manage its large business. Although marketing mix can be employed in different business but it is considered most successful in strategy of retailers. Product, Price, Place, Promotion, and People are main principles of a marketing mix [4]. These principles are discussed below.
Price: Walmart adopts the strategy of bulk sales to keep the prices of the products customer-friendly. Its procurement strategy is excellent that helps in maintaining the prices of products low through bargaining with suppliers. Diversification of products maintains the stable revenue and SKU and Universal coding system maintains efficient supply chain to maintain lower prices.
Product: Walmart sells a wide range of products. It focuses on the needs of the customers to decide which products to sell in stores. It utilizes product mix strategy to offer diverse products in each category. To maintain the economy of scale, the stores buy goods in large quantities. Relationship with suppliers is also maintained stronger.
Promotion: Walmart uses different advertisement and slogans like ‘worry free fresh’, ‘lowest price store’, etc. by employing a wide range of media channels.
Place: Walmart has a strong platform of e-commerce that delivers the products at doorstep and reduces the customer visits to stores. It maintains a strong distribution network, advance IT systems, strategically located outlets, and large fleet of trucks to maintain the geographical accessibility to the products by customers.
Major Competitors
Walmart is the largest retail brand of United States. According to 2018 statistics, Walmart made revenue of $500.3 billion and net sales of $495.76 Billion. Retail industry is evolving and intense competition has continued in recent years. There is long list of competitors of Walmart. Some of these are discussed below.
The Kroger Company: It is Ohio based food retail brand. There are around 782 stores of Kroger Company under six banners. It also operates Multi Departmental stores and Super markets.
Costco: It is also one of the largest retail brand of US. It is an international brand with presence in Mexico, Canada, UK, Japan, Spain, and Australia. It had 749 warehouses in 2018 with revenue of $129 Billion in 2017 [5].
SWOT Analysis
Some of the strengths of Walmart are its brand recognition, global presence, and human resource management, and some of its weaknesses are small margin of profit, gender discrimination, etc. Major strengths, weakness, opportunities, and threats to Walmart are provided in the following figure.
Figure 1: SWOT analysis of Walmart [6]
E-Commerce Rationale
Walmart is the largest bricks and mortar retailer of the world and it has been making significant growth in e-commerce. However, it has been witnessing stiff competition with Amazon. Both are largest retailers where Walmart is leading in the physical presence and Amazon is dominating the online shopping. Although started its operations around 30 years later, Amazon today is at par with Walmart. Both Amazon and Walmart are innovating systematically and competition between these is expected to become stiffer in the future. Walmart started with the strategy of big-box to rely on its physical locations while Amazon initially started as an online bookseller company [7]. The difference between the activities of these two brands is narrowing down. Both are offering supplementary services such as Amazon is providing music, web, and video services and Walmart has started pharmacy. The real completion between these brands started when Amazon acquired Whole Foods and Walmart acquired Jet.com.
E-commerce buys and sells largest number of products over internet. In the last decade, e-commerce has witnessed a tremendous growth. Majority of the big brands are now gradually moving towards e-commerce. Following this trend, Walmart also shifted its business over internet and it is continuously working towards the improvement of customer experience online. The research and technology team of Walmart, WalmartLabs, has also developed a new software called Polaris [8]. It is a search engine that helps customers to browse and discover a particular product and thus makes the online shopping quick, easy and intuitive. It uses advanced algorithms to provide the most relevant results to the customers. With the inclusion of Polaris, Walmart witnessed a 10 to 15 % increase in customers.
However, some of other competitors of Walmart used this feature earlier. A9 is the search engine of Amazon that helps people to comment, navigate, and save the Web pages visited by customers [9]. It has some other features such as it recommends webpages based on the user preferences and it has expandable query. It can take screenshots and open multiple columns.
To improve its sale, Walmart need some significant improvements. It can be better understood by comparing it with Amazon that is the top leader in online shopping. Walmart has simple and plain web interface that just serves the purpose of shopping. On the other hand, Amazon develops the interest of the visitors to buy a product without any second thought. It displays reviews about products from different customers and newspaper articles. Ambition of Amazon is much higher. Whenever, a customer visits the Amazon, it stores the buying history of the customer and recommends products based on preferences of the customer. Amazon uses ShopRunner shipping alliance to offer free handling and shipping to the customers [10].
Both Amazon and Walmart are working to adopt innovative technology. Walmart has a plan to place around 1500 robots at different stores. Much of the supply chain has been already automated by Walmart. Amazon is also using robots and drones to deliver its products at the doorstep. Amazon lets customers to try clothes before buying through Prime Wardrobe [7]. It has expanded its activities to new areas such as personal consultations to customers. In present world, employing the high-tech and advanced technology is a crucial step to remain competitive in the market and maintain positive growth.
To any business, customers make one of the most important aspect of its success. E-commerce platforms are focused to provide best culture and experience to customers. Amazon has received the second-highest rating in the American Customer Satisfaction Index. Until 2018, it was ranked 1st after which Costco displaced it. On the other hand, Walmart far from receiving the highest rating. The reason for this difference is the focus on the customer satisfaction by both brands. Amazon is particularly obsessed keeping the customer at the core of the business. By improving the customer satisfaction, Walmart will make sure to retain the present customers and add new customers to its e-commerce platform.
There is no competition of Amazon with Walmart in the physical store experience. To overcome this challenge, Amazon has employed excellent and quick shipping. It offers shipping on next-day to its prime members. In response to this move, Walmart also has to announce next-day delivery options to its customers only on some items. After breaking up with FedEx, Amazon started to invest in its own fleet of planes and trucks and continuously improving its logistics.
Statistics show that, in online retail, Amazon is topmost brand. According to some researches, Amazon has owned around 40% of the online retail. While Walmart accounts for hardly 5% [11]. There is plenty of room for improvement its e-commerce activities. Walmart’s CEO and President Doug McMillon in a statement said, “Our strength is being driven by food, which is good, but we need even more progress on Walmart.com with general merchandise. We’re mixing the business out better to achieve better margin rates, but there is more work to do”.
To summarize, improving the e-commerce activities by Walmart will lead to the interactive interface, increased user experience, excellent logistics for quick and free delivery, improved customer satisfaction, increased sales and competitiveness in the online retail segment.
E-Commerce Critique and Recommendations
Walmart is the largest retailer in both U.S. and Internationally. It is steadily making big and strategic moves to capture the market. It is following the strategic moves such as acquisition of other businesses and other new initiatives. However, none of these efforts is enough and it is continuously lagging behind Amazon. Walmart did not felt the e-commerce value at appropriate time and continuously funded its supply chain and logistic network. In recent past, it started investing heavily in e-commerce. However, its efforts have not started paying off as required. Many experts are now questing about the effectiveness of the e-commerce strategy of Walmart.
In 2016, Walmart acquired Jet.com, cofounded by Mac lore, in $3.3 billion [11]. The reason for this acquisition was to utilize its technology and group of individuals to take bold measures in Walmart e-commerce when the Walmart executives failed to recognize the e-commerce potential of the retailer having 11,766 stores operating worldwide. It is expected that Walmart will not keep Jet.com a separate company and will ultimately kill Jet.com by absorbing it into Walmart. It would have been a better approach if Walmart had partnership with EBay or took opinion of Facebook, Google, or Microsoft to convert Walmart into next leader in ecommerce. The strategy proposed by Lore for Walmart is to convert Walmart into “Everything Store”. However, experts do not appreciate this strategy due to following reasons.
Walmart will require huge investment to close the gap between Amazon and Walmart where there is huge difference share of Amazon (around 40%) and Walmart (around 4.7%) in retail sector [11].
The primary focus of Walmart is on shipping of bulk retail products using Pallets. To provide door-to-door or next-day delivery to consumers, Walmart will require huge investment to build an e-commerce specific logistic network. It has only 20 e-commerce specific centers while Amazon has 110 distribution centers with all focus on e-commerce activities.
It will require acquisition of number of smaller brands like ModCloth, Moosejaw, Bonobos, etc.
Improvements required in Walmart e-commerce
It is quite clear that Walmart will need huge investment in the future. Walmart has been able to achieve a continuous growth of 3.4% and its online sales are also increasing by more than 30% per quarter. However, a report on the revenue of Walmart proclaimed that Walmart witnessed a loss $1 billion in 2019. It also should be noted that Amazon started generated profits only after 16 years of its e-commerce operations. However, it is also not expected that Walmart should also take 16 years to be leader in retail e-commerce. It needs to invest strategically and heavily in e-commerce.
Marc Lore is the President and CEO of Walmart e-commerce. His decisions to compete with Amazon are motivated by his anger and revenge against Amazon. It is expected from CEOs to take decision by considering the strengths and weaknesses of the competitors. Theory presented by book Art of War written by Chinese general Sun Tzu can be followed in this regard. Therefore, first step Walmart can take is to appoint a CEO that is not motivated by personal emotions. This best technique to find a suitable CEO is to consider history of CEOs [11].
To leap forward in the race of best e-commerce retailer, Walmart should take following step to improve its competitiveness.
Grab every opportunity: Walmart should utilize every opportunity while improving its strengths. It should not lose its focus on grocery business. However, at present Walmart is not doing much in this sector. It can improve the experience of food by collaborating with other brands like Cracker Barrel. It can also acquire Companies like eDOR, DynoSafe, or PackIt to improve the delivery experience of groceries [11].
Strategic partnership: Walmart should also consider strategic partnerships. For example, it can collaborate with Home Depot for building and opening new facilities for distribution that will make the next-day delivery possible to Walmart for most of the items. Other opportunities for collaboration are pooling procurement and pooling transportation to lower the rates, studies to optimize the logistic network by identifying the shared fleet etc.
Standalone logistic services: Walmart should invest in the standalone logistic service by acquiring trucking companies and companies engaged in the last-mile deliveries. It can also use this standalone service to offer third party logistic services. It must consider partnership with Oracle for next-level trucking [11].
Remain one-step ahead: E-commerce war has already been won by Amazon. Now, it is the time to prepare for the next par. Walmart could consider the acquisition of Shopify instead of Jet.com for enabling the commerce for small sellers. It can also boost the logistics for the creation of ecosystem of high-fulfillment with lower-risk.
Focus on food: Walmart should work towards influencing the behavior of consumers by the introduction of new services. It can collaborate with Zume for the creation of supply chain of fresh food [11].
Healthcare: With the growing importance to health care in US and world, Walmart should collaborate with clinics, hospitals, nutrition centers, etc.
Own the home strategy: Walmart should consider this strategy to provide services to consumers to set smart homes. It can collaborate with Enjoy in this regard. It should also though of providing repairing services to its own appliances.
Focus on major markets: Walmart should focus only on key regions and reduce its presence in other countries.
Apparel segment: Walmart’s own ventures into clothing demonstrate its dedication to keeping the pressure on its e-commerce rival.
New technology: New technology can be adopted in the Walmart through acquisitions and partnerships.
References
[1] V. Gupta, “Taking Wal-Mart Global: Lessons From Retailing’s Giant”, strategy+business, 2020. [Online]. Available: https://www.strategy-business.com/article/13866?gko=203b4. [Accessed: 24- May- 2020].
[2] “Our Business”, Corporate – US, 2020. [Online]. Available: https://corporate.walmart.com/our-story/our-business. [Accessed: 24- May- 2020].
[3] “Walmart PESTEL/PESTLE Analysis & Recommendations – Panmore Institute”, Panmore Institute, 2020. [Online]. Available: http://panmore.com/walmart-pestel-analysis-recommendations-case-study. [Accessed: 24- May- 2020].
[4] “Walmart Marketing Mix – Understand Walmart’s Marketing Strategy”, Corporate Finance Institute, 2020. [Online]. Available: https://corporatefinanceinstitute.com/resources/knowledge/other/walmart-marketing-mix/. [Accessed: 24- May- 2020].
[5] U. Farooq, “Top Walmart Competitors | Competitors Analysis of Walmart”, Marketing Tutor, 2020. [Online]. Available: https://www.marketingtutor.net/walmart-competitors/. [Accessed: 24- May- 2020].
[6] Bstrategyhub.com, 2020. [Online]. Available: https://bstrategyhub.com/swot-analysis-of-walmart-2019-walmart-swot-analysis/. [Accessed: 24- May- 2020].
[7] B. Morgan, “7 Ways Amazon and Walmart Compete -A Look At The Numbers”, Forbes, 2020. [Online]. Available: https://www.forbes.com/sites/blakemorgan/2019/08/21/amazon-versus-walmart-goliath-versus-goliath/#67bf26fd4674. [Accessed: 24- May- 2020].
[8] “TechCrunch is now a part of Verizon Media”, Techcrunch.com, 2020. [Online]. Available: https://techcrunch.com/2012/08/30/in-battle-with-amazon-walmart-unveils-polaris-a-semantic-search-engine-for-products/. [Accessed: 24- May- 2020].
[9] “TECHNOLOGY; Amazon to Take Searches On Web to a New Depth”, Nytimes.com, 2020. [Online]. Available: https://www.nytimes.com/2004/09/15/business/technology/technology-amazon-to-take-searches-on-web-to-a-new.html. [Accessed: 24- May- 2020].
[10] A. Roggio, “Amazon Prime, ShopRunner Forcing Faster Free Shipping | Practical Ecommerce”, Practical Ecommerce, 2020. [Online]. Available: https://www.practicalecommerce.com/Amazon-Prime-ShopRunner-Forcing-Faster-Free-Shipping. [Accessed: 24- May- 2020].
[11] B. Ladd, “What If General George Patton Was the CEO of Walmart?”, Observer, 2020. [Online]. Available: https://observer.com/2019/07/walmart-ecommerce-strategy-amazon-ceo-george-patton/. [Accessed: 24- May- 2020].
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