In July 2009, Walmart introduced their initiation, support, and funding of the new Walmart Sustainability Index.
What is the Walmart Sustainability Index (WSI)?
Briefly, the WSI is intended to be a ranking of the ecological efficiency of manufactured products. Factors that go into calculating a product’s ecological efficiency are things like the amount of energy used to make the product and how well the product can be recycled after it is used. Walmart wants this ecological ranking to be displayed on each product sold within its stores so that their shoppers can make purchase choices in a “sustainable way.” (Source: Walmart Sustainable Product Index: Fact Sheet, a PDF reachable via http://walmartstores.com/Sustainability/9292.aspx)
This index is often referred to in the press as the Walmart Sustainability Index, just as I have done at the beginning of this post. But, actually calling it such is a bit of a misnomer. They don’t really want the index to be theirs per se. According to the Walmart Fact Sheet, as mentioned above, the WSI is only an initiative created by Walmart. The fact sheet says that the company doesn’t intend to “create or own this index,” but that instead the company intends to help create “a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products – from raw materials to disposal.” Through their own statement, it is clear that they don’t wish to own it; they just wish to initiate it. Yet, since they are the initiators it only seems fair that they should get the credit for it. So, the name Walmart Sustainability Index should stick. And I would think they would want this name to stick, as we shall come to understand later in Part 2 of this post.
Who or what is behind this WSI initiative?
What are the reasons behind wanting to initiate this ecological product ranking? I have two theories as to why Walmart would want to initiate the WSI.
Theory #1
Proposed: Walmart customers are the reason behind the initiation of the WSI.
Premise
All good businesses are customer-centric. As with any good business, and I certainly consider Walmart a good business (otherwise they wouldn’t be the world’s largest retailer), Walmart must be launching this initiative because this WSI service is something that is desired by their customers. Being a good business and customer-centric, Walmart must be responding to the desires of their customers. Yes, that must be it. The initiation of the WSI must be driven by Walmart customer demand. In fact, Walmart leads us to believe that customer-centricity is indeed the reason behind the WSI.
On Walmart’s website, on their Sustainability page, they post the following:
. . . our customers want products that are more efficient, last longer and perform better. They want to know the product’s entire lifecycle. They want to know the materials in the product are safe, that it is made well and is produced in a responsible way.
Most of what Walmart says here is stating the obvious. All customers want efficiency, durability, and top performance from the products they purchase. All customers want to know that the products they buy are safe and well-made. But, where does it say that their customers want to know about the degree of “sustainability,” or ecological efficiency, of the products they purchase? Walmart seemingly makes a big leap here between what their customers say they want and their reasons for the initiation of the WSI. Are you thinking that maybe the sentence “They want to know the product’s entire lifecycle,” supports that leap? I don’t think so because product life cycle means something else and doesn’t necessarily relate directly to sustainability issues.
I’d like to see Walmart’s research backing up this leap that they make. Short of seeing that research, I just have a difficult time believing that Walmart customers are demanding this type of service. Why? Well, let me explain why by taking a look at the Walmart customer.
Findings
- In 2007, according to Supply Chain Digest, Walmart segmented their 200 million customers into the following categories:
- Brand Aspirationals – People with low incomes who are fixated on brand names like KitchenAid;
- Price-Sensitive Affluents – Wealthier shoppers who love deals; and,
- Value-Price Shoppers – Those with like low prices who can’t afford much more. (I know this sentence is not grammatically correct, but it is a direct quote. I think the “with” should be “who.”)
- According to MSN Money, “Walmart customer’s average incomes are below the national average.”
- In 2005, The Washington Post said that the average annual income for the average Walmart customer was $35,000. (Allowing for an inflation rate of 2% per year since then, that brings the average up to only about $38,600 for 2010.)
- A Zogby International poll found that in 2004, 76% of weekly Walmart shoppers voted for George Bush and not John Kerry.
Discussion
Hmmmm. My Theory #1, that the WSI initiative is driven by customer demand, doesn’t seem to be supported by the facts. The facts seem to point to a customer that is concerned mostly with price and value. The facts don’t point to the type of customer that is typically overly concerned with “green” issues. The facts point to a type of customer that wouldn’t seem to care one way or the other about the WSI.
The Supply Chain Digest article said that, using Walmart’s own customer categorization, Walmart customers were segmented only on the basis of value sought, i.e., they want low prices. On pricing, certainly Walmart is customer-centric. Walmart has a reputation for low prices. In fact, all the Walmart TV commercials I see have price as their selling proposition; in not one of those commercials have I ever seen an allusion to “green” issues. And that customer concern with prices appears to be supported given the data on average Walmart customer income as shown by the Washington Post article and the MSN Money post. People earning below average wages would most probably be more interested in low-prices than in a WSI.
That’s the demographic side of the information. Now for some psychographic information.
How do the the political leanings of Walmart customers enter into this argument? Per the Zogby poll info, it seems the average Walmarter in 2004 went for George W. Bush. Well, I could be wrong, but I think it’s safe to say that those who voted for Kerry are probably more “green” leaning than those who voted for Dubya.
Theory #1 Conclusion
No. Theory #1 isn’t supported by the facts.
I don’t think that Walmart customers are the reason behind the initiation of the WSI
The reason for Walmart wanting to initiate the WSI does not appear to be due to customer demand. So the “who” in our question doesn’t seem to be the customer.
So, now it’s time for an alternate theory.
* * *
And you may read that alternate theory in my next post. That post will appear on Tuesday, January 26, 2010. If you are reading this before that date, then please subscribe to the FREE RSS feed so you can receive that article directly. If you are reading this after that date, then simply click here to continue with Part 2 of “Who Is Really Behind the Walmart Sustainability Index?“
