The future of consumerism: Walmart is printing its way to success

By Julian Carrasco and Aristotle Solomon

In recent years, as Wal-Mart’s sales growth stagnates, one wonders whether it will continue to drive the future of consumerism as it has in the past. As Charles Fishman, the author of The Wal-Mart Effect stated, “in the future there is going to be a fundamental shift in the way products are manufactured, which will radically change consumption”. The emergence of 3D-printing can radically change the future of consumption, and it “presents both a threat and opportunity for Wal-Mart”[i]. However, it appears that Wal-Mart is poised to print its way to success in driving the future of consumerism.

What is 3D Printing?

“3D-printing manufactures three dimensional solid objects from a digital file. A digital file is created in a 3D modeling program for printing. When the file is uploaded in a 3D-printer, the printer creates the object layer by layer. The 3D-printer proceeds to create the object by blending each layer together, resulting in one final three dimensional object”[ii]. Advocates of 3D-printing believe that it will change consumerism, because consumers will be able to do their own manufacturing rather than purchasing products from retailers, such as Wal-Mart. From “auto parts, to vacuum accessories, shower heads, light switch plates, holiday ornaments, phone cases, fishing gear and housewares, there is a lot that can be 3D-printed and the technology is evolving fast”[iii].

Is it the End of Wal-Mart and Every Day Low Prices?

Many would like to think that 3D-printing will sound the death knell for Wal-Mart. However, 3D-printing appears to be quite an opportunity. As current Wal-Mart CEO Doug McMillan stated “3D printing is interesting to me”[iv]. By 2017, the 3D-printing market is expected to total ~$6B in revenues, with the consumer market accounting for ~$1.5B[v], and “Wal-Mart could sell them at a colossal scale”[vi]. This technology could enhance Wal-Mart’s online strategy while reducing manufacturing and shrinkage costs. All of which could add up significantly to Wal-Mart’s bottom line.

 What Does 3D-Printing Mean for Wal-Mart’s Business?

E-Commerce

3D-printing can increase Wal-Mart’s online business not only through 3D-printer sales (which Wal-Mart currently does), but also through services. A 3D-printing service would require a web-based system to manage uploads, products, sales, deliveries and tracking. While some products could be ordered through the store, other products can be ordered online. Wal-Mart already has the e-commerce infrastructure in place, where consumers can order items online and have them delivered to their homes or pick them up at its “Grab & Go” lockers. 3D printing services will further enhance the consumers’ omni-channel experience with Wal-Mart to better compete against the likes of Amazon. As apps and games continue to flourish, “Wal-Mart would have the opportunity to integrate its services. For example, the “Lets Create! Pottery” app from Infinite Dreams allows users to design a piece of pottery and submit the design for 3D-printing[vii]. The opportunities are endless, and partnerships between Wal-Mart and app developers are a win-win situation.

Manufacturing   

Although 3D-printing may not completely eliminate manufacturing, the list of products that can be manufactured digitally is growing. Wal-Mart can leverage 3D-printing to manufacture products digitally at the introduction and decline stages of the product lifecycle[viii]. When products are in the growth and maturity stages Wal-Mart has the option of either stocking cheap, mass-produced versions or even utilizing 3D-printing. Leveraging 3D-printing in this way will allow Wal-Mart to further strengthen its strategic advantages in logistics, distribution and inventory management. Sustainability can improve if Wal-Mart creates a recycling policy where consumers return products which can be converted and reused into raw material input for printing future items. As indicated in their “2014 Global Responsibility Report” Wal-Mart is committed to improving their sustainability index, and a 3D-printing recycling program would be looked upon favourably.

Shrinkage

In his book “Made in America”, Sam Walton stated that “Shrinkage, or unaccounted-for inventory loss—theft, in other words—is one of the biggest enemies of profitability in the retail business”. In 2007, Wal-Mart’s estimated shrinkage cost was in excess of $3B[ix]. By leveraging 3D-printing, a product would only be produced and printed when ordered. Therefore many of the causes of shrinkage (e.g. employee theft, shoplifting and vendor fraud) would be greatly reduced or eliminated entirely.

Do the Numbers Make Sense?

The 3D-printing market is forecasted to be ~$10.8B by 2020[x]. About 80% of 3D-printing is forecasted to be for consumer use[xi]. Taken together, the consumer market is expected to be ~$8.6B. Currently, Wal-Mart gets 8% of every dollar spent in the US[xii]. Applying 8% to the consumer 3D-printing market would result in ~$700M in sales, which contributes significantly to Wal-Mart’s topline. It is reasonable to assume that the effect of online sales, 3D-printing services and collaborations with app developers will further increase sales in excess of $700M.

Challenges

3D-printing is still in its infancy, and has yet to be considered a part of mainstream consumerism. However, Wal-Mart needs to act now to reap the benefits of first mover advantage as Amazon, Best Buy, Home Depot, Staples and Dell are also taking similar steps. 3D-printing will further exacerbate Wal-Mart’s handling of returned merchandise. It is difficult for a retailer to track whether a mass-produced product was sold by it or someone else. Therefore security features will need to be incorporated to allow unique identification of a product to its respective retailer.

The Path to the Future

Doug McMillon recently stated that acquiring a 3D company might be the best solution. “Wal-Mart would likely acquire a company that builds printers capable of producing end use auto, or home repair parts. Having such machines at Wal-Mart’s disposal could reduce the need for costly shipments and give consumers the ability to order parts and pick them up after they are completed”[xiii]. The fact that Doug McMillon envisions 3D-printing in Wal-Mart’s future is promising. It might be the key to Wal-Mart printing its way to success in the future of consumerism.

References:

[i] Womack, B. (2014). Wal-Mart CEO Says Retailer May Consider Buying 3-D Printer Maker. [online] Bloomberg. Available at: http://www.bloomberg.com/news/2014-05-28/wal-mart-ceo-says-retailer-may-consider-buying-3-d-printer-maker.html [Accessed 17 Jan. 2015].

[ii] 3D Printing, (2015). What is 3D printing? How does 3D printing work?. [online] Available at: http://3dprinting.com/what-is-3d-printing/ [Accessed 17 Jan. 2015].

[iii] Quartz, (2015). Walmart could own the retail 3D-printing business by 2020. [online] Available at: http://qz.com/145366/walmart-could-own-the-retail-3d-printing-business-by-2020/ [Accessed 18 Jan. 2015].

[iv] Womack, B. (2014). Wal-Mart CEO Says Retailer May Consider Buying 3-D Printer Maker. [online] Bloomberg. Available at: http://www.bloomberg.com/news/2014-05-28/wal-mart-ceo-says-retailer-may-consider-buying-3-d-printer-maker.html [Accessed 20 Jan. 2015].

[v] Columbus, L. (2014). Roundup Of 3D Printing Market Forecasts And Estimates, 2014. [online] Forbes. Available at: http://www.forbes.com/sites/louiscolumbus/2014/08/09/roundup-of-3d-printing-market-forecasts-and-estimates-2014/ [Accessed 20 Jan. 2015].

[vi] Quartz, (2015). Walmart could own the retail 3D-printing business by 2020. [online] Available at: http://qz.com/145366/walmart-could-own-the-retail-3d-printing-business-by-2020/ [Accessed 18 Jan. 2015].

[vii] Quartz, (2015). Walmart could own the retail 3D-printing business by 2020. [online] Available at: http://qz.com/145366/walmart-could-own-the-retail-3d-printing-business-by-2020/ [Accessed 18 Jan. 2015].

[viii] Quartz, (2015). Walmart could own the retail 3D-printing business by 2020. [online] Available at: http://qz.com/145366/walmart-could-own-the-retail-3d-printing-business-by-2020/ [Accessed 18 Jan. 2015].

[ix] Archive.azcentral.com, (2015). Wal-Mart losing $3 billion a year from thefts. [online] Available at: http://archive.azcentral.com/business/consumer/articles/0613biz-walmarttheft13-ON.html [Accessed 22 Jan. 2015].

[x] Columbus, L. (2014). Roundup Of 3D Printing Market Forecasts And Estimates, 2014. [online] Forbes. Available at: http://www.forbes.com/sites/louiscolumbus/2014/08/09/roundup-of-3d-printing-market-forecasts-and-estimates-2014/ [Accessed 20 Jan. 2015].

[xi] Quartz, (2015). Walmart could own the retail 3D-printing business by 2020. [online] Available at: http://qz.com/145366/walmart-could-own-the-retail-3d-printing-business-by-2020/ [Accessed 18 Jan. 2015].

[xii] Quartz, (2015). Walmart could own the retail 3D-printing business by 2020. [online] Available at: http://qz.com/145366/walmart-could-own-the-retail-3d-printing-business-by-2020/ [Accessed 18 Jan. 2015].

[xiii] Engineering.com, (2015). Walmart CEO Says Retail Giant May Buy 3D Printer Company > ENGINEERING.com. [online] Available at: http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/7659/Walmart-CEO-Says-Retail-Giant-May-Buy-3D-Printer-Company.aspx [Accessed 22 Jan. 2015].