Walmart SWOT Analysis

Walmart is the world’s largest physical retailer and the top brand on the Fortune 500 list for the last 11 years. It is the most popular retailer brand in the United States with a strong presence in many more markets around the world.

Walmart’s popularity and growth are driven by its strong focus on product quality, consumer service and lower prices. Its investment in technological innovation has also strengthened its competitive edge as the company is experiencing stronger sales along its ecommerce channels.

As the retail leader in the US, Walmart enjoys formidable competitive strength.

By the end of fiscal 2023, the total number of Walmart stores operational worldwide was 10,623 which included 5,317 units in its domestic market and 5,306 units in the overseas markets. The company serves millions of customers across 19 countries through its retail stores, clubs and ecommerce channels.

Walmart sells a large array of products in various merchandise categories which also includes several inhouse brands and products. In fiscal 2023, the company generated more than $600 billion in net sales. Its omnichannel retail strategy has helped the company boost sales and improve its growth rate.

In this swot analysis of Walmart, we will analyze the leading strengths and weaknesses of Walmart as well as its opportunities and threats.

Strengths:

Strong brand equity:

Walmart is known for its customer focus. The company has grown into America’s most popular retailer by virtue of its focus on the happiness of customers. It enjoys strong brand equity as it is the most trusted retail brand for millions of retailers in the US and some other parts of the world. Apart from lower prices, it has also invested in customer service and innovation to maximize customer satisfaction and strengthen brand equity.

Largest retailer in the world:

Walmart has grown into the largest physical retailer in the world. The company is serving customers in 19 countries through its physical retail stores and online sales channels. It has more than 10,500 stores operational overall. More than half of its total stores are operational in the US alone. Since the store density of Walmart is very high, it is able to attract very high sales in the US compared to any other retailer.

Strong financial position:

Walmart is financially in a strong position. It has remained the number one in the Fortune 500 list continuously for 11 years. The total net revenue of the company increased to $611.3 billion in 2023 compared to $572.754 billion in 2022. While its non-US revenue (overseas revenue) remained flat in fiscal 2023, the company experienced a significant increase in its US revenue which climbed above $500 billion for the first time in its history. Walmart generated total $508.7 billion in net revenue from the US market in 2023 compared to $470.3 billion in the previous fiscal.

EDLP pricing:

The pricing strategy of Walmart is one of its core strengths and also the fundamental driver of its competitive advantage in the retail sector. It is also the main reason behind its high sales and net revenue as well the driver of the high customer loyalty that the company enjoys. Walmart guarantees everyday lower prices to its consumers. It attracts not just individual customers and families but also small and large businesses. Customers also buy items of their needs in large volumes due to the lower prices at Walmart. Overall, its EDLP strategy has proved highly profitable for the brand and helped it achieve superior growth.

Strong supply chain and logistics:

Walmart is the largest physical retailer in the US and the world. It enjoys a strong competitive advantage that is supported by several factors including its focus on supply chain and logistics management1. Supply chain management acquires a special importance in the context of the retail sector. Retail brands cannot survive the competitive pressure without investing in supply chain management and adopting modern practices to manage their supply chain. Walmart has invested in digitalizing its supply chain and is using data and analytics to improve its supply chain management practices. Walmart also has a private fleet of thousands of trucks and tractors that move tons of load each year. Strong supply chain and logistics management has helped the brand maintain lower prices of goods for its customers2.

Fast growth along ecommerce channels:

Over the previous several years, Walmart has kept strategically investing in building its own ecommerce capabilities. While digitalization has revolutionized the retail landscape, Walmart is ahead of the other physical retailers in this regard. THe company has grown its omni channel presence and is now selling to customers across various markets through both online and offline channels. The company has developed strong e-commerce capabilities and also digitalized its business processes to serve customers with higher efficiency. In the second quarter of fiscal 2024, its total net sales along the ecommerce channels remained $24 billion or 15% of the company’s total net revenue for the quarter3. In this quarter, the company has experienced significant growth in ecommerce revenue compared to the same quarter of the prior year.

Large array of products and merchandise:

Another key strength of Walmart is its strong merchandise portfolio. Walmart sells a very large range of merchandise to its customers in the US and other 19 countries. Walmart US sells merchandise in three main categories that include grocery, general merchandise, and health and wellness. In the grocery segment, the company sells dry grocery, snacks, dairy, meat, produce, deli & bakery, frozen foods, alcoholic and nonalcoholic beverages, as well as consumables such as health and beauty aids, pet supplies, household chemicals, paper goods and baby products. In the general merchandise category, the company sells a large range of entertainment products, hardlines, home furnishing products and apparel as well as shoes, jewelry and accessories. Its range of health products includes pharmacy, over-the-counter drugs and other medical products, optical services and other clinical services.

Overall, the company’s merchandise range is very large and complemented by its own inhouse brands and products. This enables the company to serve several segments of customers including individuals, families and small and large businesses.

Weaknesses:

Dependent on the US market:

While Walmart has maintained a significant presence in 19 countries, outside the US, its leading market is the United States that accounts for a significant portion of its sales. The company generated more than 80% of its total net sales in fiscal 2023 from the US market alone. While its international operations are also significant, they account for less than 20% of its total net sales. Competition in the US retail sector has continued to increase and to reduce its dependence on the US, Walmart would need to expand internationally.

Low profit margins:

Walmart’s promise has been to sell products at lower costs than the other retail brands. It sells a vast range of items at amazingly low prices. On the one hand, there is the pressure to manage lower prices and on the other the company stands to lose loyal customers if it sells at higher prices or tries to increase its profit margins on a vast range of products. Therefore, the profit margins for Walmart on a vast range of products are very low. The company makes up for it by achieving higher sales but still amidst increasing prices of sourcing, Walmart is under immense pressure to maintain lower prices.

Imitable business model:

There is hardly a thing about Walmart’s business model that is difficult to imitate. It has a simple and straightforward business model that attracts customers through consistently lower prices. Apart from that, you can also find matching quality at the other retail brands like Costco and Target. These brands have also adopted similar business models with a little bit of differentiation in terms of product range.

Racial profiling lawsuit:

In the previous year, Walmart was forced to pay a heavy fine to a customer which accused the brand of racial profiling by one of its associates. In 2022, a Oregon jury ordered the company to pay $4.4 million in damages to an African American who had accused the company of racial profiling and harassment while he was shopping at one of its stores4. Such lawsuits damage the company’s image most of all among a particular customer segment.

Opportunities:

Innovation:-

The retail industry has grown highly competitive. One of the leading methods for Walmart to strengthen its competitive edge is to engage in continuous innovation. It will also help the company differentiate its business from the other retailers. Walmart has strengthened its omni channel presence in the US and other markets over the previous few years. It is using data and analytics to serve its customers efficiently. Investing in AI, Machine learning and other modern technologies will also help the company improve its competitive edge.

International expansion:

The company depends to a very large extent on the US market for its sales and revenue. In fiscal 2023, the company generated only around 17% of its total net revenue from the non-US operations. To reduce its dependence on the US market, Walmart will need to expand its global footprint and enter more unexplored markets. It has the essential capital and other resources and the company can easily expand its presence internationally.

Emerging markets:-

Emerging markets also provide a strong growth opportunity for the retail brands. These markets have experienced significant economic growth and companies like Walmart can find a very large customer base in these markets. Moreover, the middle class in these regions have experienced income growth and are more likely to spend at retail outlets like Walmart. The company can faster increase its sales and profitability by expanding its presence in these markets.

Growth through acquisitions:-

Walmart can achieve more growth through acquisitions. The company has made some significant acquisitions in the past which have helped it expand its portfolio. Its acquisition of the Indian ecommerce brand Flipkart is one of them. Particularly, when it comes to growth in the foreign markets, the company can successfully expand there by acquiring local retail brands. Walmart is financially strong and acquiring smaller brands can help it expand its business as well as diversify and build new channels of growth and revenue.

Threats:

Competitive pressures:-

Among the leading challenges in the retail sector including physical retail and ecommmerce is the presence of several significant players in the US and international markets. The US retail sector is experiencing higher competitive rivalry. Walmart is experiencing increased intensity of competition from the rivals including Costco, Krogers, Target and the others. In the ecommerce segment, the mightiest player is Amazon, which is a highly aggressive brand in terms of competition. Higher competitive pressure on Walmart drives its operating expenses higher. Apart from that its supply chain operations are also affected by the increased competitive pressure.

Regulatory issues:-

A large number of regulatory pressures are also affecting US based retail businesses including Walmart. There are several laws and regulations that affect retail brands including labor laws, taxation, sourcing related regulations and others. Since it is a large retailer selling a vast range of grocery products, food safety compliance is also a critical area for Walmart. The company provides its associates the training required to remain compliant in various areas and avoid any regulatory or legal hassles5.

Growing supply chain and other operational expenses:

Supply chain related costs have kept increasing year over year. The company sources a large part of products it sells locally and also manufactures several of its own products that are sold as inhouse brands. However, the costs of raw material as well as labor and other operating expenses including those related to marketing and technology have also grown. Its total operating expenses including cost of sales and selling, general and administrative expenses were $590.86 billion in fiscal 2023 compared to $546.8 billion in the previous fiscal. The net income of the company decreased by $2 billion in fiscal 2023 compared to the prior year.

Economic challenges:

Economic fluctuations in several key markets or in the global economy can also hurt Walmart’s business. While the US has recovered faster since the pandemic, recovery in several other key markets has remained relatively slower including China. The company depends heavily on the US market. So, fluctuations in the US economy can prove costly for its business operations.