Consumer Psychology – the Only Constant in Retail and Consumer industry
What is going to change in the next 10 years for retail and consumer setting? Retailers need to focus on human motivations that shape shoppers’ behaviors and strive for positive emotions and cultivate social relationships. People are more likely to try a brand if they expect it to deliver strong emotional, identity, social, and functional benefits. This year with the COVID-19 pandemic rearing its ugly head, the deck of retail consumer’s psychological needs got shuffled but never went away.
Today’s episode is on the Topmost resilient retail company willing to adapt, with the strongest presence in the nation in traditional retail, and the lines of distribution in place to boot. That is Walmart, an American multinational corporation that operates a chain of hypermarkets, discount department stores, and grocery stores, also the world’s largest company by revenue, with US$514 billion, according to the Fortune Global 500 list in 2019. We are covering the top strategies Why Retail Giant Walmart has gone so strong over the years and considerations in winning the continuing battle with Amazon.
Factors for consideration
Global COVID-19 pandemic has been keeping Walmart in high vigilance and in hunger for thriving success. CEOs can get to understand How the retail company has achieved its current prestigious status. What are the details to look at when profits are sliding and the areas to rethink from the perspective of the CEO to reconstruct a business retail strategy? This is an important area to cover as financial losses and instability are issues retail organizations are facing at this point in time.
We are going to discover the vital factors why Walmart grew fast from Sam Walton’s vision and moving rapidly with no time to lose. Would the current COVID-19 pandemic crisis or any upcoming unseen circumstances affect and rock this mountaineer in climbing to the top position? In this case, we are visiting the main concerns and considerations that determine the make or break of the consumer company.
Walmart is entering an era of amplified retail earnings growth driven by an enhanced productivity loop, increased accelerated technology deployment. What are the questions CEO Doug McMillon needs to answer when initiatives did not run per expected and the areas to rethink from his perspective to reconstruct business retail strategy? This is an important area to cover as project viability with cost benefits involves financial management and accountability to the stakeholders what retail organizations are facing at this point in time. Would any upcoming unseen circumstances and betterment on the current decision-making process push Walmart to get any closer to Amazon?
Walmart has been driven to the road of growth by its line of CEOs. Since the demise of Sam Walton in 1992, Walmart was already a $43.8 billion retail business. By 1995, sales have doubled to nearly $100 billion under the care of a CEO with high financial acumen, David Glass (1988-1999). When H. Lee Scott had taken over the driver seat in 2000, sales skyrocketed to $219 billion.
Having a contrarian vision, Sam Walton observed and reasoned that Walmart would become a preferred destination for consumers who would rather drive a few miles to take advantage of low prices on national brands than travel several hours into the city for the same retail and consumer products. Increased retail volume in support of the lowered mark-up is the plan for Walmart.
The most impactful decision Sam Walton during his reign was to select and develop successors equipped to lead Walmart to the next level of complexity- Someone who had the retail management skills to preserve all the Walton had built and the imagination and guts to take it to new heights. In order to the best retailer in the US and eventually the world, he knew he had to hire key executives who could do things he wasn’t good at and round out the executive leadership team. Walmart leaders have never strayed from Sam’s overriding assumptions to swim upstream to move away from conventional wisdom and create “purple cow” strategies.
The goals and targets of CEOs should stay in line with Walmart’s vision. Sam Walton lived a life of frugality as his childhood coincided with the period of depression in the early 1930s. He knew the value of a dollar and takes frugality as a competitive strategy of Walmart, helping consumers save money. Glass saw alignment with Sam’s vision of retail industry of high volume, inelastic pricing, fragmented market share, and inefficient distribution for unleashing the logistical advantage of Walmart.
Consumers take the lead
CEO of Walmart Doug McMillon rose through the ranks, took up the challenge when the retail sales growth began to stall in 2014. He never regretted acquiring Jet dot com for $3.3 billion in 2016 for a fast boost on e-commerce. Walmart lacked the in-house infrastructure technology to scale its internet business to compete with Amazon which had spent many years building on. Jet dot com’s visionary founder rebuilt Walmart’s US digital operations transforming the supply chain for individual e-commerce orders fulfillment. Jet dot com played a role in reaching out to urban retail consumers in New York and other cities for scaling of the current operating model of Walmart.
Keeping an open perspective
Glass and Scott innovated around “how” to operate an efficient distribution retail network combined with a one-stop shopping supercenter format, taking a substantial slice of supermarkets’ business. This continuous flow of fresh strategic assumptions was the source of Walmart’s innovation.
Maintaining a balancing act between returns for the stakeholders and responsive innovation has not been easy for McMillon. He had to justify his actions to move in the long-term best interest of the company with the opinions of investors- to focus on the bottom line and earnings in the short term. McMillon has been on the vigilant lookout for new opportunities and now to the resale market partnership with thredUP, the leading resale platform for fashion and accessories at mass-market prices. This is to meet and adapt to consumer preferences while shopping retail online accessing 759,000 pre-owned items across women’s children’s clothing, accessories, footwear, and handbags. China and India are seen as the two big growth retail opportunities. In 2018, US retailers invested in Flipkart, India’s biggest e-commerce company rather than operate stores overseas in the recent global strategy to battle Amazon. There had been clear victories and tough struggles with lessons learned while moving ahead for the daily battle.
Moving Fast and beyond
What about the Current 2020? Going beyond local retail territory and moving globally, Walmart has abandoned retail markets such as Germany and South Korea where it failed to achieve the dominance it enjoys in the US. Walmart is more careful to preserve local brand equity and local practices rather than imposing Walmart culture everywhere. Growth had slowed down in e-commerce sales after the Jet dot com deal despite the initial sales growth of 50 to 70% each quarter of 2017 before Jet dot com was being let go in Feb 2020. Walmart’s bet on Flipkart took much longer to pay off.
Is Speed good for Walmart?
Continuous action is much needed in view of the ever-changing environment to keep up in the retail industry. Has there been a target being set and evaluation of the results against the benchmarks periodically? Has there been sufficient space to re-evaluate the whole flow and past events to decide if there are pointers to be learned and take note of before going forward with the next venture or partnership? What is the root cause to identify that was not pulling results back in place?
Projects that were meant to go long term suddenly went out of expectations. Should Walmart be going after and surpassing Amazon in getting market share and sales? Or reorganizing and reflection on organization structure is more important for long term big change in terms of e-commerce? Would quick wins hurt the long-term growth and the confidence of the investors and the public? Would real issues remain or these can be resolved with new partnerships or acquisitions?
Consumer Satisfaction versus Cost
Delivery cost and logistics are critical factors subjected to first prioritization? If not, what are the other factors to consider as well in the retail industry? We will need to analyze the gross profit and net profit to determine the actual financial health. How might the spending priorities have changed after COVID-19 and every quarter of the year? Managing the health of the workers and keeping everyone safe in the shopping process are the cost to look at. Hiring, training, and managing the workers to keep the retail stores and warehouse for active and efficient supply chain operations. This is just a high-level snapshot.
Getting the consensus from the stakeholders is a hurdle for the CEO to get through with. Getting real insights after each initiative to move forward to see improvement in the short and long term takes a lot of determination for Doug to navigate his executives strategically moving on ahead.
Focus on the priority
FOCUS is the key for Walmart to work on the targets and strengths. How to get people from various offices to work together? How to moving forward in the long term after the initiatives were taken to date? This takes a lot of analysis evaluating the profitability and qualitative factors. Every retail company is so unique in different ways. The long term organic profit stability should be the main concern in order to thrive at this point in time. There is no way to have a quick and fast resolution in this ever-changing situation.
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