In 1950, Sam Walton (known as Mr. Sam) opened a five-and-dime store after gaining retail experience from working in other businesses. This retail store of inexpensive goods was very successful, which inspired Sam to open a store of similar style, with more options but maintaining those cheap prices, called Walmart in 1962 (Walton – ton + mart = Walmart). This store was opened in Rogers, Arkansas, because Sam and his wife wanted to live in a small town and Sam liked that there were many options for places to hunt.
Lowering prices, that will never work.
In 1970, 8 years after opening, Walmart went public. It wasn’t just the prices that made Walmart successful so quickly (although it definitely helped), but the strong commitment to the service to both his costumers and his associates. Today, Walmart has over 11,700 stores and clubs under 58 banners in 28 countries. Seems to me like Sam’s plan for Walmart worked!
“Everyday Low Prices”
For the last 55 years, Walmart has been providing “everyday low prices”. How? How do they offer the lowest prices and be Fortune’s #1 company? There is a few ways they do this.
Walmart captures a huge market share by selling almost everything. No more running from store to store to get groceries, clothing, and a school supplies–everything is in one place: Walmart. Walmart’s different formats such as Sam’s Club, Walmart Discount Stores, Walmart Supercenters, and neighborhood markets help their market reach. The fact that 90% of Americans live within 15 miles of a Walmart doesn’t hurt either.
Walmart has always been tech-savy, we (or at least I) just didn’t know it. Earlier on than other companies, Walmart created a very effective inventory management system. All of their products had barcodes or RFID tags so that Walmart always knew “what they needed, how much they needed, and when they needed it.” They also were able to start communicating with manufacturers directly, allowing them to get better prices.
Walmart doesn’t make their money on their margins. They make their money on the volume they sell and provide. The larger the volume they sell, the more bargaining power they have, and the more flexibility they have with their supply costs. This was a new strategy at the time, making Walmart so successful and unique.
Some of the less popular ways that Walmart saves money, is through low wages and bad employee benefits. However, Walmart recently announced that they will be increasing starting employee wages and improving certain employee benefits as a result of the new tax bill. This is extremely exciting to Walmart’s 2.3 million employees.
Other interesting ways Walmart has cut costs have been through changes in plastic bags and printing shorter receipts. The change in plastic bags cut $20 million in costs while printing shorter receipts cut $7 million in costs. Crazy.
Walmart Labs has been very active since its founding in 2011. Walmart Labs works to “help people around the world save money and live better – anytime and anywhere – in retail stores, online, and through their mobile devices.” While some features are larger and more public than others, Walmart Labs is continually working to improve the consumer experience and bridge the connection between Walmart’s brick and mortar stores and online/mobile stores. Some of the features they have rolled out include the following:
Savings Catcher (2014):
Savings Catcher allows consumers to enter their Walmart receipt into the app which automatically compares the prices they paid with Walmart’s competitor’s prices. A competitor sells the same products that you just bought for less? Walmart will issue a gift card with the price difference. This drew many people into the app, and also emphasized Walmart’s commitment to low prices.
Walmart Pay (2015):
Walmart Pay allows users to pay for their items through their Walmart mobile app. While Walmart Pay is not as popular as Apple Pay (although I do not think they are comparable considering Apple Pay is not restricted to a single company as Walmart’s is), Walmart Pay is successful in its own way. In addition, the Walmart mobile app allows you to search for coupons and automatically apply them to any qualifying purchase, and also saves a digital copy of all your receipts making for easy organization.
Scan & Go (2014 and again in 2018):
No more waiting in grocery lines. With Scan & Go, you can scan your products as you go, have a store associate validate your digital code/receipt, and you’re all set! Walmart tested this technology in 2014, but struggled with consumers actually using the service. However, they have revamped the feature and have recently launched it in 125 stores nationwide.
Other innovations from Walmart Labs include store maps, omnichannel, mobile check-in, mobile: leveraging stores, baby registry, responsive design, and more. You can read more about each feature here.
Store No. 8
Walmart has pursued innovation in various forms, including through their Store No. 8. Named after an early store remembered by Sam Walton as an experiment, Store No. 8 is Walmart’s startup incubator that was founded in February 2017. Shortly after its founding, Store No. 8 brought on Rent the Runway’s Jenny Fleiss as co-founder and CEO of their first portfolio company to help reshape the retail experience.
“Store No 8 is where wild ideas, impossible notions, and big bets become scaleable realities.”
A current project that Store No. 8 is working on is creating an entirely cashierless store, similar to Amazon’s Go. This will definitely be a step up from Walmart’s current Scan & Go service and it will be exciting to see their execution.
Walmart will never be an Amazon, nor is it trying to be. Rather, Walmart is simply looking to be a competitor and improve their e-commerce abilities. As you can see from the numbers below, Walmart is one of a kind.
Walmart has the capital and resources to be as big as they want. However, it’s the execution and how they use their resources that will determine their success and whether they will be able to keep up with ever improving technology. Although they got off to a late start, they have stepped up to the plate and are making a clear effort to improve their technologies.
While Walmart has not always presented itself as a tech company, it absolutely is. Between Walmart Labs, Store No. 8, and more, Walmart is continually creating new ways to increase innovation and further their progress to become more advanced. Today, Walmart is a company we will be, and should be, visiting during Tech Trek…and I can’t wait!
*This post was pre-approved by Professor Kane to be posted a little bit after my presentation.