Walmart's Business Model
Author: Mikey Chai | Editor: Nichola Monroe | Updated September 22nd 2020
With 387.66 billion dollars in revenue in 2018 alone, Walmart remains the largest retail chain in America. Walmart has grown constantly and successfully from its opening in 1962; it continues to be a staple for all American families, providing groceries and appliances at affordable prices. In more recent years, Walmart has been focusing on the ever growing online shopping experience, expediting shipping and creating a user-friendly marketplace. Their newest addition Walmart Plus rivals Amazon Prime in its free-shipping, low prices, and other additional benefits. However, in order to accommodate much of Walmart’s daily processes, it is imperative that the company follows a well structured, efficient business model.
Disregarding Walmart’s online shopping platform, the company is divided into three areas of business: Walmart US, Walmart International, and Sam’s club.
Walmart has an enormous presence in the United States with retail stores present in all fifty states. Historically, Walmart US has the best performance record, when compared with Walmart International and Sam’s club with the highest gross revenue, net sales, and operating income per year. This segment operates in three forms across the states: supercenters, discount stores, and neighborhood markets. Supercenters are the largest of the bunch with an average of 178,000 square feet in size, discount stores are 105,000, and neighborhood markets are only 42,000. Stores operating under Walmart US sell almost every product from entertainment, furniture, apparel, electronics, to groceries. To try and keep competitiveness to a minimum, Walmart US markets many private firms’ products to sell.
Walmart International is the second-largest segment, operating in 26 different countries. Dissimilar to Walmart’s US, international stores are categorized under supercenters, supermarkets, hypermarkets, and warehouse clubs. In contrast, Walmart US and Walmart International both employ similar strategies. Specifically, Walmart International has, and continues to form partnerships with suppliers. Thus Walmart International can ensure that the consumer is receiving the lowest price possible.
The smallest of the three utilizes a slightly different marketing strategy than the rest. Operating in 44 states, Sam’s Club’s main attraction revolves around its membership card. Memberships include various benefits including cashback from every purchase which can be cashed out at a max of 500 per year in rewards.
Walmart’s Business Growth Strategy
How can Walmart accommodate the distinctive shops from US and International lands successfully? Walmart employs the classic omni-channel retail strategy which immerses the consumer with the most products possible to create the most fully-integrated shopping experience possible. In other words, Walmart’s extensive variety of products and cheap prices has attracted customers to return to Walmart without needing to go to a different store for a specific product. For example, you need groceries, a new iphone, and scissors. Instead of going to the supermarket, the apple store, and a general appliance store you can take a singular trip to Walmart which is both cost and time efficient. What makes this process work is the extremely affordable prices Walmart places on its products without compromising profits or shareholders money.
Walmart’s Competitive Advantage
Walmart is the largest retail chain in the US due to their competitive advantage that continues their success.
EDLP stands for everyday lowest prices, which is the pricing strategy employed by Walmart. This advantage is the most powerful attraction for customers as every consumer wants the lowest prices available for the same product. The company has stuck to this marketing strategy since its birth by keeping operating expenses low while benefiting the customers
2. Brand Image
Walmart’s reputation has also played a major role in its successes. It has become common knowledge that Walmart has become a trustworthy retail center available at any time for the consumer without any bad PR or HR.
With a total of 5355 operating stores in the United States and 6146 internationally, there is a Walmart within 10 miles in nearly every city in the US., which explains its large presence across the nation as well as the globe.
Walmart has been a staple retail center for consumers across the nation for decades. Their extensive business model and advantages place them with the most national gross profits per year in the US with other stores far behind. It is predicted that Walmart is going to expand even further with their new addition of Walmart Plus which will create an even more efficient marketplace for the ease of consumers.