Walmart

Walmart and its usage of human psychology in its growth story

Walmart
Walmart

In the recent earnings report of the last quarter, Walmart’s revenues were up by more than 2 billion dollars than what the analysts had anticipated. This was due to an increase in same-store sales and digital sales which were up by 10% and 74% respectively. In a time when the economy is crippling and businesses shutting down, how did Walmart manage to increase sales? Is it because of Walmart’s marketing or pricing strategy? Well, it turns out that this time, these business strategies took a back seat and the lead was taken over by human psychology and Walmart just happened to be one of the platforms to satisfy these psychology needs due to its business structure.

What is Hierarchy of Needs”? Ask any MBA student and she/he will be able to recollect the name, Abraham Maslow. MBA candidates are taught about the theory of motivation, which was developed by Maslow in the year 1943. It basically describes the motivational ladder for a human being and has broken down into 5 pyramidal stages.

Image Source (Blogspot)

This pyramid shows how humans move up in the need hierarchy. Every human strives to fulfill the basic needs of life which include food, water, shelter, safety etc. Only after these are satisfied, they would move towards all other activities of life. Therefore, to motivate people, it is important to satisfy the bottommost part first. As per Maslow, in the category of basic needs, physiological comes before safety and security.

But how is psychology related to Walmart’s growth?

Walmart is a superstore. This store thrives to satisfy all the needs that a human can possibly have. It has products ranging from paper napkins to bicycles. Therefore, naturally in this time of crisis, one would look for a place where all the need-based products are available under one roof. But the interesting thing to note in this crisis period is that the needs of the customer were changing every week, as cited by Walmart’s CEO. These needs can be broken down into 4 phases.

Walmart sales trend in the US
Walmart sales trend in the US

During this period

  • Grocery pick and delivery reached an all-time high
  • Consumer good sales were led by paper goods and household chemicals
  • Apparel and auto care were in the red zone
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The above trend shows how consumers changed their preferences over time. As people realised the intensity of the health crisis, everybody wanted to be safe, by stocking up necessary sanitizing materials. Probably, they had enough food supplies and hence this came in the 2nd phase. As people realised that lockdown is the new mode of life and their basic needs are satisfied, they moved on to educate and entertain themselves. Finally, as the US government announced stimulus packages, discretionary purchases went up.

The connection

Left: Maslow’s hierarchy of needs | Right: Walmart’s sales trend over the lockdown period

Taking advantage

Since Walmart and other stores have realised this, they can use it to their advantage. In fact, Walmart is now monitoring consumer behaviour every week and is following Maslow’s approach to managing the inventory. Such stores serve as a good platform to match these needs of the consumers. In the time of crisis or even otherwise, this theory is always applicable. The key is to identify the next pile of the pyramid and plan accordingly.


Author: Aayush Saraogi

Aayush is a blogger by choice and a project manager by design. Being curious is his style and with his newfound interest in psychology, he tries to decipher business concepts for his readers.



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