Three Ways Walmart Is Making Big Strides In Its Battle Against Online Retailers

by Trefis Team
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Retail giant, WalMart (NYSE:WMT), earns more than half of its revenues from groceries and hasn’t had a good time this year in the business, owing to weak consumer spending and deflation in food prices. In the light of its competitors gaining some speed in the grocery market, it has become increasingly important for the company to protect its market share.

For example, online retailer, Amazon (NASDAQ:AMZN), recently started testing its own grocery initiative named GroceryFresh. Also, big-box retailer, Target (NYSE:TGT) is making investments in developing an omni-channel model by leveraging its vast network of stores, making it imperative for WalMart to bolster its own online capabilities. Below, in this article, we discuss three ways in which WalMart is making significant progress on this front.

See our complete analysis for Wal-Mart

Finding The Lowest Price For Customers

An everyday low price strategy has been at the core of Walmart’s rise to success in the retail industry. The company relies on its massive scale globally to negotiate low prices from suppliers and passes on the benefits to customers. Despite the low price guarantee, the company has realized that its price-conscious customers do their own research to hunt for bargains at its competitors’ stores. WalMart sensed an opportunity in this behavior and came up with a feature in its mobile app called the Savings Catcher.

Using this feature, customers can scan their receipt to verify that all the items they purchased were lowest priced at WalMart among all other retailers. In case another retailer offers a purchased item at a cheaper price, the company returns the difference in prices in the form of credits. One might think that the small differences in prices might not matter to customers. However, by making it wasy to find the lowest price for its customers, the company is eliminating any chance of them even considering another store to buy things from.

Leveraging Footprint To Improve Convenience

While groceries have not received the same amount of attention as other product categories that are sold online, the online grocery market is surely growing faster than ever. One of the primary advantages that online retailers offer to consumers over traditional retailers is the convenience with which they can make  purchases. However, the gap is gradually narrowing as distribution and delivery models evolve.

The combination of buying things online and picking them up in nearby stores is one such model that is seeing adoption among big-box retailers. The mobile shopping app Curbside does just this and has been growing quickly since its debut over an year ago. Its service is used by major retailers including Target and Best Buy (NYSE:BBY). WalMart, which has been experimenting with this model for a while now, recently announced [1] an expansion of its online grocery shopping service into new markets in the U.S., along with the local pickup option.

This not only provides a convenient and cheap option for customers (as delivery usually comes with additional charges), but also provides WalMart an advantage over the likes of Amazon. As Kantar Retail, a consulting firm specializing in retail, says, “The U.S. is a car-based country. Convenience for many Americans isn’t waiting at home for something to show up.” [2]. Moreover, as seventy percent of the U.S. population lives within 5 miles of a WalMart store, the footprint gives WalMart an efficient and less expensive distribution system (vis-a-vis Amazon).

Increasing Mobile App Penetration

Thanks to the Savings Catcher feature, WalMart’s mobile app has managed to become the most popular among retailers only after Amazon and Ebay (NASDAQ:EBAY). As of June 2015, the app had 22 million users, growing more than 400% year-over-year [3]. The launch of the Savings Catcher feature alone, in August 2014, took the count from 4 million to 14 million in a matter of a month.

In addition to providing an additional channel of revenues, the app will help WalMart retain more of its customers. We believe initiatives like the Savings Catcher will go a long way in building a loyal customer base for the company and making WalMart the default choice of retailer in people’s minds.

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Notes:
  1. TechCrunch []
  2. Wal-Mart to Expand Grocery Pickup Service, The Wall Street Journal []
  3. Quartz []
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