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Case Study: Walmart Expands Mobile Efforts With Scan & Go App

Merchant: Walmart Size: 10,700 retail units Market: 27 countries Platform: Scan & Go iPhone app Bottom Line: Self-checkout mobile apps help close the purchase funnel. Retailers of all sizes are looking for ways to combat showrooming the increasingly common practice of trying out products in-store and immediately comparing prices with online retailers from a mobile device and Walmart is no exception. The worlds largest retailer has found a way to redirect its customers attention away from its competitors websites and shorten the purchase funnel, by introducing a self-checkout iPhone app. More than 50% of our customers own smartphones and are currently using them actively in our stores, explained Walmart spokesperson Ashley Hardie. We know they are using them to search for coupons, compare prices, and navigate aisles. We really want to meet and understand their needs, so were experimenting with innovative technologies. The companys Scan & Go iPhone app, which was introduced late last year, can be used to scan the bar codes on items in-store. Customers scan the products theyre planning to buy and add them to their shopping carts just as they typically would. When its time to check out, the Scan & Go app displays a QR code that the customer scans on a self-checkout screen to wirelessly transfer the list of scanned items into the register at the point-of-sale. Then you complete the payment just as you would with any other Walmart transaction, using cash, credit, or debit card, she said. Since Scan & Go is still technically a pilot program, it isnt available nationwide just yet. Walmart started with an initial test in 70 stores throughout Northwest Arkansas and Atlanta, and is now in the process of expanding the program to more than 200 stores in 14 markets. We have a number of factors that go into determining where we are going to test the locations, said Hardie. We test close

to the home office here in Northwest Arkansas so we can watch it evolve, and then we also go out and test it in other markets so we can gauge our customers feedback in those locations. In preparing for the rollout, Walmart is working with all the major carriers to make sure it has strong cellular connectivity in all the stores where the app is being tested. Customer feedback will be the main driver in deciding whether Walmart will continue moving forward with the app, and Hardie explained that the company is hoping current Scan & Go users will provide them with ideas for what features should be added or removed. We saw some users were confused about the difference between the shopping list and the Scan & Go basket. So weve added a mode where users can scan items directly from their shopping list into their basket. Scanned items will automatically be checked off. One feature that Walmart doesnt have any plans to add to its Scan & Go app is a mobile payments option. This is really about offering choice for our customers, said Hardie. We have multiple checkout options, and we think that gives us a unique advantage . We know a lot of folks still like the traditional checkout experience, so well continue to offer that. The Takeaway Walmart isnt trying to dissuade customers from using their smartphones while they shop. (In fact, the retailer is beefing up the carrier signals inside its stores to make it easier for customers to get online.) Instead, the company is combating the threat of showrooming by encouraging customers to fill their screens with its own mobile application. Shoppers are less likely to abandon an item once its been placed in a cart, whether that cart is virtual or real. By making it easy for customers to quickly scan items and place them in their carts via a mobile app, Walmart is working to decrease drop off rates and close the conversion funnel. Because the Scan & Go program is still new, Walmart says its too soon to tell how the application is changing consumer shopping behaviors. However, the retailers push to continue rolling out the app at 200 new stores is a signal that its heading in a positive direction.

2. The Walmart Sustainability Case Project

About the Project The Cases Other Studies

For more information about the Walmart Sustainability Case Project, please feel free to contact David G. Hyatt at the University of Arkansas or Andrew Spicer at the University of South Carolina.

About the Project

The goal of the Walmart sustainability case project is to develop teaching cases and notes that lead students through an in-depth analysis of Walmarts efforts to develop and implement an ambitious corporate sustainability strategy. To accomplish this task, professors from the Sam M. Walton College of Business, University of Arkansas, and the Moore School of Business, University of South Carolina, collaborated to write a series of cases that explores Walmarts sustainability journey from different positions and perspectives. During the project, our team conducted over 30 interviews that included over 25 Walmart employees who worked on the front lines developing and implementing the companys new sustainability strategy. These cases are not designed to provide a comprehensive examination of the full set of issues that Walmart has encountered during its ongoing sustainability journey. In choosing these cases, we have attempted to identify specific decision points pertaining to the companys sustainability efforts that can lead to engaged, thoughtful classroom discussions of the opportunities and challenges involved in designing and implementing a wide-ranging corporate sustainability strategy. The cases are designed to be taught alone or as a series, but there are distinct advantages to teaching them as a series. Doing so allows instructors and students to examine recurring issues and questions across positions, tasks, and time, including different levels of the organization (CEO, sustainability director, functional managers), strategic

decision-making stages (vision, strategy, implementation, measurement), and periods (from vision to implementation, and back again). To link the individual cases together as an interconnected learning experience, we have relied on the following framework:

The available cases correspond to this figure as follows: Mission and VisionLee Scotts Founding Vision Structures and SystemsAndy Ruben and the Design of Organizational Structures and Systems (A & B) Programs and InitiativesPeter Redmond and the Search for Sustainable Seafood; Bottled Water Logistics and Forecasting Measurement and LearningDefining Sustainable Products (A & B); Consumers and Sustainability at Walmart: A Students Perspective

We recommend teaching the cases pertaining to organizational mission and strategy prior to moving on to cases about particular initiatives and systemic reporting metrics. If instructors choose to teach the latter cases as standalone presentations, the earlier cases remain available to provide additional background information for class discussion.

Case Series Overview

The first caseLee Scotts Founding Visiontakes the perspective from the apex of the organization as Walmarts CEO, Lee Scott, develops and articulates his vision of what Walmart hopes to achieve by pursuing an aggressive sustainability strategy. This case explores the pressures that led Scott to announce the companys ambitious sustainability goals: achieving zero waste, 100% renewable energy, and selling sustainable products. It also explores the choices made when defining and communicating the scope of the strategy, particularly through an in-depth analysis of his announcement of Walmarts new goals in his October 2005, Twenty -First Century Leadership speech. The case Andy Ruben and the Design of Organizational Structures and Systems flows from the previous discussion, by moving from the development of an ambitious vision to the challenges of adopting strategic policies and processes to reach those aspirations in practice. This case puts students into the role of Andy Ruben, Walmarts first Vice-President for Sustainability , asking them to make concrete decisions about what should be done, in what order, and by what process if they were to implement an ambitious corporate sustainability strategy. In the case, Ruben confronts specific choices about how to define the responsibilities of the new sustainability office at Walmart in his efforts to lead the organization toward achieving Lee Scotts vision. In Case B, we review the basic decisions Ruben made while building the resultant sustainability office. The next group of cases asks students to move from organization-wide decisions about mission and strategy to explore specific choices about which initiatives to pursue at the individual product and practice levels. In these cases, higher-level strategic choices operate as the context for line managers, who must make concrete decisions about how to achieve new sustainability goals in their own business operations. In Peter Redmond and the Search for Sustainable Seafood, students examine the responses of Peter Redmond, Vice President a nd Divisional Merchandise Manager of Deli and Seafood, to organizational pressures to make seafood more sustainable at Walmart. In a second case, we look at bottled water. We have two versions. The longer version includes data that students can use in forecasting bottled water. (The longer case is best used for an operations class; the shorter one is appropriate if the instructor wishes to teach within the case series or as stand-alone within a sustainability course.) Both cases illustrate the clash, as well as the complementarity, between Walmarts business model and their professed sustainability goals. The case also provides students with the opportunity to explore how Walmart might become more efficient, but at the expense of overall system efficiency. We are continuing to develop an additional series of caseson LED light bulbs and plastic bagsthat will further explore the detailed challenges involved in choosing concrete initiatives aligned with the new sustainability strategy. We expect these cases to be available in 2014. Finally, we move full circle from initial vision, strategy, and initiatives to measuring progress over time, against initial goals and aspirations. In particular, in Defining Sustainable Products (A), we examine Walmarts search fo r a systemic solution to define a sustainable product precisely. In this case, Matt Kistler, who succeeded Andy Ruben as the company sustainability leader in 2007, knows that the company is lagging behind on its espoused goal of selling sustainable products. The case asks students step into Kistlers shoes as he leads Walmarts sustainability office through a systematic review of the different models and frameworks available for measuring the sustainability of products presently in use. Eventually, the students face a decision about what Walmart should do to make systemic progress with regard to measuring and selling sustainable products. In Defining Sustainable Products (B), we examine the situation three years later, as Walmart assesses the progress made in achieving its goal of selling sustainable products.

To further encourage students to analyze initial goals in comparison with outcomes over time, we have developed a consumer-oriented caseConsumers and Sustainability at Walmart: A Students Perspectivethat moves beyond the perspective of internal Walmart participants to explores issues of sustainability from the point of view of a typical Walmart shopper. In this case, we examine the experience of a fictional student shopper who goes to Walmart and wants to buy sustainable products, which helps raise questions for students about what Walmarts actions mean to them as consumers, citizens as well as business professionals. The case also asks students to evaluate the progress that Walmart has made in its stores over the course of its sustainability journey, particularly in comparison to its initial aspirations and goals. By allowing students to switch roles and perspectives throughout this case series, we hope that they ultimately come to recognize the systemic interdependencies that define and shape the opportunities and challenges of designing and leading an ambitious corporate sustainability strategy. Over time, we plan to add more cases, articles, and teaching notes to offer additional perspectives and guidance to the material already developed. Along these lines, we welcome and encourage feedback from educators about the strategies that they have used to teach these cases, as well as any other information they might care to share about other Walmart sustainability cases, articles, or commentary, to which we can link through this website.


3 Case study: The Rise of Wal-Mart Wal-Mart demonstrates how a physical product retailer can create and leverage a data asset to achieve world-class supply chain efficiencies targeted primarily at driving down costs. Wal-Mart isnt just the largest retailer in the world, over the past several years it has popped in and out of the top spot on the Fortune 500 listmeaning that the firm has had revenues greater than any firm in the United States. Wal-Mart is so big that in three months it sells more than a whole years worth of sales at number two U.S. retailer, Home Depot.*1+

At that size, its clear that Wal-Marts key source of competitive advantage is scale. But firms dont turn into giants overnight. Wal-Mart grew in large part by leveraging information systems to an extent never before seen in the retail industry. Technology tightly coordinates the Wal-Mart value chain from tip to tail, while these systems also deliver a mineable data asset thats unmatched in U.S. retail. To get a sense of the firms overall efficiencies, at the end of the prior decade a McKinsey study found that Wal-Mart was responsible for some 12 percent of the productivity gains in the entire U.S. economy.*2+ The firms capacity as a systems innovator is so respected that many senior Wal-Mart IT executives have been snatched up for top roles at Dell, HP, Amazon, and Microsoft. And lest one think that innovation is the province of only those located in the technology hubs of Silicon Valley, Boston, and Seattle, remember that Wal-Mart is headquartered in Bentonville, Arkansas. A Data-Driven Value Chain The Wal-Mart efficiency dance starts with a proprietary system called Retail Link, a system originally developed in 1991 and continually refined ever since. Each time an item is scanned by a Wal-Mart cash register, Retail Link not only records the sale, it also automatically triggers inventory reordering, scheduling, and delivery. This process keeps shelves stocked, while keeping inventories at a minimum. An AMR report ranked Wal-Mart as having the

seventh best supply chain in the country (the only other retailer in the top twenty was Tesco, at number fifteen).*3+ The firms annual inventory turnover ratio of 8.5 means that Wal-Mart sells the equivalent of its entire inventory roughly every six weeks (by comparison, Targets turnover ratio is 6.4, Sears is 3.4, and the average for U.S. retail is less than 2).*4+

Back-office scanners keep track of inventory as supplier shipments come in. Suppliers are rated based on timeliness of deliveries, and youve got to be quick to work with Wal-Mart. In order to avoid a tractor-trailer traffic jam in store parking lots, deliveries are choreographed to arrive at intervals less than ten minutes apart. When Levis joined Wal-Mart, the firm had to guarantee it could replenish shelves every two daysno prior retailer had required a shorter than five day window from Levis.*5+

Wal-Mart has been a catalyst for technology adoption among its suppliers. The firm is currently leading an adoption effort that requires partners to leverage RFID technology to track and coordinate inventories. While the rollout has been slow, a recent P&G trial showed RFID boosted sales nearly 20 percent by ensuring that inventory was on shelves and located where it should be.[6] Data Mining Prowess Wal-Mart also mines its mother lode of data to get its product mix right under all sorts of varying environmental conditions, protecting the firm from a retailers twin nightmares: too much inventory, or not enough.*7+ For example, the firms data mining efforts informed buyers that customers stock up on certain products in the days leading up to predicted hurricanes. Bumping up prestorm supplies of batteries and bottled water was a no brainer, but the firm also learned that Pop-Tarts sales spike seven fold before storms hit, and that beer is the top prestorm seller. This insight has lead to truckloads full of six packs and toaster pastries

streaming into gulf states whenever word of a big storm surfaces.[8]

Data mining also helps the firm tighten operational forecasts, helping to predict things like how many cashiers are needed at a given store at various times of day throughout the year. Data drives the organization, with mined reports forming the basis of weekly sales meetings, as well as executive strategy sessions. Sharing Data, Keeping Secrets While Wal-Mart is demanding of its suppliers, it also shares data with them, too. Data can help firms become more efficient so that Wal-Mart can keep dropping prices, and data can help firms uncover patterns that help suppliers sell more. P&Gs Gillette unit, for example, claims to have mined Wal-Mart data to develop promotions that increased sales as much as 19 percent. More than seventeen thousand suppliers are given access to their products Wal-Mart performance across metrics that include daily sales, shipments, returns, purchase orders, invoices, claims and forecasts. And these suppliers collectively interrogate Wal-Mart data warehouses to the tune of twenty-one million queries a year. [9]

While Wal-Mart shares sales data with relevant suppliers, the firm otherwise fiercely guards this asset. Many retailers pool their data by sharing it with information brokers like Information Resources and ACNielsen. This sharing allows smaller firms to pool their data to provide more comprehensive insight on market behavior. But Wal-Mart stopped sharing data with these agencies years ago. The firms scale is so big, the additional data provided by brokers wasnt adding much value, and it no longer made sense to allow competitors access to what was happening in its own huge chunk of retail sales. Other aspects of the firms technology remain under wraps, too. Wal-Mart custom builds

large portions of its information systems to keep competitors off its trail. As for infrastructure secrets, the Wal-Mart Data Center in McDonald County, Missouri, was considered so off limits that the county assessor was required to sign a nondisclosure statement before being allowed on-site to estimate property value.[10]

Challenges Abound But despite success, challenges continue. While Wal-Mart grew dramatically throughout the 1990s, the firms U.S. business has largely matured. And as a mature business it faces a problem: Wal-Mart needs to find huge markets or dramatic cost savings in order to boost profits and continue to move its stock price higher. The firms aggressiveness and sheer size also increasingly make Wal-Mart a target for criticism. Those low prices come at a price, and the firm has faced accusations of subpar wages and remains a magnet for union activists. Others had identified poor labor conditions at some of the firms contract manufacturers. Suppliers that compete for Wal-Marts business are often faced with a catch-22. If they bypass Wal-Mart they miss out on the largest single chunk of world retail sales. But if they sell to Wal-Mart, the firm may demand prices so aggressively low that suppliers end up cannibalizing their own sales at other retailers. Still more criticism comes from local citizen groups that have accused Wal-Mart of ruining the market for mom-and-pop stores.[11]

While some might see Wal-Mart as invincibly standing at the summit of world retail, its important to note that other megaretailers have fallen from grace. In the 1920s and 1930s, the A&P grocery chain once controlled 80 percent of U.S. grocery sales, at its peak operating five times the number of stores that Wal-Mart has today. But market conditions changed, and the government stepped in to draft antipredatory pricing laws when it felt A&Ps parent was too aggressive.

For all of Wal-Marts data brilliance, historical data offers little insight on how to adapt to more radical changes in the retail landscape. The firms data warehouse wasnt able to foretell the rise of Target and other up-market discounters. And yet another major battle is brewing, as Tesco methodically attempts to take its globally honed expertise to U.S. shores. Savvy managers recognize that data use is a vital tool, but not the only tool in managements strategic arsenal. Key Takeaways Wal-Mart demonstrates how a physical product retailer can create and leverage a data asset to achieve world-class value chain efficiencies. Wal-Mart uses data mining in numerous ways, from demand forecasting to predicting the number of cashiers needed at a store at a particular time. To help suppliers become more efficient, and as a result lower prices, Wal-Mart shares data with them. Despite its success, Wal-Mart is a mature business that needs to find huge markets or dramatic cost savings in order to boost profits and continue to move its stock price higher. The firms success also makes it a high impact target for criticism and activism. And the firms data assets could not predict impactful industry trends such as the rise of Target and other upscale discounters.

3. Macy's Omni-channel Strategy on the Move

Macy's is firing on all cylinders in its mission to transform itself into a true omni-channel enterprise, and its research shows the $26 billion retailer is moving in the right direction as it works to gain market share through a smart combination of its physical, virtual and brand assets. Among other initiatives, the retailer is bringing digital assets into its stores, equipping sales associates with mobile devices to allow them to service customers better, opening a new warehouse, optimizing inventory with RFID, bringing direct-to-consumer fulfillment into stores and remodeling its flagship Herald Square location. The omni-channel imperative Macy's strong sales growth over the past several years has been bolstered by increases in its online sales. Sales on and saw an increase of 40 percent last year over 2010, and the channel continues to expand. But whatever its sales online, the impact of the internet is even greater across the enterprise as a whole. "Ninety percent of our customers research online at least occasionally before purchasing in-store," said Brian Leinbach, Macy's senior vice president of systems development and field services, speaking earlier this week at a Manhattan Associates' supply chain conference in Orlando, Fla. "Our best customers shop us online and in our stores," he said, adding that they are also twice as likely as other online buyers to have researched a product in its stores before purchasing online. Whether starting in the store and moving online or vice versa, Macy's customers are engaging in a flurry of activity going back and forth between online and stores from checking item availability and seeking product information to making the purchase. We live in a world where people are "constantly checking in and connecting" on smartphones and other devices, said Leinbach. By 2015, social media will affect 80 percent of consumers' discretionary spending, he said, and there will be "50 billion things" available on the internet by the end of the decade. "Information is just part of us, what we need and thrive on. We want to leverage that as change agent with Macy's." "The shopping experience is at the top of our food chain" Given the increasing consumer predilection for checking in online with friends, with products, with other stores Macy's is working hard to keep the customer happy and engaged in any channel by delivering fresh and unique merchandise as well as a rich digital experience in stores as well as online. Macy's brick-and-mortar locations are increasingly becoming a "blend of physical and digital," says Leinbach. Photos of Macy's handbag department shown by Leinbach at the conference reveal real purses and digital displays side by side, allowing customers to touch and hold the real thing but also to check out an endless aisle of other handbags, rotating them and looking inside, all onscreen. This format allows Macy's to display merchandise that it might not be able to otherwise because of limited floor space or inventory. The retailer is also researching digital mannequins that could be re-outfitted quickly and easily throughout the day, changing clothes to appeal to different types of customers who shop at different times of day, for example. Kiosks and point-of-product info will be an ongoing part of the in-store experience, as will a new visual broadcasting system. While Macy's has long featured video loops in its stores, the new system will bring it to the next level, allowing the retailer to tailor its videos by department, time of day or to highlight doorbusters or other merchandise on promotion. Other new customer-facing technology is appearing in its cosmetics department, where a "beauty spot" touchscreen provides a blend of physical inventory with a virtual interactive display offering

additional product information. At its Clinique counters, customers can seek help via an iPad app or through the more traditional method of on-site technicians. The idea is to give consumers choices, and allow them to get information at their own speed, or to ask for guidance, says Leinbach. Customers also will have more opportunities to engage on their own terms. By year end, Wi-Fi will be installed all 840 store locations, says Leinbach. Macy's has also partnered with Google to provide instore maps that customers can download and use to self-navigate its stores, and it is also partnering with Google for tap-and-go mobile payments via Google Wallet. In an overhaul that involves major architectural as well as technology changes, Macy's is reinventing its Herald Square flagship store in Manhattan as part of a four-year renovation totaling in the "hundreds of millions of dollars," says Leinbach. The newly refurbished Macy's will launch this summer, featuring, among other changes, a full acre of shoe-selling space! "If we own it, she should be able to buy it" The promise of so many new digital offerings is exciting but only if there's product to support it. That other half of "buy anywhere" is "fulfill anywhere," and Macy's is implementing initiatives to both optimize inventory and ensure that customers can "shop across channels enjoyably" in other words, get what they want. To that end, Macy's is equipping its stores to handle direct-to-consumer order fulfillment; 300 of its 840 locations will offer this capability by year's end. "We are bringing the components of a flagship experience of selection and service to all customers through improved leveraging of central and store inventories," said Leinbach. Macy's is also looking to better leverage its approximately 30,000 sales associates, not only by fulfilling from stores, but by empowering associates with new tools to better assist customers. New "search and send" capabilities, for example, will enable a sales associate to assist a customer who finds a product she likes but that is not available in her size, by finding the requested size anywhere in the network and having it shipped to the customer's house. In some departments, mobile POS handhelds will allow sales associates to check out customers on the floor so that they do not ever have to traipse back to the cash register. Additionally, reports newly delivered via mobile, instead of paper, will allow the management team to react in real time to developments while walking the floor. Referencing a Saturday Night Live skit in which a customer was unable to find a sales associate on the floor of Macy's, Leinbach assures that Macy's focus on customer services will guarantee help aplenty. For example, when its new acre of shoes opens this summer, customers will encounter a staff of 150 sales associates on the floor and another 80 to pick shoes in the backroom. Optimizing inventory across the enterprise The need to keep inventory optimized for a "buy anywhere, fulfill anywhere" model is a big driver of Macy's ongoing item-level RFID implementation, whose benefits are becoming increasingly apparent as the retailer ramps up the choices it offers customers. Macy's is applying RFID chips at the source, allowing for wall-to-wall visibility in its stores that enables the retailer to get the right amount of product in the right place. Its RFID readers, powered by Motorola, allow associates to take inventory 20 times faster than via traditional manual methods, with 95 percent accuracy. "We used to check inventory once a year. Now we are checking 15 to 20 times a year. That's a game changer," says Leinbach. To support its omnichannel growth, the retailer also has added an eighth distribution center in Martinsburg, W.Va., to service the East Coast. The astoundingly large two million-square-foot DC is so big, says Leinbach, that its engineers had to account for the curvature of the earth in its design. The new DC, which began receiving goods just last week, is the first to run on the latest version (2010) of Manhattan Associates' warehouse management system (WMS). Other DCs will follow suit.

"This level of growth requires tremendous courage," says Leinbach. "We cannot make a mistake. Every experience must be top notch."