Walmart : A Success Story

The Covid pandemic has been a testing time for America’s big retailers, from Chewy to Casper to Target and Amazon, all have been losing their grasp on the margins. While revenue has been steady, they’ve failed to report profits. But one old time retailer has managed to get past this crisis and has emerged as the clear winner — Walmart. This nearly 60-year-old retail establishment known for its knack to increase margins while keeping prices low for its customers is one of the biggest success stories in the retail industry.

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History of Walmart

Let’s rewind to 1950. The war was over and there was a burgeoning consumerist attitude that led to the belief that anything was impossible. And Sam Walton, Founder of Walmart was the living embodiment of this belief. He began his journey into retail by buying a branch of the Ben Franklin stores in 1945.
He primarily focussed on offering low cost products to consumers and achieving higher sales volumes while keeping profit margins low. This customer driven style of doing business didn’t go well with suppliers and, eventually, unable to extend the lease on the location, Sam opened a new store Walton 5 and Dime in Bentonville.
On July 2, 1962, Sam opened the first Walmart Discount City Store in Rogers, Arkansas.

By 1970, Wal-mart Stores Inc had 38 stores operating with 1,500 employees and made sales worth $44.2 million. Wal-mart stores went public on the New York Stock Exchange in October 1970 and the rest is history!

The Success Story of Walmart

In mid-2019, Amazon surpassed Walmart to be declared the largest retailer on the planet. Yet Walmart leads on many fronts like:

-It Pulls more revenue

– It has significant assets on its balance sheet (due to its real estate) 

-It employs over 2.2 million employees on its payroll that;s 4 times the number of employees Amazon has on payroll

Even today Walmart still stands strong amidst a pandemic while its competitors struggle to break even. Experts credit it’s omni channel presence for its success. The pandemic brought the Direct-to-Customer model to its knees whereas Walmart continues to have a stronghold on it’s online and offline stores. How?

The Magic is in the Mix

The marketing mix is fundamental to any contemporary business course, but even books can’t explain the Marketing Mix as well as Walmart’s success story can.

Here’s how Walmart leveraged the 4 Ps of the marketing mix to rule the retail world for more than 50 years:

Price: Less is More

  • Customer friendly prices to focus on bulk sales 
  • Impeccable procurement strategies to get the players in the supply chain to keep prices low
  • Varying purchasing options, option to pay by cash

Product : Belief in Bulk 

  • Offer a wide range of products in each category: grocery, apparel, furniture, appliances hardware etc.
  • They buy in large quantities to achieve economies of scale
  • Walmart White labels exclusively available in Walmart stores

Promotion: Customer is King!

  • Discounts across all seasons
  • TV ads, billboards, social media for ecommerce 
  • Reliable warranties and replacement policies
  • Appealing Slogans: “ save money, live better,” “lowest price store,” “worry-free fresh,” and the most common, “everyday low prices.”

 

Place: Omnipresent

  • 90% of the US population lives within 10 miles of a Walmart
  • Strong E-commerce Platform 
  • A DTC Model backed by well-planned distribution centres
  • Branding and differentiation of their outlets- Walmart Supercentres, Walmart Neighbourhood Market, Walmart Express Stores and Walmart Discount Stores

Lessons we can learn from Walmart

To Learn and Innovate

In order to up their e-commerce game, in 2011, Walmart acquired Kosmix, a social media firm run by two very driven founders who eventually would hook Walmart up with a price comparison engine to compete with Amazon. Kosmix is today better known as Walmart Labs.

In 2016, Amazon’s growing hold over the ecommerce industry, led Walmart to acquire Jet.com for it’s supreme supply chain model. This pricey acquisition worth $3.3 billion gave them great mileage. Jet.com helped Walmart tap into the big brands like Nike and Blue Apron that weren’t willing to sell on walmart.com.

Result? Walmart recorded a 40% increase in sales in fiscal 2019.

Expand the Customer Segment

Walmart is perhaps one of the only retailers that understands why its customers shop the way they do. In 2007, they divided their 200 million customers into 3 core consumer groups:

  • Brand Aspirationals – People with low incomes who are fixated on brand names like KitchenAid
  • Price-Sensitive Affluents – Wealthier shoppers who love deals
  • Value-Price Shoppers – Those who like low prices and who can’t afford

much more

In order to appeal to different kind of shoppers, they focussed their brand position on 5 power categories:

Food, Entertainment, Apparel, Home Goods and Pharmacy.

They worked on building brands in each of these categories to compete with other retail giants Best Buy, Macy’s or Home Depot. 

This diverse segmentation and deep dive into customer behavior helped Walmart understand what to sell and more importantly what not to sell. They scaled back on some fashion-forward clothing and other high-end products which didn’t appeal to their shoppers.

Walmart still wanted to push it’s customers to purchase beyond household and grocery and they did this with great panache especially when it went online.

To Adapt to the New Shopper’s Journey:

After Jet.com, Walmart acquired many more digital natives like Modcloth and menswear Bonobos that were already a big hit with the millennials and high-income customers. They introduced their very own mattress brand, Allswell. 

E-Commerce Strategies Adopted by Walmart

Apart from growing it’s curbside pickup, Walmart offered the fast-paced, upbeat online generation the Express Delivery service- a new store-to-door service that delivers products to the customers in less than 2 hours.

Walmart.com personalised the shopping experience even more with a design so accessible and easy, that online shoppers were able to see trending products on the homepage itself, that could check the status of the delivery on the home page. 

This way Walmart kept up with the pace and once again gave its customers what they wanted – Fast and Easy Shopping!

Result? Last year, Walmart’s e-commerce sales grew by 37%. During the pandemic, they shot up by 74% in the first quarter and attracted new footfalls to its website.

Walmart Today

On May 19, 2020, Walmart discontinued Jet.com.

Walmart CEO, Doug McMillon said “While the brand name may still be used in the future, our resources, people and financials have been dominated by the Walmart brand because it has so much traction,” he said. “We’re seeing the Walmart brand resonate regardless of income, geography or age.”

A brand that speaks to everyone, everywhere and everytime!