How Big Data Helps Walmart Get the Turnover of Half a Trillion Dollars per Year
Walmart is the largest retailer in the world with over 11 thousand stores in 28 countries. For millions of people on all continents, Walmart is one of the best places for shopping. Over 260 million customers visit the retail chain weekly. If Walmart were a country, it would rank 28th, based on its GDP, as the retail giant’s revenue in 2016 comprised $ 486 billion.
The secret behind such success is the application of a sophisticated business strategy and the ability to analyze big data.
DataCafé: Marketing in Real Time
Walmart is one of the first brands in the world to start working with big data. The strategy proved its effectiveness, as the company has the highest sales per square meter, the fastest goods turnover and the high operating profit ($ 22.8 billion).
As of today, Walmart is building the world’s largest private cloud, capable of handling 2.5 petabytes of data per hour. To analyze such a huge array of information, the corporation created an analytical Data Café hub. It is located at the retailer’s headquarters in Bentonville, Arkansas.
Over 200 flows of external and internal data are based here, including 40 petabytes on the latest transactions. Every employee of the company can ask Café analysts to help to solve problems encountered during work.
In total, the Walmart Data Cafe processes almost 25 thousand requests per hour. Over 90% of requests are analyzed within the first 2 seconds.
The high speed of information analysis made it possible to reduce the probability of human error. Also as indicated by Naveen Peddameyl, the company’s senior analyst, reduction the time to solve the problem even for a few minutes saves millions of dollars for the company.
Data collection and analysis runs in real time. Therefore, should any anomalies be detected, Data Café analysts will be immediately aware of this. One of such situations was described by a Forbes journalist, Bernard Marr:
“During Halloween, one of the analysts who monitored sales of a new biscuit type noted its popularity in most stores. However, two stores showed zero sales. A prompt response to the problem enabled to resolve this issue in no time. It turned out that in these stores, biscuits were not put on the shelves in time.”
Due to Big Data, Walmart can get the most incredible insights, as well as reveal hidden patterns in customer behavior. For example, the company found out that sales of beer and baby diapers are somehow interrelated. Having placed these two types of goods closer, the store noted an increase in their sales.
The company strives to anticipate customers’ expectations. For this sake, the Data Cafe collects information from 200 external sources. These are the data on local events, weather, Nielsen researches, petrol prices, information from social networks.
Bernard Marr, the founder and CEO of Advanced Performance Institute, described the operational principle behind it in a very interesting way in his LinkedIn blog:
Let’s consider a real example: Walmart can analyze the list of your previous purchases, the goods on stock, define your location and inquire about the weather forecast in the corresponding region in a couple of seconds, then send you an ad of a chargrill cleaning agent only if you have purchased a chargrill from them before, if the sun is shining, and you are within the range of five kilometers away from Walmart that has the bottles with cleaning agent available.
The result will not be slow to arrive. After all, the main thing is to deliver the information that is useful to the buyer in the right place at the right time.
@WalmartLabs and Innovations
Seeking for innovations, the corporation created @WalmartLabs, whose team is developing new ways of big data application in retail.
One of their most successful projects, Social Genome, has been designed to improve the advertizing efficiency in social networks. The special software analyzes billions of Facebook entries, tweets on Twitter, videos on YouTube, Pinterest pictures; LinkedIn reposts on mentioning Walmart products. The data obtained enable Walmart specialists to target the advertisement very accurately.
Analysis of social networks also helps to identify the trendiest products. Thus, due to analysis of social media, Walmart found the increasing popularity of Cake Pops. The retailer reacted in the twinkling of an eye. The corresponding goods immediately flooded the store shelves.
There is another interesting retailer’s IT solution that enables to increase interaction with the Shopycat brand, utilizing social networks. This unique Facebook application recommends gifts for friends, based on their comments, likes and posts in social networks.
Walmart pays much attention to the development of brand loyalty. In addition to traditional sales-discount methods, the retailer actively uses mobile technologies. A mobile application that provides navigation along the retail space, monitoring of goods availability in the store, payment for the goods with a bar code, and management of a shopping cart in the future is among the most popular applications at all stores these days.
Competition with Аmazon. Focus on Omni-channel Retail
Competition is the force for progress. In the Walmart’s case, this “force” is presented by Amazon, the largest online retailer.
The rivalry between these two retail giants resembles the most famous competition in the American sports league between the Boston Red Sox and The New York Yankees, which started in 1919. Back then, the owner of the Red Sox, experiencing serious problems, sold the legendary Yankees outfielder team of Ruth Babe, nicknamed “Bambino”. Later, the Yankees won 27 World Series, winning the title of the most successful team in history, with its many players being admitted to the baseball hall of fame.
The Red Sox had to wait for its revenge for many decades, until finally in 2004 the team got rid of the Bambino’s “curse”, winning the game of the World Series against the Yankees.
Today, 98 years later, tickets for the Red Sox VS the Yankees match remain among the most desired in baseball.
It is of the same interest to watch the competition between Walmart and Amazon. Each has its own development strategy. Each rival’s step is followed by a response.
Hence, in August last year Walmart, having decided to strengthen its position in online trading, purchased a Jet.com online resource. Due to this transaction, the giant offline retailer gained access to the unique Jet.com pricing algorithm, which calculates the basket cost based on the quantity of goods in the assortment and the proximity of delivery points to the buyer’s address. Therefore, as assured in the company, the basket cost can be 10% lower, than the analogous order placed at Amazon.
According to the financial data for the first quarter of 2017, the Jet.com deal turned out to be successful. The company reported an increase in this quarter’s Walmart online sales by 63%. Although the company online sales share is still six times lower than that of Amazon, Walmart has managed to increase the offline store traffic.
While Walmart conquers the online market, Amazon, in turn, goes offline. Back in 2015, the retailer opened a bookstore in Washington, and last year the news on opening a test supermarket without vendors and Amazon Go queues passed round the Internet.
In June this year, the Amazon giant moved even further. The company purchased the Whole Foods Market grocery chain with its network amounting to over 400 supermarkets in the US, Canada and the UK.
The deal will strengthen the Amazon’s position in the market of sales and delivery of food and groceries, with its online trade share amounting to only 2%. Thus, it will strengthen the competition on the market that is traditional for Walmart.
Walmart actively studies online trading, while Amazon goes offline. These steps are more than just a rivalry between two retail giants. They indicate a large-scale paradigm shift. Retail enters a new fourth stage of its development.
“The future of retail is beyond the omni-channel focus. Today we see how online business starts opening its physical sales points, offline stores create sites and mobile applications. The introduction of modern IT solutions for business becomes a necessity, ” commented Alexey Khokhlov, Marketing Director of Skywell. The latter, inspired by the Walmart experience developed a unique IT product for retailers, called Skywell Smart Tracking that now aids the Auсhan Ukraine hypermarket network in the organization of proximity marketing, enabling to increase sales and improve the loyalty program due to communication with the client, depending on its location at the store.