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Filene - The Blended Walmart Business Model
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Filene - The Blended Walmart Business Model

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The high points from the Filene Research Institute's special report on Walmart's Blended Business Model and its implications on the financial industry:

The high points from the Filene Research Institute's special report on Walmart's Blended Business Model and its implications on the financial industry:
http://filene.org/publications/detail/walmart

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Filene - The Blended Walmart Business Model Filene - The Blended Walmart Business Model Presentation Transcript

  • ///////////////////////////////////////////////////////////////////////////// THE BLENDED WALMART BUSINESS MODEL///////////////////////////////////////////////////////////////////////////// brent dixon, advisor, filene research institute
  • Walmart invites banks and creditunions in to lease space. Hands up?
  • Win-win! All love! Convenience andmutual happiness abounds.
  • Meanwhile, they’re ramping up theirMoneyCenters.
  • MONEYCENTER PRODUCTS MONEYCARD PREPAID DEBIT CARD
  • MONEYCENTER PRODUCTS CHECK CASHING & BILL PAY $3...Or free if deposited on MoneyCard. Check cashing is 30 - 50% less than typical competition.
  • MONEYCENTER PRODUCTS CREDIT CARDS Closed and open loop
  • MONEYCENTER PRODUCTS SHAREBUILDER INVESTMENT ACCOUNTS No fees, no minimums, $25 bonus for new account
  • MONEYCENTER PRODUCTS MONEY TRANSFERS $24B market to Mexico alone; fees start at $7 for $200 sent. Approximately 50% Western Union cost.
  • And none of these even need abanking charter.
  • Next? Walmart kicks out leasingbanks and credit unions.(For example, in 2001.)
  • Do you think those customers and members stopped doing their financial services at Walmart?
  • Back to this:Meanwhile, Walmart is trying to geta bank charter in the States.
  • ADVANTAGES:1. Reduced interchange2. Ability to issue & process branded products3. Cross-promotional opportunities
  • 1999: Attempted to acquireFederal BankCentre.
  • BLOCKED.
  • 2001: Attempted joint venturewith Toronto Dominion (TD)Bank.
  • BLOCKED.
  • 2002: Attempted acquisition ofFranklin Bank.
  • BLOCKED.
  • 2005: Applied directly to be anILC (Industrial Loan Company).
  • BLOCKED.
  • And when asked about themotivation, Walmart spokespeoplesay...
  • “Bank branches?! No way. Nah,man. Naaaaaahhhhh.”
  • “We just want to save money on merchantfees. Full-service branches. Ha.”
  • “ ... “
  • (MEANWHILE, IN MEXICO...)
  • 2007: Attempts to open BancoWalmart.
  • BOOM.
  • • Basic savingsPRODUCTS IN • Prepaid debit • Checking w/ debitMEXICO • Regular savings • CDs • Store credit card • Open credit card
  • YEAR 1 YEAR 2 YEAR 3 YEAR 41st branch 16 branches 38 branches 157 branches
  • (WHAT DOES THIS HAVE TO DO WITH US?)
  • 2008
  • 2010
  • 2010
  • WHEN, NOT IF.
  • BLENDED BUSINESS MODEL• Merchandise sales• Finance income from in-store purchases• Finance income from open-loop purchases• Fee income from transactional products• Finance income from installment loans
  • BLENDED BUSINESS MODELADVANTAGES:“Walmart could cross-subsidize across allfive to maximize overall profitability.”
  • ADVANTAGES: TARGET MARKET“Walmart retail model is attractive toearly-stage financial consumers.” • Young Adults • Immigrants • Families • Low-Income
  • ADVANTAGES: BRAND“Walmart’s branding as low-costleader is attractive to rate-/fee-sensitiveconsumers.”
  • Not price-competitiveon allproducts.
  • ADVANTAGES: CONVENIENCE“Walmart’s convenience benefits aredifficult to counter.”
  • BLENDED MODEL MEANS MOREROOM FOR PRICE CUTS.Reduced fees “serve as a loss leader toattract low-income and unbankedcustomers so that they will purchasemore retail merchandise at Walmart.”
  • QUESTIONS FROMDR. MANNING
  • What innovative approaches and new services are youdeveloping that will differentiate you from the generic financial services offered by Walmart?
  • In response to the Walmart blended business model, what strategic partnerships are youforging with other retailers and community organizations?
  • What welcoming social spaces can you develop that will attract the nextgeneration of credit union members?
  • If the answer is very little, then you may be shocked when few of your members services arewhen your credit union’s carereplaced by a MoneyCenter at the local Walmart Supercenter.
  • QUESTIONS?EMAIL ME: brentd@filene.orgCALL ME: (214) 736-4505TWEET ME: WWW.TWITTER.COM/ITSJUSTBRENTLET’S KEEP THECONVERSATION GOING