WALMART BUSINESS STRATEGY

Abhijeet Pratap

November 17, 2023

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Walmart has established itself as the retail leader in the US physical retail sector. The company has achieved solid financial growth over the past several years. It has remained at the top of Fortune 500 list for 11 years. While the US is the largest market of Walmart, it has also built a strong presence globally in several more markets. Overall, there are more than 10,500 Walmart stores operational globally that include more than 5,300 operational in the US alone.

The company generated more than $600 billion in net revenue in 2022. Since the pandemic, the US retail sector has recovered fast, driven by fast economic recovery. However, in several other markets, recovery has been comparatively slower.

Walmart’s competitive edge has continued to improve as the company has increased its investment in innovation and built a strong omnichannel presence in the US and several more markets. It is a leader in the physical retail sector in this area and now generates a significant part of its total net revenue from ecommerce sales. Its pricing strategy and supply chain management have played a key role in helping Walmart become the dominant player in the US physical retail sector.

Walmart has a large and loyal customer base that it serves through both online and offline channels. However, the company is also focusing on expanding internationally to achieve higher sales growth. The company offers a vast assortment of products in several merchandise categories. Its product range is the largest of all the physical retailers in the US which draws customers in very large numbers.

Walmart SWOT Analysis In this post, we will discuss the main pillars of Walmart’s business strategy that have helped the brand achieve a leadership position in the US retail sector and strengthened its competitive advantage.

EDLP pricing strategy:

The main pillar of Walmart’s business strategy is its pricing strategy. Its pricing strategy has proved highly successful at drawing crowds of shoppers to Walmart stores. This pricing strategy is known as EDLP pricing strategy or Every Day Lower Prices. The company promises the customers to deliver products at the lowest prices in the market. Its cost leadership strategy is based on the concept of economies of scale.

The company sources a vast selection of gods from its suppliers in very large volumes. By ordering products in very large volumes, the company is able to buy at very low costs from the manufacturers and suppliers. This helps the company maintain lower prices of the merchandise sold in the Walmart stores in the US and the other markets. Lower prices are the leading factor that people are drawn to Walmart for their everyday needs. The company stays true to helping its customers save money so they can live better.

Supply chain management:

Another key aspect of Walmart’s business strategy is its focus on efficient supply chain management which helps it maintain lower operating costs and source a vast volume of products from the suppliers and manufacturers at very low costs. Walmart has developed and maintained a fully integrated supply chain that provides critical support to its store operations in the US and the other markets.

Technology has enabled the company to maintain supply chain and logistics operations efficiently. With the help of technology, sourcing is more predictive and supply chain transactions are more automated. Moreover, the company sources a large portion of the products sold at Walmart locally. Around two thirds of the products sold at Walmart are sources locally. Not just in the US, but in the other markets too, the company sources a large part of its merchandise locally which also helps the company minimize risks and costs of merchandise. It also carries out regular audits to minimize supply chain related risks.

The use of advanced warehouse and inventory management systems has also helped the company minimize operational risks and grow supply chain efficiency. Compared to the other retailers in the US, Walmart started investing early in supply chain optimization. With the use of modern technologies like AI, machine learning, robotics and other similar technologies, the company has been able to maximize supply chain efficiency.

Walmart’s supply chain can be considered as the backbone of its retail operations and a key source of its competitive advantage. Its strong supply chain management is also the main support behind its cost leadership strategy.

Vast product assortment:

If Walmart dealt in a limited product assortment, it would not have been as profitable business as it is. Walmart deals in a really vast product assortment which helps it address the needs of diverse customer segments that also includes small and large businesses. While it has helped the company attract a more diverse and very large customer base, it has also helped the company maximize its profits. The profit margins on some products can be very low but somewhat better on others. So, selling a large product assortment also helps the company improve its profit margins. Its inhouse brands are also quite popular and experiencing high demand among customers since the company does not just focus on product range but also on product quality.

The inhouse brands include several product categories and appeal to a large segment of Walmart customers. Its inhouse brands like Marketside, Clear American, Great Value and Sam’s choice offer a wide assortment of good quality products to the consumers. Most of the private label brands of Walmart enjoys strong popularity and demand. The company offers its customers a wide choice of premium products at discounted prices. Since customers are getting the benefit of premium quality and prices at the same time, these private labels draw customers in very large numbers.

Marketing:

Walmart has always marketed itself as a customer centric company whose focus is on helping people save more money. The company promotes a customer friendly brand image that is rooted in American culture. It targets consumers from various segments and primarily families and the millennial customers.

Its strong brand image has played a central role in helping the company create strong demand and achieve a leadership position in the US retail sector.

In recent years, the company has focused on developing the image of a customer friendly and innovative friend. It is why the company has grown its investment in technological innovation and strengthening its online presence.

The company uses digital channels as well as traditional channels including its own stores for marketing and promotions. Its is using its ecommerce sites and other diverse digital channels including social media and online promotions for reaching and engaging its customers.

Walmart enjoys strong brand awareness in the US and several more corners of the world. Its strong presence in the US is also a key factor that has driven high brand awareness in the market. With its more than 5300 stores in the US, the company has managed to remain within the proximity of a vast portion of the US population.

It also promotes various deals and discounts regularly. Social media channels have also played a critical role in helping Walmart reach millions of customers worldwide. It has more than 32 million followers on Facebook alone. In fiscal 2023, Walmart spent $4.1 billion on advertising.

Technological innovation:

Since the pandemic, technology is playing a critical role in driving sales and customer loyalty in the retail sector. However, Walmart was among the first retail brands in the United States to take critical steps towards technological transformation since a long time before the pandemic. Walmart had started strengthening its technological capabilities including ecommerce capabilities several years before the pandemic.

Its strong digital capabilities proved useful during the pandemic and following the pandemic. It is why as recovery began after the pandemic, the company experienced swift growth in its sales along the ecommerce channels. Now, a significant part of its total net revenue comes from the online sales channels and the company is intensifying its efforts to create better technologies that can help it increase its operational efficiency and provide superior service to its customers.

Cloud technology has brought significant changes to how retail businesses run their digital operations. In 2018, Walmart partnered with Microsoft to provide resources so it can fastly advance its cloud journey. The company had realized that technology was the future of retail quite early and so started investing in critical technological areas back from the early 2010s.

Its supply chain is a critical part of its overall business operations and so the company focused on streamlining its supply chain operations with the help of technology. The company operates a highly digitalized supply chain and is still investing in supply chain automation to make its supply chain processes more efficient.

Walmart’s focus on technological innovation has helped the company strengthen its competitive edge and compared to the other physical retailers it is investing a lot more in technology. Due to its investment in technology, the company might be able to expand its market share in the US ecommerce market faster.

Domestic and International expansion:

Walmart has also relied on market expansion for growth including domestic and international expansion. The company has more than 10,500 stores operational worldwide, around half of which are operational in the United States. In the US, the company has a denser footprint compared to the other retailers. Moreover, it does not depend on a single format of stores but utilizes various formats based on location and customer needs. Apart from Walmart super stores and Sam’s club stores, it also has Walmart discount stores and other small format stores operating in the United States.

Walmart generates a substantial part of its total net revenue from the US market. It is also because of the high number of Walmart store locations in the US. A large part of the US population lives in the proximity of a Walmart store. This has helped the company reach and serve more customers with ease and also grow its customers by attracting more and more customers to its stores. Walmart stores are not just retail stores but people like to visit the Walmart stores to take a break as well as and for a large group of consumers, shopping at Walmart is a family affair.

Customer service:

The retail industry is experiencing intense competition as there are several domestic and international retail brands operating in the US market. Just product quality, lower prices and product availability are not sufficient to draw and retain customers in large numbers. It is why the focus of Walmart is on providing its customers a superior shopping experience. At Walmart, the focus remains on providing excellent customer service to make shopping at Walmart a relaxing and worry free experience for the shoppers.

Customer service is now an intrinsic part of the retail experience. No retail brand can expect loyalty from its customers without investing in customer service. The retail industry has grown highly competitive and there are several national and international players in the US market. These players are quite aggressive about market share and among the other things, the service aspect of retail is quite critical to maintaining competitive advantage.

Walmart has always focused on these two things which include lower prices and best customer service. The company invests in training its associates so they are able to provide best quality customer service to the shoppers. While it has worked to maximize customer satisfaction, it has also helped the company strengthen its reputation in the market and gain a solid competitive edge.

Conclusion:

Walmart is currently the leader in the US physical retail sector. It has achieved a strong competitive edge and continues to find more growth due to its strong focus on innovation. The retail industry has experienced intensifying competition over the past several years. However, Walmart has successfully maintained its leadership position and continues to deliver its promise of helping people save money to help them live happier lives.

The company has also focused on product quality and sells a vast assortment of products in several categories. While these are the drivers of the strong customer loyalty that the company enjoys, there are some other critical pillars of Walmart’s business strategy as well as and include customer service, innovation and supply chain management.

All the leading brands in the retail sector that have experienced a high level of success in the US retail sector have managed their supply chains well. Walmart has optimized its supply chain in a manner that it can cater to its stores and changing customer demand with higher efficiency. A digitized supply chain has helped it weather difficult market conditions. As the market has recovered following the pandemic, the company has experienced solid growth in revenue. Its ecommerce sales have grown at an impressive rate indicating that Walmart could experience superior growth in the near future.

Walmart is driven by a customer focused strategy. It is critical for retail brands to be customer focused and while the company has excelled in most parts of retail business, it must also invest in building a culture that maximizes satisfaction for all the stakeholders.