Harvard Case - Walmart Ecommerce (B): Omnichannel Pursuits
"Walmart Ecommerce (B): Omnichannel Pursuits" Harvard business case study is written by Ramon Casadesus-Masanell, Karen Elterman. It deals with the challenges in the field of Strategy. The case study is 24 page(s) long and it was first published on : Dec 21, 2019
At Fern Fort University, we recommend Walmart implement a comprehensive omnichannel strategy focused on leveraging its existing strengths and addressing key weaknesses to achieve sustainable growth and competitive advantage in the rapidly evolving e-commerce landscape. This strategy will involve:
- Investing in technology and analytics: To enhance customer experience, streamline operations, and gain valuable insights for informed decision-making.
- Strengthening its supply chain: To ensure efficient and timely delivery, especially for online orders and click-and-collect services.
- Developing a robust digital marketing strategy: To attract new customers and engage existing ones through personalized experiences and targeted campaigns.
- Expanding its product assortment: To cater to a wider range of customer needs and preferences, particularly in the growing online marketplace.
- Enhancing its customer service: To address customer concerns promptly and efficiently, building loyalty and positive brand perception.
2. Background
The case study focuses on Walmart's efforts to adapt its business model to the growing e-commerce landscape. Despite its dominance in traditional retail, Walmart faces significant challenges from online giants like Amazon and the increasing adoption of omnichannel shopping by consumers. The case highlights Walmart's attempts to integrate its online and physical store operations, offering services like click-and-collect and same-day delivery. However, Walmart struggles to compete with Amazon's extensive product selection, fast delivery times, and personalized customer experience.
The main protagonists are Doug McMillon, Walmart's CEO, and Marc Lore, the head of Walmart's e-commerce operations. They face the challenge of navigating a complex and rapidly changing market while balancing the need to maintain Walmart's core strengths with the necessity to embrace innovation and digital transformation.
3. Analysis of the Case Study
Porter's Five Forces:
- Threat of New Entrants: The e-commerce market is relatively easy to enter, with low barriers to entry, leading to increased competition.
- Bargaining Power of Buyers: Consumers have high bargaining power due to the availability of numerous online retailers and the ease of switching between them.
- Bargaining Power of Suppliers: Walmart's vast scale gives it significant bargaining power over suppliers, but this advantage is challenged by the increasing online presence of suppliers.
- Threat of Substitute Products: The online retail market offers a wide range of substitute products, making it challenging for Walmart to maintain its market share.
- Competitive Rivalry: Intense rivalry exists among established players like Amazon, Target, and other online retailers, driving down prices and forcing companies to innovate.
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty: Walmart enjoys a strong brand reputation and a loyal customer base, particularly in rural areas.
- Extensive store network: Its vast physical store network provides a competitive advantage for click-and-collect services and last-mile delivery.
- Efficient supply chain: Walmart's established supply chain network offers cost advantages and allows for rapid product distribution.
- Strong financial resources: Its substantial financial resources enable significant investments in technology and infrastructure.
Weaknesses:
- Limited online product selection: Walmart's online product assortment lags behind Amazon's, limiting its appeal to online shoppers.
- Slower delivery times: Walmart struggles to match Amazon's fast delivery speeds, particularly for same-day and next-day deliveries.
- Lack of personalized customer experience: Walmart's online platform lacks the personalized recommendations and tailored experiences offered by Amazon.
- Limited digital marketing capabilities: Walmart's digital marketing efforts are less sophisticated than those of its competitors, leading to lower customer engagement.
Opportunities:
- Growth of e-commerce: The continued growth of e-commerce presents a significant opportunity for Walmart to expand its online presence and capture market share.
- Emerging technologies: Leveraging AI, machine learning, and data analytics can improve customer experience, optimize operations, and gain a competitive edge.
- Market expansion: Expanding into new markets, particularly in emerging economies, can drive growth and diversify revenue streams.
- Strategic partnerships: Collaborating with other companies, including technology providers and logistics companies, can enhance capabilities and accelerate growth.
Threats:
- Increased competition: The e-commerce market is becoming increasingly competitive, with new entrants and established players constantly vying for market share.
- Changing consumer preferences: Consumers are increasingly demanding personalized experiences, faster delivery times, and seamless omnichannel shopping.
- Cybersecurity threats: The increasing reliance on technology exposes Walmart to cybersecurity risks, which could damage its reputation and disrupt operations.
- Economic uncertainty: Economic downturns and geopolitical instability can impact consumer spending and negatively affect Walmart's business.
Value Chain Analysis:
Walmart's value chain can be analyzed to understand its key activities and identify areas for improvement:
- Inbound Logistics: Walmart's strong supply chain network is a key strength, but it needs to be optimized for faster delivery and efficient handling of online orders.
- Operations: Investing in technology and automation can improve efficiency and reduce costs in warehousing and fulfillment operations.
- Outbound Logistics: Walmart needs to invest in last-mile delivery solutions and partnerships to offer faster and more convenient delivery options.
- Marketing and Sales: Developing a robust digital marketing strategy and leveraging data analytics to personalize customer experiences is crucial.
- Customer Service: Improving customer service channels and providing prompt and efficient support for online orders is essential.
Business Model Innovation:
Walmart needs to innovate its business model to effectively compete in the evolving e-commerce landscape. This involves:
- Omnichannel Strategy: Integrating online and physical store operations to provide a seamless customer experience, offering services like click-and-collect and same-day delivery.
- Personalized Shopping Experience: Leveraging data analytics to provide personalized recommendations, targeted promotions, and tailored content.
- Subscription Services: Introducing subscription-based services for recurring purchases, offering discounts and convenience to loyal customers.
- Partnerships and Acquisitions: Collaborating with technology providers, logistics companies, and other businesses to enhance capabilities and expand reach.
4. Recommendations
1. Invest in Technology and Analytics:
- Enhance E-commerce Platform: Upgrade its online platform to offer a more user-friendly experience, improve product search functionality, and provide personalized recommendations.
- Implement AI and Machine Learning: Leverage AI and machine learning to optimize pricing, inventory management, and customer service.
- Data Analytics Platform: Develop a robust data analytics platform to gain insights into customer behavior, market trends, and operational efficiency.
2. Strengthen Supply Chain:
- Invest in Logistics Infrastructure: Expand its warehouse network and invest in automated fulfillment centers to handle increased online orders.
- Optimize Delivery Network: Partner with logistics companies and explore alternative delivery models to offer faster and more convenient delivery options.
- Improve Inventory Management: Implement advanced inventory management systems to ensure accurate stock levels and reduce stockouts.
3. Develop a Robust Digital Marketing Strategy:
- Content Marketing: Create engaging content to attract new customers and build brand awareness.
- Social Media Marketing: Leverage social media platforms to connect with customers, build community, and promote products.
- Search Engine Optimization: Optimize its website and online content for search engines to increase visibility and drive traffic.
- Targeted Advertising: Utilize targeted advertising campaigns to reach specific customer segments and promote relevant products.
4. Expand Product Assortment:
- Increase Online Product Selection: Expand its online product assortment to offer a wider range of products, including niche categories and specialty items.
- Partner with Third-Party Sellers: Consider partnering with third-party sellers to access a broader range of products and expand its online marketplace.
- Focus on Private Label Products: Develop and promote its own private label products to differentiate itself from competitors and increase profit margins.
5. Enhance Customer Service:
- Improve Customer Support Channels: Offer multiple customer support channels, including live chat, email, and phone support.
- Provide Prompt and Efficient Service: Train customer service representatives to address customer concerns promptly and efficiently.
- Personalized Customer Interactions: Leverage data analytics to personalize customer interactions and provide tailored solutions.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Walmart's strengths, weaknesses, opportunities, and threats. They are aligned with the company's mission to provide value to customers and its core competencies in supply chain management, logistics, and retail operations. The recommendations also consider the evolving needs of consumers, the competitive landscape, and the potential for growth in the e-commerce market.
Quantitative Measures:
- Increased online sales: The recommendations are expected to drive significant growth in online sales, contributing to increased revenue and profitability.
- Improved customer satisfaction: Enhanced customer service and a more personalized shopping experience are expected to lead to higher customer satisfaction and loyalty.
- Reduced operational costs: Optimizing the supply chain and leveraging technology are expected to reduce operational costs and improve efficiency.
Assumptions:
- Continued growth of e-commerce: The recommendations are based on the assumption that the e-commerce market will continue to grow in the coming years.
- Consumer demand for convenience: The recommendations assume that consumers will continue to demand convenience and personalized shopping experiences.
- Technological advancements: The recommendations rely on the availability and adoption of emerging technologies, such as AI, machine learning, and data analytics.
6. Conclusion
Walmart's success in the e-commerce landscape requires a strategic shift towards a comprehensive omnichannel strategy. By investing in technology, strengthening its supply chain, developing a robust digital marketing strategy, expanding its product assortment, and enhancing its customer service, Walmart can effectively compete with online giants like Amazon and capture a significant share of the growing e-commerce market. This strategy will enable Walmart to leverage its existing strengths, address its weaknesses, and capitalize on emerging opportunities, ultimately achieving sustainable growth and competitive advantage in the digital age.
7. Discussion
Alternative Options:
- Acquiring a major e-commerce player: Walmart could acquire a leading e-commerce company to gain access to its technology, customer base, and market expertise. However, this option carries significant financial risks and requires careful integration.
- Focusing solely on physical stores: Walmart could choose to focus on its physical store network and minimize its investments in e-commerce. This option would limit its growth potential in the rapidly evolving online market.
Risks:
- Technological disruption: Rapid advancements in technology could render Walmart's investments obsolete or create new competitive threats.
- Cybersecurity breaches: Walmart's reliance on technology exposes it to cybersecurity risks, which could damage its reputation and disrupt operations.
- Economic downturn: An economic downturn could impact consumer spending and negatively affect Walmart's business.
Key Assumptions:
- Consumer demand for omnichannel experiences: The recommendations assume that consumers will continue to embrace omnichannel shopping experiences.
- Availability of technology and talent: The recommendations rely on the availability of advanced technology and skilled personnel to implement the proposed solutions.
- Successful integration of online and physical operations: The recommendations assume that Walmart can successfully integrate its online and physical store operations to create a seamless customer experience.
8. Next Steps
Timeline:
- Year 1: Implement key technology upgrades, optimize supply chain operations, and launch a comprehensive digital marketing campaign.
- Year 2: Expand product assortment, enhance customer service channels, and introduce new omnichannel services.
- Year 3: Evaluate the effectiveness of the implemented strategies, make necessary adjustments, and continue to invest in innovation and growth.
Key Milestones:
- Launch of an enhanced e-commerce platform: Within 6 months.
- Implementation of AI and machine learning solutions: Within 12 months.
- Expansion of warehouse network: Within 18 months.
- Introduction of subscription-based services: Within 24 months.
By implementing these recommendations and taking proactive steps to mitigate risks, Walmart can successfully navigate the challenges of the e-commerce landscape and emerge as a leader in the omnichannel retail space.
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Case Description
This case is an abridged version (part 2 of 2) of "Walmart's Omnichannel Strategy: Revolution or Miscalculation?", HBS Case 720-370. The (B) case describes Walmart's omnichannel strategy in 2018 as it battled Amazon for online retail market share. Walmart aimed to integrate its enormous brick and mortar footprint with its growing ecommerce business, e.g., through merchandise and grocery delivery and order online, pickup in store options. It also followed a two-part acquisition strategy that included specialty retailers such as Shoes.com and digitally native vertical brands that developed their own products and sold them directly to consumers, such as ModCloth and Bonobos. In 2016, it acquired the ecommerce retailer Jet.com. In addition to building its online marketplace, Walmart hoped to leverage its existing assets, such as its massive network of retail stores and thriving grocery business, in the fight against Amazon. The case poses the question: Could Walmart successfully compete against Amazon and other online retailers in areas such as grocery delivery, product selection, shipping costs, and delivery times?
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