{"id":2537,"date":"2015-11-22T17:02:10","date_gmt":"2015-11-22T22:02:10","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/walmart-exchange-using-data-to-go-from-retail-to-media\/"},"modified":"2015-11-22T17:02:10","modified_gmt":"2015-11-22T22:02:10","slug":"walmart-exchange-using-data-to-go-from-retail-to-media","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/walmart-exchange-using-data-to-go-from-retail-to-media\/","title":{"rendered":"Walmart Exchange: Using Data to Go from Retail to Media"},"content":{"rendered":"

Walmart has long reigned at the top of the traditional retail ecosystem for decades, but in 2014, it entered the world of digital media with the introduction of Walmart Exchange, or WMX. WMX is an ad exchange that allows suppliers to leverage customer data from Walmart stores and Walmart.com to target, purchase, measure and optimize advertising on both Walmart.com and third-party sites that have partnered with Walmart. Walmart also provides software to retarget customers on email.<\/p>\n

Value Creation<\/strong><\/p>\n

The issue that has consistently plagued the advertising industry since its inception has been the ability to measure the return of each dollar spent. The advent of the Internet has certainly dramatically increased this ability. However, e-commerce still only comprises roughly 7% of overall retail<\/a>,\u00a0and linking online advertising to in-store purchases remains a challenge. For example, even digital ad platforms like Google can only estimate a link of an online search by a user with a purchase by attempting to link location history on smartphones with the advertiser\u2019s location. Walmart, on the other hand, actually owns the actual sales data.<\/p>\n

Walmart wasn\u2019t the first retailer to market with its exchange \u2013 that distinction unsurprisingly goes to Amazon which introduced an ad network in 2012. Other retailers have since entered the media fray, including major competitors like Dollar General, Target, Safeway, etc. While the number of retailers offering advertising platforms has made the competition for media budget share much stiffer, the combination of Walmart\u2019s overall scale and massive trove of off-line data from the\u00a05K+ stores in the US remains its strongest moat against other competitors. To enhance their ability to connect offline purchases of their customers, Walmart created digital products such as Savings Catcher<\/a>, an app that incents customers to scan their receipts for money back on items that are sold for less at competing stores.<\/p>\n

Walmart has a unique view into the customer\u2019s full purchase behavior \u2013 from the customer\u2019s weekly grocery trips at her local Walmart store to her Cyber Monday purchases made on Walmart.com. Not only does this insight allow them to compete effectively against Amazon, it also provides advertisers an invaluable capability\u00a0to target customers while in the store.<\/p>\n

Value Capture<\/strong><\/p>\n

Leveraging its data for competitive advantage is how Walmart was able to achieve its market position in the first place.\u00a0The first scaled deployment of Walmart\u2019s data to vendors came 20 years ago in the Retail Link system, which provided sales and inventory data of suppliers\u2019 products to facilitate supply chain optimization. In 2014, Retail Link was upgraded to be a more real-time, predictive tool, incorporating data from Walmart.com, social media, and Nielsen, among other sources to provide more insight into customer demographic and behavioral information.<\/p>\n

\u00a0<\/strong>Similar to how Retail Link furthered Walmart\u2019s EDLP strategy, the company is hoping to help save suppliers money through more optimal marketing buys, which in turn should reduce the prices that customers buy for products. Moreover, WMX should ideally help drive revenue \u2013 in both advertising dollars and in customer purchase \u2013 for Walmart.<\/p>\n

Future of WMX<\/strong><\/p>\n

WMX makes a ton of sense for Walmart as a natural extension of its omnichannel strategy. WMX does not represent a breakthrough product or capability for Walmart but rather something that they had to do to keep being relevant in the age of digital. Utilizing customer data to help strengthen supplier relationships something that is more important than ever before, given the level of pressure that Walmart is feeling from Amazon on one end and Dollar General and other deep discount stores on the other. Moreover, WMX demonstrates Walmart\u2019s continued focus on developing big data capabilities in-house.<\/p>\n

The biggest challenge for the company will be in its ability to actually deliver improved results for its advertisers. That its proprietary dataset could more accurately close the loop on advertising spend is highly probable \u2013 whether Walmart will develop the right algorithms and use the right combination of datasets to correctly analyze and direct marketing dollars is another question altogether.<\/p>\n","protected":false},"excerpt":{"rendered":"

Walmart has long reigned at the top of the traditional retail ecosystem for decades, but in 2014, it entered the world of digital media with the introduction of Walmart Exchange, or WMX. 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