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Walmart Touts Employee Appreciation Gifts—A New Danger or Business as Usual?

Walmart SeasonalMillions of businesses around the US received an email or saw advertising from Walmart promoting its employee recognition gift shop ahead of Employee Appreciation Day on March 3. This is a signal that incentive, rewards, and recognition companies and even potentially technology companies in the IRR (Incentive, Rewards, and Recognition) field need to add value through expertise or risk being cut out of significant market opportunities.
By Bruce Bolger
Online gifting and rewards companies are raising millions from investors and yet looming in the wings are potential competitors like Walmart, which already does business with many of the people who own, run or manage the 200,000 plus companies in the US with sales of over $10 million. These are the same size of companies mostly serviced by promotional distributors, incentive, recognition, and related technology companies.
WalmartWill companies like Walmart, Amazon, Microsoft, and Google be the next big competitors for the gifting, rewards, or engagement technology business? This remains to be seen, given past attempts by other major retailers to enter the field, including Amazon and Target. 1-800FLOWERS.com already leads the way among retailers active in the business, with a corporate gifts link from its home page and a tech platform for managing corporate gifting. Amazon made a bold entry into the market in the 2000s, but reportedly backed off when the volume did not meet expectations and because of sales tax nexus issues at the time. Amazon Incentives currently focuses on gift cards but multiple incentive and recognition companies are known to have direct feeds for Amazon merchandise and fulfillment as well.
Already, by all accounts, most of the incentive, rewards, and recognition business already is moving through retail, because the generally accepted volume of all the incentive, recognition, loyalty, and promotional companies, even including credit card and travel loyalty programs, doesn’t come close to the $176 billion volume recently estimated by the Incentive Federation.
Right now, three major obstacles stand in the way of retailers or major software companies becoming any more of a threat then they already are to those who sell incentive, rewards, and recognition:
1. The IRR field is a business of exceptions. Despite the potential overall size of the market, it is exceptionally fragmented so that most of the bulk business opportunities that turn up have unique requirements tailored to a promotion that does not necessarily comport with a retailer’s logistics system. While some of these opportunities are quite large, in the aggregate they are small in comparison with the tens or hundreds of billions of dollars in retail volume upon which their systems are based.
2. Value creation depends upon expertise, not just moving boxes. As long as organizational management continues to view incentives, rewards, and recognition as basic do-this, get-that propositions with little to no need for holistic program design and measurement, demand for rewards will still flow to mostly retail sources most familiar to companies that can deliver a number of products in bulk or individually. As more professionals become attuned to the opportunity to enhance the value of these programs through effective program design and measurement, the winners will not be the providers of the rewards but those with the expertise and holistic skills to optimize the long-term impact and justify the investment. Will retail or technology companies move to provide professional services? Not likely.
3. Technology requirements go beyond do-this, get that. Effective employee engagement and Enterprise Engagement technologies go way beyond a simple points-redemption online catalog or gifting platform; they include surveys, learning, communications, peer-to-peer recognition, referrals, innovation, etc., far more technology than a consumer retailer would invest in given the small size of the market relative to their consumer retail sales.
Who could be the biggest disruptors in the incentive, rewards, and recognition space?  Amazon, Google, and Microsoft. All have the technology capabilities to easily create employee or even enterprise engagement applications. What they lack is industry expertise or any evidence that the market size, while enormous by most standards, has enough zeros to warrant the effort. Microsoft, Amazon, and Google each have annual sales in the hundreds of billions of dollars. There is not a single player in the incentive, rewards, and recognition business known to have ever exceeded $1 billion in annual revenue, and that might have been Amazon, for whom that was and remains a rounding error.

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