How many times have you gone to the store with coupons in hand, looking to take advantage of a good deal, only to find out that other couponers got there ahead of you and cleared the shelves? Or maybe you’re not shopping with coupons at all, and your friendly neighborhood extreme couponer decided to grab every available item for themselves, preventing anyone else from being able to buy just one.
Walmart is proposing a new way to solve these problems, by analyzing shoppers’ purchase histories and couponing habits to ensure their shelves are fully stocked and able to withstand a rush of coupon-bearing customers.
The idea is described in a newly-published patent application entitled “Coupon Optimization System”. The application describes a method of “matching inventory replenishment to a demand peak” using “a database of customer profiles (and) a database of manufacturers’ historical and future coupon attributes”.
Many stores already take price promotions and coupon drops into account when deciding how many products to order. If they know an item is going to go on sale, or a manufacturer is going to offer a high-value coupon, they might order extra items to make sure they can meet the expected increase in demand and don’t sell out too soon.
But, considering how many empty shelves there can be when there’s a sale or a coupon available, this approach doesn’t always work.
So Walmart says its system is much more precise. “Systems for monitoring and analyzing sales data corresponding to a sale, coupon, event or holiday are conventionally based upon a store-by-store or region-by-region analysis,” the patent documentation explains. But Walmart’s system “is localized on a customer-by-customer basis”. That means Walmart will make its inventory-ordering decisions based on precisely what it determines you’re likely to buy, what coupon you’re likely to use, and when you’re likely to do it.
Walmart proposes creating a customer profile for each shopper, which may be linked to your payment method. “Purchases associated with that credit card or debit card are analyzed for purchasing patterns,” the patent application reads. Then “an algorithm predicts whether a customer will use (a) coupon, as well as when and where the use is likely to occur”.
Some shoppers, for example, may tend to use coupons only in specific categories, like dairy products or household cleaning products. Others may use only high-value coupons with a face value of more than a dollar. Walmart’s algorithm would even take into account “certain combinations of coupon attributes” that motivate a specific shopper to buy, such as BOGO offers on household cleaning products or frozen pizza coupons worth $1 or more.
Then the system aggregates all of this individual shopper information to predict how much of a product will be needed, “ordering additional inventory just in time to meet demand so that customers will not experience the frustration of out-of-stock events, and so that excess inventory will not take up valuable storage space or go unsold.”
Walmart says its system can even predict demand down to the day, or even the hour. “Some consumers are likely to use a coupon or take advantage of a discount as soon as it becomes available,” it explains. So if this is the case at a particular store, Walmart can ensure there’s plenty of stock on hand as soon as a coupon becomes available. But “other consumers may be last-minute users of coupons or discounts”. So in that case, Walmart could ensure it gets extra inventory right before a coupon expires.
On the flip side, Walmart could reduce its orders if it predicts decreased demand, to avoid having too much unsold inventory on hand. Purchase data might indicate that shoppers at a specific store won’t buy a particular product at all without a coupon. Or “a poorly managed discount or coupon event” in the past might result in reduced demand in the future, by discouraging shoppers from using a subsequent coupon or buying that particular product again.
Finally, there’s the matter of personalized coupons that are only given to specific shoppers. “Regional or store-by-store data cannot be used to predict the impact in demand that this coupon will make,” Walmart’s patent application explains. “Customer-by-customer data… makes tracking this difference quite simple.”
Many manufacturers and retailers have tried to discourage shelf-clearing, by imposing limits on how many similar coupons you can use or how many items you can buy during a sale. But if Walmart’s method of predictive inventory management works, those restrictions might not be needed. So the next time a high-value coupon comes out, you won’t have to worry about rushing to the store to get the deal and fight off other couponers who have the same idea. Instead, there will be plenty of products for everyone – and couponing may not have to be a combat sport anymore.
Image source: Walmart
This is really great reporting, thank you! Sounds like you heavily researched Walmart’s new patent application and that they are bringing some very unique technology to the marketplace. Just wondering how the new system will deal with all the people who buy/steal hundreds of Sunday coupon inserts each week and then take the stacks of coupons to Walmart and clear the shelves!? That would seem like a very unpredictable pattern to try and forecast. Thanks again!