WAL-MART: A NEW AGE SHOPPING EXPERIENCESoeb ContractorAnthony FitzpatrickApril MerscherJoseph NachinsonAdrienne Tallarom 

Seems Familiar?Retail Category Percentage of

Customers That

Left Due to Long

Wait Times

Department Stores 72 %

Specialty Clothing 65 %

Mail/Shipping

Service

53 %

Convenience Store 50 %

Drugstore 46 %

Source: Maritz poll, July 15 2008

Lines are Killer!

Wal-Mart• Always in the forefront of

adopting new technology• Customer focused

organization• Long lines at the checkout

lane is a problem for the customers

• Wal-Mart already requires suppliers to place RFID tags on shipments

• Wal-Mart - RFID reduced Out-of-Stocks by 30 percent for products selling between 0.1 and 15 units a day

Technology

RFID GPS Kiosks

•RFID:▫Better alternative to

traditional barcodes for identification

▫Uses radio waves for identification

▫Can be read from several meters away and beyond the line of sight of the reader

▫Cost of RFID tags reducing every year and now available for 3¢

•GPS Tracking on carts▫Ability to develop patterns

of customer movement inside the store

▫Better position displays according to movement

▫Track purchases off displays and promotions

▫Sell data to market research companies

▫Identifies cart at kiosk for check out process

•Kiosks:▫Pulls out cart specific purchase

information▫Has payment options and ability

to swipe credit card▫Printing of receipt and coupons▫Allows speedy checkout.

Competitive Environment• Build Awareness with customer base

▫Advertising Media, Billboards, Public Transit, etc In store: Flyers, Banners, Greeters, Coupons, etc

• Economies of scale – 1st Mover Advantage▫No 3rd party or partner companies in operating its

business, easier to integrate▫Full Vertical Integration

Significant expertise in implementing and using IT systems

▫Competitors lack resources & expertise to respond accordingly…..Wal-Mart remains innovative leader

Cost/Benefit Analysis

Costs

• Initial System Cost ▫ RFID readers

Stand alone for carts Standard for kiosk

▫ GPS for carts▫ Antenna ▫ Middleware ▫ Consulting/Integration

• Recurring Costs ▫ RFID tags▫ System Maintenance ▫ Data Storage / Sorting

• An increase in sales of 2% due to reduced out-of-stock items

• 30% reduction in inventory due to lower safety stock

• Reduction in theft • Approx. 40 employee

reduction per store • Market Research• Decrease in wait time for

customers increase sales by 3%

Benefits

Definition of Scenarios

•Best Case – All Walmart stores would implement this technology – 4,300 total stores

•Worst Case – Project would not proceed past the initial implementation – Assumed to be about 10% of the Walmart Supercenters, total of 274 stores

•Likely Case – Only Walmart Supercenters would implement this technology – 2737 Walmart Supercenters

COST ANALYSIS (Millions)Item Best Case Worst Case Most Likely Tags* $ 113.5 M $ 7.2 M $ 72.3 M

Readers: Stand Alone $ 2,150 M $ 137 M $ 1,368 MReaders: Standard $ 6.02 M $ 0.384 M $ 3.8 MGPS on Cart $ 129 M $ 8.22 M $ 82.1 MAntenna $ 0.175 M $ .011 M $ 0.112Middle Ware $ 786.9 M $ 50.1 M $ 501 MConsulting/Integration $ 550.4 M $ 35.1 M $ 350 MIncreased Data Storage* $ 860 M $ 54.8 M $ 547 MMaintenance* $ 362 M $ 23 M $ 230 MTOTAL COST (year 1) $ 4,958 M $ 315 M $ 3,155 MBENEFIT ANALYSISValue Creation Best Case Worst Case Most Likely

Inventory Control* $ 10,350 M $ 507 M $ 7,245 MTheft * $ 1,347 M $ 85.8 M $ 857 MOut of Stock Sales* $ 8.02 M $ 393 M $ 5,617 MStaffing $ 1.38 M $ 0.877 M $ 0.875 MMarket Research* $ 10 M $ 3 M $ 7 MDecrease Wait Time* $ 12,037 M $ 842 M $ 8,426 MTOTAL BENEFIT (year 1) $ 31,770 M $ 1,832 M $ 22,153 M NET BENEFIT (year 1) $26,812 M $1,515 M $18,989 M

Financial Feasibility

*Recurring Costs/Benefits

Organizational Implementation

• Plan of Attack and Time Line

• Risks1. Technology – 3rd Party Right?2. Competitors – How long before we are copied?3. Customers and Suppliers – Will they buy into the

technology?4. Costs – Will they decrease?5. Inventory – Does this provide better tracking?6. Employees – Will they buy in?7. Executives – Is there an ROI?

Research /

Purchase

Install / Market Train Go Live +

Evaluate Metrics

Implement

Company Wide

1 yr ½ yr ½ yr 1 yr 1-2 yrs

Organizational Implementation• Risk Mitigation

1. Technology – Well rounded selection team2. Competitors – Confidentiality and long term contracts3. Customers and Suppliers – Market positively and show value4. Costs – Research before and track after5. Inventory – Track both ways6. Employees – TRAIN! TRAIN! TRAIN! INFORM!7. Executives – Analysis of ROI, show updates during implementation

• Risk Mitigation1. Time, Costs, Wait (Queue) time decreases

• Contingency Plan1. Scrap Project2. Revert to previous system – ensure employees still know

traditional check out procedures