What the Walmart Model Tells Us About Consumers
What the Walmart Model Tells Us About Consumers
A Blog Post by Sean Reyes, Chief Marketing Officer for Recall Masters
Most of us shop at Walmart from time to time, but it’s quite comical that so few of us will also outwardly admit it. But it’s no laughing matter when you look at the revenues since it’s humbling beginnings in 1962 when Sam Walton opened the first store in Arkansas. The retail giant has continued to own the retail shopping experience, pummeling competitors like Target and obliterating American fortresses like Kmart.
Even those who don’t compete directly with Walmart, like Home Depot and McDonald’s, have to watch in awe at the company’s current ability to attract financially-strapped shoppers. Where most retailers are being cautious about stocking and staffing levels, Walmart is growing as consumers hunt for inexpensive groceries, household essentials and other merchandise. What can franchise dealerships, specifically fixed operations, learn from Walmart’s success amidst a tightening consumer market?
Walmart recently reported that sales at stores open at least a year increased 3.8% during its latest quarter from the same time last year. The company then raised its sales and profit forecast for 2024. Size has its advantages, as the nation’s largest retail uses its buying power to procure products that consumers need while increasing profit margins on items that consumers never intended to purchase when they initially walked in the store. That price advantage, according to analysts, can result in as much as a 25% savings – a noticeable difference than traditional supermarkets and other retail outlets.
While price can create a discernable differentiator, it’s not central to Walmart’s growth. Low and middle-income shoppers have traditionally represented the core of Walmart’s customer base. This remains steady, thus not much room to grow. It is the market segment of consumers who make more than $100,000 a year or more that is fueling Walmart’s more recent success.
Snicker all you want, but growth in its online digital sales, which include in-store pickup and delivery, grew 22% last quarter. By competing with Amazon in the digital space, Walmart was able to offer similar goods at prices those wealthier segments were in search of while leveraging local brick-and-mortar stores for support and returns. Shoppers who might not otherwise ever step foot in a Walmart were now retrieving ordered items designated for in-store pick up or returning items for refunds. It’s all about new customer acquisition, increased traffic, attractive pricing and a broadened product offering.
It’s not all unicorns and rainbows at Walmart. Their entry into certain markets, like healthcare, fell flat and cost them millions. They’re also not immune to declining retail sales in certain months and have even faced having to lay off staff in certain roles, namely in their ecommerce division. Still, they’ve done a lot to counter bad public relations when it came to how they treat their employees, “associates” if you will.
Like our automotive industry, they’ve had to increase pay structure and benefits in order to retain their most productive employees, though primarily unskilled labor. While the company is a global brand, their presence in local markets translates into corporate responsibility when it comes to how they treat their employees. In small markets where Walmart was positioned as the enemy of local, main street businesses, the company no longer faces the same volume of criticism. Consumers have a choice in where they shop, it seems. There’s room for both local merchants and corporate behemoths.
So what does all of this have to do with service departments at franchise dealerships? The models for retail consumer goods and automotive servicing are world’s apart at first glance. However, as you sift through the data and the details, Walmart’s success is framed by one clear differentiator – convenience. Convenience isn’t necessarily measured the same way for every consumer, but there are enough overlapping positioning tactics that govern what most of us might describe as convenient – price, time, proximity and equivalent quality. A few months ago, Walmart’s CEO, John Furner pointed to convenience as what consumers value the most, especially as time and money become more elusive to the average American consumer.
“An underlying trend that I think is here to stay is convenience,” Furner explained. “People are willing to trade off in some cases, on prices, for things that are more convenient. The parts of the service sector or the retail sector that find more innovative ways to serve people, in a way that saves them time, takes friction out of their lives, lowers some of the decision-making they have to go through — I think those are the companies and the parts of the economy that will continue to win.”
In a recent discussion with one of our industry’s fixed operations pillars, Mike Vogel, President and Owner of ASMC, he stressed the three pillars – trust, value and convenience – that dealers need to establish in order to secure longterm customer retention. Trust requires transparent servicing consistently over time. That’s one variable that is measured by a calendar and with processes that serve in the customer’s best interest, not for dealership profitability. Value is a bit slippery, as consumers don’t all share the same concern for price. Instead, value is one’s personal sentiment for product/services delivered for the price paid. Since most customers can’t troubleshoot their vehicle’s problems, repair costs can create a lot of anxiety. That’s where established trust can help. Value is simply a fair (or better than fair) deal in the eyes of the consumer. That leaves us with convenience as the sole variable dealers need to deliver on.
What’s convenient to one may not be convenient to another. One dealer customer has no problem sitting in the lounge waiting for repairs, while others may want a shuttle, rideshare or a loaner. No matter how you slice it, the dealers with the best retention will deliver services that take the customer’s perception of convenience into account. If we want to rip a page out of Walmart’s approach to convenience, vehicle servicing for the long haul has to consider the full range of services all vehicles need throughout the ownership lifecycle, including those that don’t present huge financial windfalls in the short term. No different than Walmart’s approach to groceries being stocked alongside big screen televisions, dealers need to keep customers from shopping elsewhere. Let’s not give vehicle owners a chance to visit a retail aftermarket provider when we decide that selling tires is not profitable. Or give them a reason to doubt that we care, when we failed to detect and resolve a dangerous recall.
Convenience also means prompt service. Many dealers still have not yet adopted express service for regular maintenance or for same-day diagnostics like an independent repair facility. Consumers have a choice on where to service and dealers need to understand what consumers may find once they shop around. For the first time in history, according to a consumer survey from Cox Automotive that outlined vehicle servicing, consumers are looking at the aftermarket first, especially upon expiration of the vehicle’s warranty. Convenience in automotive also looks like mobile repair. When busy vehicle owners can’t get to the dealership, is the dealership committed to go to the home or business of the vehicle owner?
I’m not suggesting that dealerships become the “Walmart” of their community. I’m only suggesting that we look to Walmart to better understand how they leveraged “convenience” as a means to build market share, increase revenues, diversify across multiple product lines and appeal to consumers who value time as much, if not more, than money. These should be a very familiar theme for dealerships in today’s market. Many of the best ideas in business come from outside of the very industry struggling to find solutions. Our industry needs to continue evolving to catch up with other industry’s that have blueprinted leaner and faster processes for consumers.
About the Author
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Sean Reyes oversees all marketing efforts at Recall Masters as Chief Marketing Officer. Sean also serves as the host of the FixedOps UX, a “minicast” that revolves around the fixed operations ecosystem and the tactics that build a better user experience for customers, dealership staff and other stakeholders. Sean’s experience spans more than 35 years of business development and strategic marketing experience, having developed go-to-market products and solutions for the automotive, healthcare, insurance, finance and technology industries to serve Fortune 1000 clients like American Express, Toshiba, Western Digital, Cox Communications, Novartis, Microsoft, IBM, Compaq, HP, National General Insurance, MyCustomer Data, DigniFi and several automotive affiliates and dealerships. Sean lives in Napa, CA with his wife Kathryn and spends his free time hiking, kayaking, playing guitar, going to concerts, rebuilding project cars and helping his kids embark on adulthood. |
