{"id":23427,"date":"2017-11-15T04:56:53","date_gmt":"2017-11-15T09:56:53","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/walmarts-rural-dominance-a-brick-mortar-advantage-in-an-ecommerce-battle\/"},"modified":"2017-11-15T04:56:53","modified_gmt":"2017-11-15T09:56:53","slug":"walmarts-rural-dominance-a-brick-mortar-advantage-in-an-ecommerce-battle","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/walmarts-rural-dominance-a-brick-mortar-advantage-in-an-ecommerce-battle\/","title":{"rendered":"Walmart\u2019s Rural Dominance: A Brick & Mortar Advantage in an eCommerce Battle"},"content":{"rendered":"

In an age of rapid digitization, traditional brick & mortar retailers have been forced to evolve their business models and increase their online presence. Given such, Walmart\u2019s $3.3B investment decision to build and open 292 Walmart stores and Sam\u2019s Clubs in 2017 directly contrasts with the direction most retailers have taken.[1]<\/a> Walmart continues to expand its operations in traditional retail with a greater focus on creating a digitally integrated, multi-channel experience.[2]<\/a> Traditional retailers, particularly those who serve customers in suburban and rural regions, must find a way to go on the offensive against eCommerce pure-plays to minimize customer turnover. Walmart continues to embrace its heritage as a mass market traditional retailer, yet recognizes that it must rebuild its competitive advantage through superior omnichannel operations that service the customer both on and offline.[3]<\/a> Rather than competing directly against Amazon in the online space, Walmart will differentiate itself through its extensive distribution network throughout the United States<\/p>\n

Over time, Walmart has restrained from actively entering urban areas and instead has predominately focused on on rural and suburban regions. Walmart currently serves as the primary low-cost retailer for a high contingent of rural poor Americans, operating with \u201c2.5 times as much selling space per inhabitant in the poorest one-third of states as in the richest one-third.\u201d[4]<\/a> Although the firm initially faced great resistance from local retailers within small rural towns, evidence points to a more positive economic impact for those towns in which a Walmart was located relative to those where one was not.[5]<\/a> Such commitment to under served markets has enabled Walmart to aggressively expand its footprint across rural America\u2014ninety percent of Americans now live within 10 miles of a Walmart store.[6]<\/a> When compared to the fact that thirty-one percent of Americans live within 20 miles Amazon\u2019s distribution centers, the race for retail market share among suburban and rural geographies becomes more competitive.[7]<\/a><\/p>\n

These firms have two of the most elite supply chains in industry, yet face opposing business challenges\u2014Walmart must identify ways to integrate eCommerce to prevent customer turnover while Amazon continues to focus on shifting consumer behavior away from traditional retail toward eCommerce. Nonetheless, Amazon has defined the pace to-date at which Walmart must evolve to remain competitive in the eCommerce space. Walmart has begun offering free two-day delivery on all Walmart.com orders over $35 and has also rolled out its Pickup Today program which allows omnichannel shoppers to order online and pick-up in stores. [8]<\/a> [9]<\/a> This \u2018buyer-arranged pickup\u2019 strategy enables Walmart to provide an alternative for on-the-go customers who would prefer to minimize the time spent in stores, however, will not be enough to threaten Amazon\u2019s \u2018seller-arranged delivery\u2019 system in the long term which enables quick door-to-door delivery.[10]<\/a> Walmart must continue searching for a cutting-edge strategy that changes the way customers think of shopping. Digital strategy must not be developed in a silo as a way to attract and retain customers, but rather as an additional component of a broader customer promise that emphasizes strong cross-channel coordination.[11]<\/a> Walmart has highlighted its intention to slow its investment in opening new stores in 2018 and instead redirect much of this capital toward eCommerce and technology.[12]<\/a> Plans to accelerate the focus on evolving the customer experience across channels demonstrates Walmart\u2019s intention to strike a balance between maintaining its core business and evolving its use of technology.<\/p>\n

As Walmart continues its transition toward becoming an omnichannel player, it needs to monitor the pace at which its consumers begin leveraging its online channel. This understanding should provide visibility into how consumer behavior is evolving and reveal insights into optimal ways that Walmart can drive its customers back into stores. This will not only keep consumers engaged with the brand, but also allows Walmart to extract greater value from its customers; omnichannel shoppers spend 4% more in stores on average and 10% more online than single channel shoppers.[13]<\/a> By using the digital channel in ways that enhance the shopping experience and drive customers into stores, Walmart has an opportunity to reestablish a competitive advantage in rural and suburban markets that will challenge Amazon as the retail landscape continues to evolve.<\/p>\n

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