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Sara Lebow (00:00):

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(00:25):

Hello, listeners. Today is Wednesday, July 2nd. Welcome to Behind the Numbers: Reimagining Retail, an EMARKETER podcast made Possible by Quad. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebow. Today's episode topic is Walmart in 2025.

(00:49):

Before we get into that, let's meet today's guests. Joining me for today's episode, we have two regulars. First up, it's Suzy Davidkhanian. Hey, Suzy.

Suzy Davidkhanian (00:59):

Hey, Sarah.

Sara Lebow (01:00):

Also with us, another regular, Rachel Wolff. Hi, Rachel.

Rachel Wolff (01:03):

Hey, how you doing?

Sara Lebow (01:05):

Good. Okay, let's jump in. Walmart turned 63 today, so we're going to talk about Walmart. We're also just a few days out from both Walmart and Amazon's summer sales, Prime for Amazon. Prime's actually turning 10 this year, and Walmart Deals for... Well, you can guess who that is for. Walmart Deals comes a couple of months after the company made headlines for saying that it may raise prices due to tariffs. Why was it such a big deal that Walmart made the statement that they might raise prices?

Rachel Wolff (01:36):

Well, I think there's a few factors, right? One is the timing. They said this right after Amazon got a lot of flak from President Trump for saying... Not even saying, but having a possible plan to display tariff increases on one of their marketplaces. So the fact that Walmart was open about saying that tariffs would raise prices was notable in that sense. And also, it's just a barometer for the broader retail industry. Walmart has arguably more pricing power than any other retailer out there. So if they're raising prices, then you can expect most of the retailers to follow suit.

Sara Lebow (02:14):

Yeah, Walmart also potentially has some political sway. I mean, they do have some political sway. They're huge, so the fact that they made that statement showed some confidence in them wanting to make a statement about tariffs. I started this episode comparing Walmart and Amazon, or at least naming them next to each other. We've also talked in recent podcasts about other competitors like Target and Costco. Is Walmart successfully differentiating itself from its rivals? Suzy, why don't you take this one first?

Suzy Davidkhanian (02:46):

I think so. I mean, I think just by their sheer volume, and the fact that they're trying to do so many different things under one brand, and that they have, like you used Amazon, but I think they compete with everybody from Home Depots of the world, to grocery chains, to Amazon. Their new, sort of, not so new foray into higher end and into fashion will have them pitted against department stores. I think they're at this intersection of so many different categories, all in one place. And then, tied to that, they have the membership program that they're working through. They have a really strong private label that in and of itself differentiates them and drives traffic, and they're working out the delivery and how to do the last mile in a really efficient way. Plus, they have financial arm and TV, and it's just the list goes on and on around how they are so much more complete as a organization than many others.

Sara Lebow (03:45):

Yeah, I mean, as Target consumers and maybe consumers elsewhere get a little tired of both high prices and then varied stances from Target, Walmart is taking steps to sort of attract those customers. Now, Walmart doesn't make political statements that are any more attractive to say, like, a liberal customer than Target's are, but it does tend to have lower prices or at least the appearance of lower prices. And through private label, it's been launching a lot of products that attract the maybe slightly higher-end Target shopper.

Rachel Wolff (04:18):

Yeah, I think it's been a really interesting shift, to see how Walmart is bringing in a more economically diverse, I suppose, audience. Their fastest-growing cohort for the past few quarters has been that high-income earner. And so, as Suzy said, they are really targeting that consumer with a broader assortment of higher-end goods. Like, they just partnered with Rebag, so you could buy a Hermès bag off of Walmart if you so chose.

Suzy Davidkhanian (04:44):

And I also think, in addition to all of the things that we're talking about, they are really thinking about the customer journey from end to end. So not only how do they get you into the fold, how do they keep you, how do they deliver to you, and then how do they get you to come back? It helps that they have such a stronghold in grocery and pharmacy, and these are very high purchase frequency, high intent, sort of in some ways, because you're going in with a purpose, but you're also, they're lower price points, so you're also open to be swayed into other brands potentially, but that makes it so much stickier, and they have fuel. I mean, they're just endlessly-

Sara Lebow (05:21):

Yeah, fuel's a big one.

Suzy Davidkhanian (05:22):

Yeah, doing things to keep people in the fold that they already have, and then to get new people with things like Rebag, as Rachel was saying.

Sara Lebow (05:29):

Yeah, I mean, this won't surprise people, but on a day you're fueling up, you're also likely to visit retailers. You're already out and about and you're already spending money, you're likely fueling up as part of a shopping trip. So attaching fuel to a retailer is a great bet. Walmart also has been doing a lot with pet. Suzy, I think two years ago you predicted Walmart would lean into pet and then they did. Am I making that up?

Suzy Davidkhanian (05:51):

I mean, I wouldn't be surprised. I feel like I've [inaudible 00:05:54]-

Sara Lebow (05:54):

I think you did that on the [inaudible 00:05:55]-

Suzy Davidkhanian (05:55):

... predictions. [inaudible 00:05:57] would not agree, but when Starbucks does have a stable coin that they allege, "Be ready, you heard it here first."

Sara Lebow (06:04):

For more on that, listen to the rest of the episodes of the Behind the Numbers podcast. But zooming back in on Walmart, we've talked about a lot of different corners of their business. If you were to make a pie that describes what drives Walmart's success, what ingredients would you include and what percentage of each ingredient?

Suzy Davidkhanian (06:24):

I don't mind going first, I have to announce that, in true Suzy fashion, I may have taken this in a slightly different direction.

Sara Lebow (06:32):

Are you making a cake, or-

Suzy Davidkhanian (06:33):

But it's still a pie.

Sara Lebow (06:34):

Okay.

Suzy Davidkhanian (06:34):

No, no, I'm still making a pie. I just changed my ingredients to be a little bit more inclusive. So my 50% is their data capabilities, and that's everything from the membership program to how they have so many omni-channel experiences, so that they can connect the dots between your in-store and online experience. The sheer number of categories and SKUs. I mean, I could go on and on about how much data they're getting from us, but they're also using that data to then refuel back into their system, their retail media component, where they're making high-margin dollars on our data in some ways, if you will. They are using the data to then think about membership components. They're using it to personalize, and make recommendations, and get us back into their fold. So that was, for me, 50%.

Sara Lebow (07:21):

Yeah, before you jump into the second half of the pie, I just want to point out how important that is specifically for Walmart. Walmart's strength... Oh, you might be about to say this. Walmart's strength is in its giant footprint, which means it needs to be able to attribute its media dollars to in-store sales. That can be really difficult. It can be really difficult as a retail media business to prove what ads online drove sales in store, and so it's very important that Walmart has that data and that capability.

Suzy Davidkhanian (07:52):

Yes.

Sara Lebow (07:52):

Give me the rest of your pie.

Suzy Davidkhanian (07:54):

Okay, so in addition to data, and my 30% is on the tech component, they have a really, really strong technology group, and I know they've had some ups and downs in that group, but they are able to harness technology to make a really... Like, to think about the consumer experience and the workplace, workforce experience in a different way. They're able to make everything feel and seem smoother on the corporate side and the store side, on the distribution side.

(08:26):

I think they're also using a lot of robotics. We're going to talk a little bit later about their delivery, which is all tech related, their checkout-free stores. I think they're spending a lot of time leading into technology. And so that's the 30%. And then I have 20% for I think they're always willing to take a risk and pivot. So they're trying live stream shopping, it hasn't always worked. They're trying it in different ways. They tried that rom-com. Remember when we talked about it with Blake where it was like shoppable media? They've to do flash sales.

Sara Lebow (08:55):

Oh, my God, I forgot about that.

Suzy Davidkhanian (08:57):

Yeah, they really try. They lean in really heavily in influencers and creators for the back-to-school season.

Sara Lebow (08:57):

Yeah, they have a huge influencer program.

Suzy Davidkhanian (09:05):

Yeah, they're now, the latest, I think, is that they're doing the dark stores, which is new for them, and that's-

Sara Lebow (09:12):

Can you explain what a dark store is?

Suzy Davidkhanian (09:13):

Yeah, they're trying to see, they're piloting it, so they have just one where a store footprint will be the distribution center. So the most often sold goods in that local area will be going straight to that store, which they're calling a dark store, instead of going through a distribution center, to the store, and then to the consumer. But I could go on, they're elevating their private label. They just launched something new, really foreign to them. They were all about more basics, and now they're doing that. So I think for me, those are the three things. Their data, 50%, 30% tech, and 20% their willingness to take risks and pivot as needed.

Sara Lebow (09:50):

Okay. Rachel, what's in your pie?

Rachel Wolff (09:53):

So I think my pie is maybe a little bit more conventional, just looking at Walmart's strengths. So I put 40% I would say to their grocery business, because I think that's just a huge driver for them. As Suzy was saying before, it just gets people into the store, and that is the opening point for all of the other incremental sales they can drive for general merchandise and so on. So 40% there.

(10:16):

I would say another 40% again to their overall value strategy, their ability to pressure suppliers to keep prices low, going back to private label, all the things that they're doing there. And then, I guess as part of the whole value offering, what they're doing with convenience and faster delivery.

(10:32):

And that kind of goes into the third piece of the pie, which as you mentioned earlier, is their store footprint, right? It's huge. And not only are a lot of people going to their stores, but they are able to use their stores as fulfillment centers, again, to get goods to people faster. It's a crucial part of their retail media proposition. So all of these things I think work together.

Sara Lebow (10:54):

Rachel, you mentioned what Walmart is doing with convenience. What are they doing with convenience?

Rachel Wolff (10:58):

So I mean, when we think of convenience, I think Amazon often comes up as the top player, but really, Walmart is, I would say, neck and neck with Amazon. They are really pushing their same and next-day delivery, but they are reformatting, essentially, their entire fulfillment system in service of that.

Sara Lebow (11:18):

Yeah.

Rachel Wolff (11:19):

And so stores are crucial.

Sara Lebow (11:20):

Stores in general are also just obviously convenient. I'm sitting on some soon-to-be-published data right now that says that convenience, buying something immediately is the number one reason people go into stores, which I think is unsurprising, but is important.

(11:34):

Some other things that we didn't call out specifically that I think could maybe make good toppings for this pie or maybe are folded into some of the ingredients are Walmart's retail media business in particular. It's the second biggest retail media business in the US, after Amazon buy a long gap, but still after Amazon. And in addition that it's marketplace. Walmart has really expanded its marketplace recently, and you mentioned this earlier, Suzy, but fuel, gas, I think that that's really important that Walmart has that involved as well.

(12:06):

So Suzy, one of your pie pieces was technology. I want to talk about what technology is most likely to drive Walmart forward and keep them a successful business that's been around for 63 years. So Suzy, why don't you go first again for this one?

Suzy Davidkhanian (12:22):

Sure. So I was assigned Sparky, but I happily took it because I think-

Sara Lebow (12:29):

Don't give away how much we prep for this.

Suzy Davidkhanian (12:31):

I think one of the things we forget in dated companies is that there's this aura of sparkle that comes with headlines and Walmart leaning into all things AI, from agentic, to gen AI, to regular predictive AI modeling. All of that sort of helps give that allure of newness and more modern. And so Sparky, for me, is that continuation of that allure, but it is of course more than an allure. It's helping them with their margin, it's guaranteed. They started, if you remember two years ago, we didn't stop talking about it, NRF, the help me plan a unicorn birthday party, right? They were using their regular search function to understand natural language. It was more than one-word searches to help you with something, right?

Sara Lebow (13:13):

Was that a party for a unicorn or themed unicorn?

Suzy Davidkhanian (13:17):

Themed unicorn.

Sara Lebow (13:18):

Okay.

Suzy Davidkhanian (13:19):

You're right, fine. Good call out.

Sara Lebow (13:20):

Was fun.

Suzy Davidkhanian (13:22):

Good call out. Then, they went earlier this year. I mean, I'm just talking about a couple of the splashy things, so it's no surprise that Sparky came next. Earlier this year, they launched Wally, which is their workforce tool to make the workforce, both corporate and in-store, smarter. And that was everything from how do you make sure that someone in the store can help get to merchandise faster? How do you help with retraining? How do you help with inventory planning? How do you help save time and energy across all parts of their business and make processes a little bit more fluid so that people, the employees, have more time to do other "higher-value", quote, unquote, activities? And so now, not that long ago or earlier in June, they launched Sparky, which is a consumer-facing smiley face on their app, which I don't know who I was talking about the Microsoft paperclip helper thing, remember?

Sara Lebow (14:14):

I'm always talking about Clippy. It wasn't me, but I'm constantly talking about Clippy and all of these brands are launching their own Clippies now.

Suzy Davidkhanian (14:21):

Yes, so this smiley face kind of reminds me of that. It didn't succeed then, they were ahead of the time, but maybe it'll succeed now, Clippy, but it's a task-based thing, doohickey, that's helping you as a customer, whether you're in store or online, as long as you're on the app, to get help with whatever you're looking for. And it'll help you do things like reorder, track, recommend. But given how big you guys have both talked about their marketplace and how many SKUs they have, having a helper bee that knows you, and understands you, and knows your context, and help you get through all of the different SKUs to what you need at the price point you're willing to pay when you need it, I think is really a game changer.

Rachel Wolff (15:03):

I think what interests me about Sparky as well is that they're positioning it as like a general assistant. So it will help you with your shopping, but you can also ask it general questions like, "What's the weather?" And then, it can give you recommendations based on that, or, "What sports teams are playing tonight?" So all of these tidbits of information that may not come up necessarily in your shopping journey, but the point is just to get you to Walmart and to get you to ask it anything you like.

Sara Lebow (15:28):

How do you guys feel this compares with Amazon Rufus?

Rachel Wolff (15:32):

Well, I think going back to that, Rufus is very much focused on, "What does the product do? Does it fit your requirements, or is this the best fit for you?" Whereas, again, this feels like more of a general-purpose tool that's building to a broader agentic experience.

Suzy Davidkhanian (15:48):

And I think this, because it's layers to the foundation, it really signals that they're willing to use AI to streamline a lot of the different both internal and consumer-facing tasks that are there to help you. And you could even do things like, "I'm traveling to so-and-so in this month, so help me figure out what I need to purchase for that," and it'll give you... It's like one level further along than Rufus, that original AI helped me plan a one-year old's unicorn themed birthday party is like Rufus versus this is that next level.

Sara Lebow (16:21):

And the next one will let you plan a birthday party for a unicorn. Rachel, what is a tech you think is driving Walmart forward?

Rachel Wolff (16:31):

All right, so my assigned-

Sara Lebow (16:32):

Oh, my goodness. It sounds like I'm like doling out mandatory assignments. Everyone has to be on my podcast.

Rachel Wolff (16:42):

I volunteered for this one, I will say. Okay, so we talked about delivery, what Walmart is doing delivery more broadly, but I'm going to hone in on a few of the specifics that they're doing in the space. So they announced in April, they totally redesigned, really, their delivery system using what they call an advanced geospatial tech. So basically, they divided geographical areas into these sort of hexagonal grids. If you look at it, it looks like a beehive. And the idea is to optimize delivery, so that can map delivery areas more accurately and get orders to consumers faster. So they said by doing this, I think they said 12 million more customers now have access to faster delivery.

(17:28):

And the more notable thing is that a single order can now be fulfilled by multiple stores that are within the grid, as opposed to, in the past, you might have an order where things were coming from different stores and they would have to come at different times. And so it's just a less efficient experience. So I think for them, this is a game changer in the way that Amazon's hub and spoke model is the game changer for their fulfillment network. It gets orders to customers faster, it makes the organization as a whole more efficient. And for Walmart, which says that their e-commerce business is going to be profitable by this year, I think this is clearly an important step to get there. And then, as a sort of corollary to that, they are also trialing drone delivery. So that's another way to get stuff to people faster, whether people want it-

Sara Lebow (18:17):

Yeah, is drone delivery ever going to happen?

Suzy Davidkhanian (18:19):

I mean, they're piloting it.

Sara Lebow (18:20):

Should these companies stop trying to make drone delivery happen, or is it like maybe it'll catch on?

Rachel Wolff (18:26):

I mean, I feel like I'm skeptical. I think that it has its uses. The example that keeps getting trotted up is parents who run out of diapers and desperately need them, or if you need medication flown to you. But I think in the grand scheme of things, will drone delivery be a regular part of people's lives? I don't think so.

Suzy Davidkhanian (18:44):

And I don't remember what it was that I thought drone can work on certain categories. I don't think Walmart is the right one, because they're everywhere. And so if you really need something in a pinch, there's also other things that you can do to get it. But I do think it helps shape consumer perception. Consumers aren't going to understand the beehive, which is amazing and really, really a big deal. But they are going to be like, "Oh, and Walmart is trying drone delivery. That's so cool. They must not be so dated and rural, right? They must be kind of modern and cool."

Rachel Wolff (19:15):

Yeah, I mean, what they said was that a lot of the people who are testing their service are just interested in it. They're curious as to how it works. And I think probably if you live in any of these neighborhoods and you see drones flying overhead constantly, you might be at least a little bit intrigued.

Sara Lebow (19:28):

This is consistent with my take, which is that I think drone delivery is a brand marketing play to get your brand talked about, seen. But that's okay, that's important. My technology that I was assigned, that I was actually assigned, because I chose last, that will drive Walmart forward is its deal with Vizio. So about a year ago, Walmart bought Vizio. Vizio is a CTV manufacturer, TV manufacturer. And in doing that, Walmart really helped out its retail media business, not only because it got its hands on a lot more data, but because Walmart accounts for, right now, about 8% of retail media spend and growing. It already has excellent data, but it doesn't necessarily have places to put ads for engaged viewers. When we talk about retail media, obviously Walmart has on-site retail media ads. Vizio allows for more engaged CTV ads coming directly from Walmart.

(20:27):

It also helps unlock more in-store ads. Walmart really piloted the wall of TVs showing ads in store. Having its own TVs in store can help make those ads even more powerful, connect it to Walmart's own data. Those are some examples of technology that is working really well for Walmart, and we also know that its footprint works really well for it. Approximately 90% of the US population lives within 10 miles of a Walmart or Sam's Club. That's Walmart's big stat that they have all over their website. Other retailers can't replicate Walmart's footprint. Some grocery stores can, but in large part, they just aren't going to be able to match that footprint. What can other retailers replicate?

Rachel Wolff (21:10):

Well, I think, as Suzy was saying before, Walmart's willingness to experiment with technology and to lean into the cutting edge, whether it's GenAI in its infancy or now agentic AI, just making sure that they are investing in the tools that will give their employees the opportunity to be more efficient and just make the customer journey more seamless.

Suzy Davidkhanian (21:33):

I had three.

Sara Lebow (21:35):

Perfect.

Suzy Davidkhanian (21:36):

I like thinking in threes, like the pie. One is to lean into what you're good at, but don't sacrifice the things that are adjacent to what you're good at. So in this instance, Walmart is very good at value pricing and very low-cost private label. But as they start to think about their changing consumers and customer base, that they are open to other categories. And so retailers should know who your core customer is, but what else they're willing to buy, if anything else, and try and lean into that.

(22:08):

I think you should absolutely, number two, listen to your customers, analyze the data, look at the shifting patterns, understand the macro view, but also what's going on within your stores and online properties in all channels, really, to see what you should be doing to pivot where you can.

(22:24):

And third, which is similar to what Rachel said, I think it's really important to experiment across every business unit, in store, online, in the corporate offices, and to not penalize people for failed attempts. Like, the dark stores might not work. Maybe they're going to sacrifice some stores that are not amazing stores, but they could still be using those stores as distribution centers and have people shop in them, and then they'll just go back to what they were doing before, and that's okay.

Sara Lebow (22:49):

Yeah, the difference between Walmart and a smaller retailer, though, is that Walmart has that money to maybe experiment with, for a better term than lose. They have the budget to throw at a new idea, and a smaller retailer might not be able to take on that risk.

Suzy Davidkhanian (23:05):

Absolutely, right? Everybody's pockets are different depths, but I think that you can experiment, and try new things, and do A/B testing. You don't need to throw money at something. You can just do A/B testing or do consumer research, and ask customers where you can bend more or try new things. I'm pretty sure that some of those GPT tools will be, or the agentic tools, will be able to help you figure out where you can experiment and it not cost you so much money. If it's not now, it'll be in the very near future.

Sara Lebow (23:35):

Yeah, you can definitely make your own Clippy and it can be whatever you want it to be.

Rachel Wolff (23:40):

Yeah. The only thing I'll add is that I also think that it's important for retailers to think about what strategic partnerships they can make that could help them boost their business, whether that's as a retail media company partnering with another platform that has adjacent competencies, so you can broaden your appeal to advertisers, or, I mean, I think one of the smartest things that Walmart did was to partner with American Express Platinum, and that really helped them gain access to an entirely new customer base that they were under-indexing with before. So if you can find opportunities like that, that will get your company in front of a new audience that maybe didn't think of you in that way, I think that would be a huge growth opportunity.

Sara Lebow (24:21):

I love that. That's a great note to end on, so thank you so much for being here, Rachel.

Rachel Wolff (24:25):

Thanks for having me.

Sara Lebow (24:26):

Thank you, Suzy.

Suzy Davidkhanian (24:27):

Thank you.

Sara Lebow (24:28):

Thank you to our listeners and to our team that edits the podcast. 90% of these recordings take place within 10 feet of one of our editors. Please leave a comment or a review and remember to subscribe to the Behind the Numbers podcast. We'll be back next Wednesday with another episode of Reimagining Retail, an EMARKETER podcast made possible by Quad.