By Lee Peterson
It simply didn’t make sense at first blush: About half the people said they loved Walmart; the other half said they don’t. Even more confounding, such sharp customer polarization often hinged on the same metric: customer service. How did the world’s largest retailer manage to measure up to half the people, even as it failed the other half? Better yet, what would help them turn things around with its non-fans?
For the last three years, we’ve surveyed consumers annually to learn what brands, among 100 top players, were winning (good), stuck in the middle (bad), or at the point of no return (ugly). This research dive gave us a new way to think about how consumers really felt about brands during a period of massive upheaval and disruption, in large part driven by Amazon, the world’s largest online marketplace. In total we’ve surveyed more than 11,000 shoppers, asking them to rank their favorite brands and no other company elicited the kind of polarizing responses that Walmart did.
In designing this research project, we divided consumers into two simple cohorts, based on the formative experiences people have had with technology during their lifetimes: Digital Natives and Digital Immigrants. We defined Digital Natives as shoppers between the ages of 18 to 29, a consumer segment who has grown up in a digital world, embracing a world dominated by e-commerce. We defined Digital Immigrants as 46 or older, or consumers whose formative years were spent in the analog world, meaning they grew up before the digital revolution upended every norm of consumer culture and shopping—and so they interact with it as if newcomers to a new land.
Could this explain why Walmart’s customer base reported such polarized sentiments about it? Perhaps. After all, you might logically call Digital Natives the Amazon generation. Amazon effectively entered the world in 1994, making it, at 25, a Digital Native itself. Walmart, on the other hand, founded by Sam Walton in 1968, is 55, and although the world’s largest retailer, is a Digital Immigrant. Moreover, could this generational divide explain why Amazon is seemingly immune from the same kind of deep enmity Walmart engenders among half of its customer base?
Perhaps it’s a combination of Target and Amazon that is responsible for the divide? Though Target is in third place for Best Retailer in our study, the store has a cult-like following and has continued to make improvements, both on the digital front and through its BOPIS offering. Recently, Target has found success with private label brands, further accentuating its popularity. Though Target may never have the number of physical stores to rival Walmart, will its online success continue to widen Walmart’s love/hate gap?
Whatever the answer, it’s a worrisome finding for Walmart, considering there was no similar customer polarization among Amazon’s customer base. Walmart is a half a trillion-dollar company,1 with more than twice as much revenue than Amazon. Yet such an obvious weakness could threaten Walmart’s dominance over the long-term.
In our study (GBU-20, an Annual Retail Report Card) Amazon was chosen as the most popular “good” brand three years in a row. But it was also identified as the “best” brand, among all others, meaning that when respondents were asked to “fill-in-the-blank” on their favorite brand, Amazon was the number one response. Its dominance over every other retailer we asked customers to rank was definitive, with double-digit leads over the rest of the competition. When asked what retailer “gets me,” Amazon was chosen as the top brand by 75% of respondents (compared to 81% in 2018 and 79% in 2017). Meanwhile, Walmart was chosen as a retailer that “gets me,” by only 51% of respondents (compared to 56% in 2018 and 53% in 2017). And while Amazon might have “slipped” a bit in the most recent report, they are still 24 percentage points ahead of the next closest brand (Walmart). In short, Amazon’s unchallenged first position should deeply worry Walmart.
Faced with this finding, we dug deeper. Was there a demographic explanation? Was the split consistent along income lines? How did these polarizing responses break out along gender, income, and generational lines?
As we searched for answers, we did find some good news for the world’s largest retailer. The people who love Walmart, really do love Walmart. That loyalty is built around one theme. Price. Price. Price. Price. Price. That was the sentiment echoed by a variety of customers: a 30-something man with a household income over $150,000, a 30-something man with an income over $100,000, a 40-something female with an income around $50,000, a 20-something male with an income over $100,000 and a 20-something female with an income under $50,000. In addition Walmart fans cited selection and variety as two other big reasons for loving the brand.
But on the bad news front, the people who don’t like Walmart, really don’t like Walmart, with the consistent and unifying gripe—customer service and associates. Once again, it didn’t matter what the income level, gender, or age of the respondent was—frustration with the retailer’s customer service was shared by almost all respondents. “Prices are low, but customer service is poor,” according to a woman with a household income around $40,000, who added: “So is the treatment of the workers.”
These results are nothing less than an existential indictment against the world’s largest retailer. After all, customer service is—or should be—Walmart’s most viable defense against its biggest rival: Amazon. But it isn’t. At least for half its customer base. A typical response on Amazon’s customer service, across gender, income level and age: “Customer service is amazing.”
If Amazon manages to elicit almost universal admiration from its customer base, while Walmart only does among half its customer base, what might be done to fix the situation. Or put another way: Can Walmart turn its haters into fans?
Our research indicates there might be some underlying demographic explanations, but we do not believe it is the determining factor, Amazon, after all, is admired across all income levels, genders, and ages.
Consider the average household income for Prime users—$150k. That’s more than triple the typical Walmart shopper. The average Walmart shopper is a white, 51-year-old female with an annual household income of $56k.2
In a recent strategy meeting, Walmart’s CEO Doug McMillon announced that the centerpiece of his plan to thrive in an e-commerce era is…their giant stores. The below diagram appeared in a recent Wall Street Journal article depicting Walmart’s strategy with their supercenters at the core. You see new services (and revenue streams) being added like unattended delivery, health clinics and even digital advertising (Amazon is the third largest US seller of online advertising3). Putting their brick-and-mortar footprint at the center of their plans seems like a solid idea given it’s their biggest differentiator against Amazon and that more than half of Walmart’s 40% growth in U.S. e-commerce sales last year came from expanding online grocery pickup or delivery service run out of stores.4
Consistent with our research findings, Walmart also recognizes it needs to make improvements on the customer service front, and they’re starting with improving employee circumstances. While Amazon recently increased its minimum wage to $15 per hour, Walmart increased its wages to at least $11 per hour and started a five-year, $100 million Retail Opportunity Initiative5 designed to increase employee education opportunities and to retain more employees through the prospect of career advancement.
In the end, only more research might unearth what’s really going on here. Is this divide within Walmart’s customer base reconcilable? One thing is certain: Complacency shouldn’t win. For a brand as big as Walmart, competing with Amazon will not allow settling for a 50-50 split between lovers and haters. It’s a tall task, but Walmart may have the best shot to steal the “America’s Favorite” title from Amazon.