As global consumers face the inevitable threat of inflation, shoppers are demanding more from their retail customer experience than simply product availability and service these days. Nor is the ability to provide frictionless browsing, purchasing and research options exclusive to digital retail.
Brick and mortar may still retain the lion’s share of the US retail market by over 85 percent. But shopping habits have changed drastically over the past ten years.
Today’s consumers are more informed. They’re more connected. They’re more demanding. And 73 percent of them are just as likely to shop online as they are in-store, even in spite of pandemic relaxations.
Why is Walmart Succeeding in eCommerce Where Other Retailers Fail?
The key to Walmart's online success isn't just their price advantage. Nor is it necessarily the strength of the Walmart name. They may lag far behind Amazon’s market share of digital retail, but Walmart has successfully bridged the gap between traditional retail and eCommerce in ways that even Amazon couldn’t have predicted.
Data analytics may seem like an unlikely advantage when it comes to optimizing retail eCommerce sales. But any successful starting point begins with analyzing hard data.
That includes Walmart's 98 percent increase in net sales in 2021 compared to the start of the pandemic.
Supply Chains and Walmart’s Automation Push
Walmart’s projected $75 Billion online revenue may seem small in comparison to Amazon. But their continued digital investments are nothing to scoff at. And at the heart of their $14 Billion digital push is a transformation which could revolutionize the supply chain industry.
Automation, forecasting and human error: Can Walmart bridge the gap?
In the US over 1 million deliveries are made each week from Walmart Marketplace via third parties, including food and grocery delivery services. It may seem like a staggering figure, but that sheer volume doesn’t account for human error in fulfillment.
Nor does it take demand forecasting into consideration—one of the more significant challenges retailers faced during the great digital transition of 2020. While there may have been multiple factors which have contributed to the ongoing supply chain crisis, the sad reality is that many business inventory management strategies have failed to meet global consumer demands in recent years
Automation may seem like it removes the human element out of fulfillment. But Walmart is hoping the opposite is true.
By automating standard fulfillment processes, employees are freed from time consuming and error-prone labor while customers and stores can expect more accurate inventory management and delivery times. The result is a precision-driven process; one which maximizes a high volume flow of traffic and shipments.
Why is Walmart investing $14 Billion in automation?
Automation is a process that’s becoming increasingly standard in both physical and digital retail. While it's been estimated that AI-driven demand forecasting can help reduce supply chain errors by as much as 50 percent, it's not merely adaptation to a changing logistics and operations market that is behind Walmart's recent $14 Billion investment in automation.
But automation is becoming increasingly attractive to many consumers, as well. A recent survey from Windstream Enterprises found that 68 percent of consumers are more likely to shop at a retailer who offers automated returns—a process Walmart launched in-store as far back as 2017
Walmart Omnichanel: A Digital Transformation
Walmart may be the undisputed king of in store retail. But with 90 percent of their estimated 220 million weekly customers living within 10 miles of a store, is there any need for Walmart to establish digital innovation as a priority?
There is. A 2020 report from PwC revealed that 86 percent of consumers are likely to continue their increased online shopping habits even as pandemic restrictions are slowly being lifted.
There’s a certain loss in translation when brick and mortar brands transition to a digital format. Walmart’s chief customer advantage may be largely the result of both convenience as well as its discount pricing structure, but physicality still remains one of the most significant factors in the overall customer experience.
Yet Walmart has been able to position itself as a major contender in eCommerce through a digital transformation which has affected both product life cycles as well as its organizational structure. And for third party merchants, it's poised to deliver an enticing alternative to the Amazon behemoth.
Walmart, Amazon and the global third party market
When Walmart launched its first online storefront in 2000, there were virtually no traditional retailers providing online sales. The digital commerce market was still in its infancy, dominated by and large by Amazon. And not surprisingly, it remains so today.
The key to Walmart's growth in the physical world was rooted in the key to all retail growth: expansion. But while Walmart may have capitalized on its name recognition and its variety of product offerings, they didn't open up Walmart Marketplace to third party sales until 2009—almost ten years after Amazon recognized the need for a viable third party platform (and two years before Amazon's acquisition of Whole Foods.)
It might be tempting to state that Walmart has been simply riding the digital coattails of Amazon. And recent solutions for third party sellers, including Walmart Connect (an inhouse media alternative to Amazon's own thriving advertising business), do little to dissuade that notion.
For better or worse, Amazon sets the benchmark for other businesses in eCommerce, both large enterprises and medium sized businesses. But unlike other businesses, Walmart has a preexisting cost advantage for consumers.
Walmart and marketplace share
The rivalry between Walmart and Amazon for online market share is, of course, legendary. But while Amazon has yet to make any significant headway in brick and mortar despite valiant attempts in recent years, Walmart has had almost forty years of experience as a retailer when they made the jump to eCommerce.
Walmart has brought considerable insight into consumer needs with them to the digital sphere, resulting in everyday delivery methods such as BOPIS ("buy online, pickup in store") and automated in-store inventory scanning, as well as partnering with the likes of JD.com to expand both their online and in store presence in China.
“We're also an innovation company,” said Walmart Chief Executive Officer Doug McMillan in a 2018 interview. “Current and emerging technologies make it possible to serve customers better than ever before. We're learning how to work differently. We're learning how to put product management, engineering and business leadership together to work in a more agile fashion.”
Can Walmart Embrace Digital Challenges Beyond 2022?
eCommerce is experiencing a growth rate unlike any before. Yet with new growth comes new challenges—challenges impacting both digital and traditional retailers alike.
Businesses who fail to implement an effective digital strategy are rapidly finding themselves obsolete as more and more consumers are demanding a seamless flow between the online and in-store customer experience.
Historically, big box retailers spend the majority of their capital on physical expansion and rebranding. Walmart doesn’t need to. They continue to retain some of the most loyal customers in the US; customers who have embraced Walmart’s digital transformation with open arms.
But can Walmart embrace the challenges posed by that loyalty? That’s the $35 Billion question.
Walmart made a big splash in eCommerce in 2021. Is your brand ready to as well? Find out more at Color More Lines.