Many people know that Walmart is the largest retailer in the world. But less of us know that Walmart has also been the largest grocer since 2002, when it sold $53 billion in grocery. As a matter of fact, it is grocery that propelled Walmart into being the world’s largest retailer. What started as a traffic driver to draw people into Walmart stores now has become Walmart’s primary business. In 2010, for the first time, Wal-Mart earned 53% of its US sales from grocery. By 2011, the grocery share has risen to 54%. In addition to Walmart Supercenter aimed at suburbanites, Walmart continues to expand its grocery business with smaller store formats such as Walmart Market and Walmart Express that appeal to urban shoppers. Wal-Mart is now selling more grocery than the next top three US supermarket chains – Kroger, Safeway, and SuperVal – combined, taking 28.64% of the $585.6 billion US grocery market in 201l. Walmart is now more of a grocer or food supplier than a discount store.
But Walmart is not your typical grocer. One of the many things that Walmart does differently is not running any loyalty card programs of the kind popularly practiced by more than half of supermarket chains, including top names like Kroger’s Club Plus, Safeway’s Club Card, SuperVal (Shaw’s) Rewards Card, Ahold USA’s My Stop&Shop Card, and Giant Eagle’s Advantage Card, and more.
We know this from experience, since 89 Degrees advised and supported Safeway, Giant Eagle, Ahold USA, and some other pioneers in their program development, implementation, and data mining in the 1990s and early 2000s prior to their insourcing.
Loyalty card programs, characteristically named after a barcode fob for grocery store coupons, were innovated by supermarkets in the early 1990s. They offer cardholders discounted pricing and other benefits for their personal information. In return, retailers running loyalty card programs have the ability to link customers to their purchases and other transactional behavior and thus gain business efficiency and competitiveness by mining and applying customer intelligence to supply chain, marketing, and store operations.
With rising concerns for consumer privacy and upcoming legislation against unauthorized consumer data collection and usage, more and more retailers are adopting loyalty programs as an important route for their data collection, data mining, and personalized marketing practices (also see my postings Leverage Loyalty Programs to Collect and Link Customer Data and Loyalty Program’s Privacy Value). Most grocery chains have also taken this route and free enrollment in program membership has reached 173.7 million in 2010 (Colloquy Talk, April, 2011). An average US household holds membership in two or more grocery loyalty card programs. But none of those loyalty card programs is offered by Walmart -- in spite of its being the largest grocer in the world.
Not only grocers, but other retailers have been racing to jump into the loyalty program bandwagon across retail verticals. Global furniture retailer Ikea’s Family Card, pharmacy chain CVS’ ExtraCare, department store Macy’s Star Rewards, United Airline’s Mileage Plus, gaming giant Harrah’s Total Rewards, coffeehouse chain Starbucks’ My Starbucks Rewards, office supplier Staples’ Rewards, and retailer of consumer electronics Best Buy’s Reward Zone, just to name a few of the high profilers. Loyalty card program has evolved into a high-tech way for retailers to track every move of their biggest, most-frequent spenders.” (Why Pay Full Price by Elizabeth Holmes) The number of programs per US household has risen to 18, though only 8.4 of them are active (Colloquy, April 2011), It seems running and participating in loyalty programs is becoming a business necessity.
Still, Walmart seems to have not been moved by the trend, though it has the Sam’s Club card and store-branded credit cards offering reward points. Unfortunately, the store-branded credit card cannot link individual customers with their transaction histories and thus constrains the potential for customer intelligence, plus many Walmart customers are not even qualified for a credit card. The Sam’s Club card can serve the same as a loyalty card program, collecting data required to mine customer intelligence, but the membership is a paid program with an annual fee.
This raises some questions:
• Does Walmart need a loyalty card program?
• Can Walmart have a loyalty card program?
• Or is Every Day Low Price (EDLP) the card Walmart should play against its rivals’ loyalty card advantages of customer intelligence?
Walmart’s rivals, particularly those supermarket chains committed to their loyalty card programs, need to consider what they can do to further leverage the data treasure from their loyalty card programs to battle against Walmart. Selling and sharing shopper card data has been a good source of revenue, but the value of mining the data and running your primary businesses with that intelligence far outweighs that aspect, especially if Walmart is your unfriendly neighbor and you’re up against EDLP – a game Walmart practically invented.
Jundong Song is a partner and vice president of marketing intelligence and technology at 89 Degrees, a next-generation marketing solutions provider that uses advanced analytics to drive better results for data-intensive marketers.