In a funny coincidence, the same week that we discussed Walmart with Professor Kane and guests was also the same week we studied Walmart for my Supply Chain Logistics class. And not in the way you would think.
Walmart Goes Green-ish
We read a case study on Walmart’s efforts to become more environmentally friendly. From a supply chain perspective, going green can create more operational efficiencies, leading to more growth and profits. Additionally, Walmart realized they had an image problem. According to a McKinsey & Company study “between 2 percent and 8 percent of consumers had stopped shopping at Walmart because of the company’s practices.” Walmart bet that it could both create more profits by creating a green supply chain, and improve their public image.
The article goes into many examples of where Walmart, working with suppliers, improved operations. But the most fascinating to me was in the case of their seafood line. Walmart’s seafood line was quickly increasing, while at the same time they were struggling to find enough supply to fill demand. This was due to unsustainable fishing practices. To solve this problem, Walmart created a new incentive structure to increase the demand in the market. They announced that within 3-5 years, Walmart would carry 100% MSC-certified wild-caught fish (stands for Marine Stewardship Council). This third party program audits and certifies fisheries and processors, and those businesses that get accredited receive an MSC eco-label that signals that the fish have been harvested and processed sustainably.
This announcement served as a demand-signal to suppliers. Fisheries and processors in the market knew that, were they to get an MSC-certification, they would have a guaranteed buyer in Walmart. This is a win for the suppliers, who are given clear incentives to guarantee a long-term business partnership, a win for Walmart, who gets the added benefit of public goodwill, increase in supply, and the foundation of an industry upon sustainable practices that ensure demand won’t run dry, and finally a win for the environment (although there is some dispute on that front).
Walmart and Lord & Taylor
Walmart’s partnership with Lord & Taylor is brilliant. To me, this signaled two possible strategies, but made one thing clear: Walmart is utilizing the digital space to help differentiate their brand across multiple segments.
Is Walmart Trying to Capture a New Target Audience?
According to survey data, the average Walmart shopper is a white, 51 year old female, with an annual household income of roughly $56,000. As we heard from Matt’s presentation and follow-up blog post, 82% of consumers making $112,000 per year or more have Prime subscriptions (making up the largest percentage of Prime memberships), and the average age of an Amazon customer is 37 years old.
The significance of this data is that Walmart is possibly trying to penetrate the segment of the market that Amazon so successfully adopted (and vice versa, though not the subject for this blog post). To do that, they need to up their digital media strategy—by creating the same kinds of partnerships they did when making their supply chain more efficient.
Households that are in the middle to upper level income group are more likely to shop online. Creating a digital partnership, rather than in-store, with Lord & Taylor is thus a good strategy, as online shopping habits are more prevalent in upper income levels. Additionally, this is a way to target a different market segment without ostracizing the other.
The problem that arises with this strategy, is Walmart is going to have to deal with the space that their brand occupies in the mind of the wealthier consumer. Walmart’s mantra is “Save money. Live better.” They have differentiated themselves as a low-cost company where you go for a bargain. Will consumers that occupy higher tax brackets shop at Walmart.com, even if they are provided with brands like Lord & Taylor, which are targeted at these demographics?
Is Walmart Trying to Shift their Current Customers Online?
One thing I couldn’t help but think about during the Walmart visit, was how I had no idea how successful Walmart was doing online. I had the same thought when doing the research on Walmart going green for supply chain efficiencies. Both reflections made me think about Walmart’s branding image (and that maybe I need to read the business section more often). If they are trying to target new audience segments, why wasn’t I, as a consumer, aware of any change via marketing, etc.?
This failure to shift their position in my mind, made me come to another insight: what if their partnership with Lord & Taylor is something altogether? What if they are selling the Lord & Taylor brand exclusively online, but the prices will be more comparable to the current pricing you see at Walmart? What if Walmart isn’t trying to actively acquire new customers from the upper-middle class, but instead trying to shift their current customers online thru exclusive offerings (like this joint branding)? This could be a brilliant way of keeping customers exclusive Walmart customers, and prevent them from moving to Amazon, who is making an increasingly concentrated effort to acquire this segment.
Or perhaps, they mean to try to accomplish both. Amazon is technically a discount retailer, among many things. Maybe Walmart believes that through leveraging partnerships like the one they established with Lord & Taylor, they can capture some of Amazon’s customers, as well as keep their current shoppers. One way that Walmart could ensure success for both different segments—their established audience of middle to lower income shoppers and their potential newer target of upper-income level, is through targeted social media campaigns. This would allow them, through different channels, to address their different consumer wants.