Walmart: Nfc-aving Prices

Walmart can aid CPG brand loyalty by implementing smart packaging for ease of repurchase.

Walmart can aid CPG brand loyalty by implementing smart packaging for ease of repurchase.

Dashing Away From The Stores

The $4.8-trillion retail industry in the U.S. stands at a crossroads. As customers increasingly demand convenience as a cornerstone of the buying experience, e-commerce platforms are becoming a critical piece of the retail industry. E-commerce has become a new sales channel for retailers to reach consumers. This platform has disrupted the retail industry’s traditional brick-and-mortar sales channel, causing significant declines in foot traffic and in-person sales. Retail store visits fell from 35 billion in 2009 to 17 billion in 2013. In contrast, retail sales from e-commerce platforms are growing rapidly; having accounted for $130 billion of total online sales in 2009, sales grew to $211 billion by 2013.

In the retail industry, two firms occupy opposite ends of the e-commerce spectrum: Walmart and Amazon. Walmart has long been a behemoth in the brick-and-mortar retail space. With $353 billion in 2015 U.S. revenues and 5,163 stores in the U.S., it has three times the sales of its closest competitor. Amazon, only founded in 1994, has dominated the e-commerce space, commanding 68 per cent of the mass merchant e-retailer market in the US. Walmart, by comparison, represents just 10 per cent of this market. However, Walmart is poised for growth in the sector with its latest acquisition of, an online market place that discounts more as customers shop more

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Behind Amazon’s success as the leader of e-commerce is the technological innovations it brings to customers that streamline the purchasing process. Amazon, over time, has been able to establish itself as a credible force within the retail industry, advancing the industry as a whole. To maintain a competitive advantage, Amazon has focused on improving the customer experience with the introduction of features such as one-click purchasing, open B2B marketplaces, and, most recently, the Amazon Dash Button

Dash Button, launched in March 2015, is a goods-ordering service which uses a small handheld device to facilitate the purchase of specific consumer-packaged goods (CPGs) from Each device features an embedded button and is embellished with the logo of the brand from which the device purchases products from. Pressing the button sends a Wi-Fi signal to the Amazon Shopping app, which places an order for a specified quantity of the respective item, to then be shipped directly to the customer’s home address. The value proposition of this product is the faster rate of product replenishment, leading to an increase in product loyalty.

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While the most tangible benefit of Dash Button is its convenience, Amazon’s is poised to pull consumers away from brick-and-mortar channels and further integrate e-commerce into customers’ daily experience. Retail giants operating predominantly offline are the first to be exposed to this threat. It is this impending threat that suggests that Walmart should proactively embrace the e-commerce ecosystem before Amazon and similar online giants begin to nullify its power in the retail space.

Despite its high hopes, Dash Button has not realized the success it initially sought. In a study, it was discovered that only 0.1 per cent of the sample size have purchased a Dash Button. Additionally, fewer than 50 per cent of those who own the button have even used it. The failure of this technology to capture consumers presents an opportunity for Walmart.

With declining consumer interest for the traditional sales channels Walmart offers and rising threats from Amazon, Walmart should capitalize on trending e-commerce growth. Its acquisition of provides new customer-friendly features and its underlying brand equity within the retail space will ensure it gains traction. However, Walmart will need to complement its existing e-commerce platform with technological innovations to directly compete with improvements like the Dash Button. There is opportunity in Walmart maintaining its share of consumers by converting existing brick-and-mortar shoppers to their e-commerce platform. The bridge lies in creating a portal to e-commerce from the brick-and-mortar stores by targeting shoppers in a way that the Dash Button could not. A technology exists that will spearhead Walmart’s evolution to an e-commerce giant: Near Field

Being Intelligent With Packaging

Smart packaging includes the embedding of technology into product packages. This includes technology such as QR Codes and augmented reality, both of which allow consumers to interact with packaging to learn about a product. Of the technologies that exist today, one innovation that can help solve the issues Walmart faces is NFC chips.

NFC chips operate as part of a link. Activated by another chip, small amounts of data between two devices can be transferred when held inches apart. One application of NFC technology is the triggering of mobile devices for payment services like Apple Pay. Integrating NFC with product packaging could help Walmart revolutionize the way that its customers re-order products through the e-commerce marketplace.

If customers hold an NFC-enabled phone against the packaging of a previously purchased container of detergent at home, it can trigger the e-commerce site to open, add the detergent to their online cart and ship it to their house. The convenience to the consumer is the value proposition of intelligent packaging. Customers will be able to reorder a preferred item without leaving their homes.

NFC could also provide additional product information, recipes and expiration dates for food items, and authenticity checks for premium goods. According to a Deloitte study, 84 per cent of retail store visitors use their smartphones before or during their visits to stores for product information. Those who do are 40 per cent more likely to spend money. By enhancing its digital ecosystem a to include NFC technology, Walmart can migrate from the largest brick-and-mortar store to a key driver of retail innovation.

NFC is the technology of choice due to superior versatility when compared to existing intelligent packaging technologies. Packaging featuring QR codes and Bluetooth beacons, while targeting similar functionality as NFC packaging, have not been well received by consumers because they are inconvenient. QR codes require the customer to download an app to scan the code and Bluetooth beacons push product notifications to the customer’s phone, removing the locus of control form the consumer. In a study by Strategy Analytics, NFC technology produced a 61-per-cent preference when reordering consumables, compared to 20 per cent for QR codes. Furthermore, there is a growing trend in the mobile phone industry towards the integration of NFC chips in phones, and it is estimated that 1.9 billion phones will be NFC-compatible by 2018.

Getting Close To Technology

NFC technology has an edge over the Dash Button because of its low cost, re-programmability and ease of packaging. Brand loyalty and sales channel diversification in the CPG industry are falling in the United States. NFC-based intelligent packaging streamlines the customer purchasing experience to address these issues.

Among the top 100 US CPG brands, 90 have experienced market share declines in the past year. A more fragmented market has resulted in increased consumer brand-shifting, accounting for a 4.4 per cent decrease in sales volume for declining brands. NFC packaging would address the issue of brand loyalty by encouraging the re-purchasing of an item due to the convenience it provides to the consumer. Despite the Dash Button’s commercial failure, studies have shown that the button leads to at least an 80-per-cent brand repurchasing rate for the products it helps reorder. If NFC packaging could emulate or improve on the Dash

Button’s figures, then CPGs would be more than likely to partner with Walmart to generate brand penetration and sustainable revenue sources. The Amazon Dash Button program requires a $200,000-licensing fee from participating CPG firms, as well as an 8-15 per cent commission to Amazon on every product sold. Walmart should structure its membership costs to be competitive with these fees.

Buyer shopping habits are changing as well. Traditional weekly one-stop shopping trips at big-box stores are disappearing. In their place, drug stores, premium grocers and discount chains offer consumers alternative options and are quickly capturing retail share. The diversification of sales channels has pulled consumers from traditional retailers, and an increasing number of consumers are spreading their purchases across a larger number of channels. NFC packaging would transfer these consumers from brick-and-mortar stores to the e-commerce sites where it’s easier for CPG companies to target ideal customers and present their entire product portfolio in one place.

Declining brand loyalty and sales channel diversification presents an opportunity for Walmart to push CPG firms to adopt NFC packaging. The incentive for CPG firms to undertake this technology is the increased repurchasing of same-products and the ease of operating in e-commerce over physical locations.

The introduction of this portal also connects traditional customers to Walmart’s existing digital sales channel. Walmart’s promotion of its e-commerce channel is limited, instead choosing to focus on flyers, print ads, and other traditional advertising which continue to decline in popularity and effectiveness. Flyer readership and response rates have been plummeting in recent years. Walmart’s reliance on traditional channels restricts its reach to younger generations and restricts traditional shoppers from adopting technological advancements. By promoting the use of this new sales channel through known and loved brands, Walmart sets itself up to gain traction in the digitized world and convert traditional shoppers into online shoppers.

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The most tangible benefit Walmart stands to realize is the growth in e-commerce sales it makes from every purchase made through NFC chips. Synergies between CPG firms and Walmart can be strengthened by offering attractive shelf-space or looser credit terms to companies that adopt intelligent packaging. Under this approach, Walmart can better track customer purchasing habits through online profiles, giving it access to valuable payment data.

Customer purchase data could be sold to CPG companies in exchange for discounts or support in growing Walmart’s e-commerce platform. Further, the creation of a direct sales channel linked to a specific good, benefits consumers through convenience and introduces the opportunity to make a transition into e-commerce. Most importantly, these sales channels facilitate interactions between Walmart and its users, creating room for better personalization.

Moving Forward

NFC-enabled intelligent packaging would kick-start Walmart’s e-commerce strategy. By embracing this digital era, Walmart sets itself up to compete directly with online players and helps the brand appeal to younger consumers who buy online.

Moving forward, successful companies will need to integrate new technologies to defend their market shares in the face of a more digitized world. The retail industry has long protected known and loved brands inside the brick-and-mortar stores. A move to e-commerce now threatens that stability. Retail giants must take a proactive approach to tackling the new era of digitization.