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:
http://filene.org/publications/detail/walmart

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Filene - The Blended Walmart Business Model

  1. 1. ///////////////////////////////////////////////////////////////////////////// THE BLENDED WALMART BUSINESS MODEL///////////////////////////////////////////////////////////////////////////// brent dixon, advisor, filene research institute
  2. 2. Walmart invites banks and creditunions in to lease space. Hands up?
  3. 3. Win-win! All love! Convenience andmutual happiness abounds.
  4. 4. Meanwhile, they’re ramping up theirMoneyCenters.
  5. 5. MONEYCENTER PRODUCTS MONEYCARD PREPAID DEBIT CARD
  6. 6. MONEYCENTER PRODUCTS CHECK CASHING & BILL PAY $3...Or free if deposited on MoneyCard. Check cashing is 30 - 50% less than typical competition.
  7. 7. MONEYCENTER PRODUCTS CREDIT CARDS Closed and open loop
  8. 8. MONEYCENTER PRODUCTS SHAREBUILDER INVESTMENT ACCOUNTS No fees, no minimums, $25 bonus for new account
  9. 9. MONEYCENTER PRODUCTS MONEY TRANSFERS $24B market to Mexico alone; fees start at $7 for $200 sent. Approximately 50% Western Union cost.
  10. 10. And none of these even need abanking charter.
  11. 11. Next? Walmart kicks out leasingbanks and credit unions.(For example, in 2001.)
  12. 12. Do you think those customers and members stopped doing their financial services at Walmart?
  13. 13. Back to this:Meanwhile, Walmart is trying to geta bank charter in the States.
  14. 14. ADVANTAGES:1. Reduced interchange2. Ability to issue & process branded products3. Cross-promotional opportunities
  15. 15. 1999: Attempted to acquireFederal BankCentre.
  16. 16. BLOCKED.
  17. 17. 2001: Attempted joint venturewith Toronto Dominion (TD)Bank.
  18. 18. BLOCKED.
  19. 19. 2002: Attempted acquisition ofFranklin Bank.
  20. 20. BLOCKED.
  21. 21. 2005: Applied directly to be anILC (Industrial Loan Company).
  22. 22. BLOCKED.
  23. 23. And when asked about themotivation, Walmart spokespeoplesay...
  24. 24. “Bank branches?! No way. Nah,man. Naaaaaahhhhh.”
  25. 25. “We just want to save money on merchantfees. Full-service branches. Ha.”
  26. 26. “ ... “
  27. 27. (MEANWHILE, IN MEXICO...)
  28. 28. 2007: Attempts to open BancoWalmart.
  29. 29. BOOM.
  30. 30. • Basic savingsPRODUCTS IN • Prepaid debit • Checking w/ debitMEXICO • Regular savings • CDs • Store credit card • Open credit card
  31. 31. YEAR 1 YEAR 2 YEAR 3 YEAR 41st branch 16 branches 38 branches 157 branches
  32. 32. (WHAT DOES THIS HAVE TO DO WITH US?)
  33. 33. 2008
  34. 34. 2010
  35. 35. 2010
  36. 36. WHEN, NOT IF.
  37. 37. 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
  38. 38. BLENDED BUSINESS MODELADVANTAGES:“Walmart could cross-subsidize across allfive to maximize overall profitability.”
  39. 39. ADVANTAGES: TARGET MARKET“Walmart retail model is attractive toearly-stage financial consumers.” • Young Adults • Immigrants • Families • Low-Income
  40. 40. ADVANTAGES: BRAND“Walmart’s branding as low-costleader is attractive to rate-/fee-sensitiveconsumers.”
  41. 41. Not price-competitiveon allproducts.
  42. 42. ADVANTAGES: CONVENIENCE“Walmart’s convenience benefits aredifficult to counter.”
  43. 43. 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.”
  44. 44. QUESTIONS FROMDR. MANNING
  45. 45. What innovative approaches and new services are youdeveloping that will differentiate you from the generic financial services offered by Walmart?
  46. 46. In response to the Walmart blended business model, what strategic partnerships are youforging with other retailers and community organizations?
  47. 47. What welcoming social spaces can you develop that will attract the nextgeneration of credit union members?
  48. 48. 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.
  49. 49. QUESTIONS?EMAIL ME: brentd@filene.orgCALL ME: (214) 736-4505TWEET ME: WWW.TWITTER.COM/ITSJUSTBRENTLET’S KEEP THECONVERSATION GOING

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