- Wal-Mart Stores Inc. is the largest private company in the world in terms of revenue ($480 billion) and employment (2.2 million). They also have the largest customer base in the world, which enables Walmart to offer lower prices than many, if not all, of its competitors. They consistently have suppliers that are willing to sell to them at lower prices than their other competitors.
- The integrated logistical system that Walmart uses is one of the best in the world. It is interconnected with their suppliers and delivers up to the second status of goods. This system allows for timely distribution of goods, fewer goods in storage, reduced transportation costs, less time in-transit, and more money in consumers’ pockets!
- Walmart uses its size to leverage suppliers into paying lower prices. There are many stories that flood the internet, where Walmart has pulled the playground rules on a competitor; “Play by my rules or I am taking my ball and going home!”. For example, Vlasic was selling a gallon jar of pickles in Walmart for $2.97. Walmart and Vlasic were only making 1-2 cents per jar, but Walmart wanted it more as symbol of their power. When Vlasic wanted to increase the price 50 cents, Walmart threatened to discontinue business with Vlasic completely. Vlasic relented on the price because Walmart supplied about 30% of their business.
- Despite the ability to be able to offer prices lower than anyone, this approach does have its drawbacks. The most obvious is that the product the consumer receives will be of lesser quality than some of their competitors (or in the words of Paris Hilton when asked if she ever shopped at Walmart “Do they sell walls there?”).
- Walmart offers wages and benefits that are subpar for its size and its industry, resulting in high employee turnover. There have been many critics of Walmart’s willingness to keep their frontline employees’ wages and benefits low while increasing the wages and benefits of their upper level management.
- Walmart has a top notch supply chain system however; they are not utilizing it effectively when it comes to online sales. Walmart online products are similar to Amazon’s, but Amazon uses their space more effectively. Walmart could use the same approach as Amazon by introducing a consignment approach to online sales. They would advertise the product online, charge for the services and have the suppliers store and ship the products to the consumer. They could also introduce the “preferred” supplier (just like Amazon) and offer guarantees or free shipping to home.
- They could offer memberships with perks, similar to Amazon, such as free shipping to customers residences. Walmart offers free shipping to their stores however, in the increasingly internet driven society, most people like the comfort of having their product delivered directly to their door steps. Walmart charges for any and all deliveries to homes.
- Walmart could improve its revenue by diversifying its portfolio. All of Walmart’s current ventures are related to their retail stores, which isn’t bad however, there is an excellent opportunity that exist for Walmart to enter the digital movie industry. Amazon offers access to free digital movies as part of their membership. As part of the prior statement, Walmart could partner with Hulu, Netflix, or Vudu and offer their services as part of the membership perks.
- As a low priced jack of all trades retailer, Walmart does specialize in any one particular area. This allows business to develop niches and compete with Walmart for certain customers.
- The biggest physical threat to Walmart is Amazon. The domination of the online retail market by Amazon encroaches on Walmart’s brick and mortar store sales.
- Washington DC poses a new threat to Walmart. There have been many legislations introduce that places penalties on business that sells products that are predominately overseas. These types of bills aren’t new however, they have been gaining new traction since the recent economic recession.
- Walmart’s image has suffered greatly in the past and continues to suffer today. Whether it is because of unfair wage policies or its bully tactics that force suppliers to lower prices; leading to lay-off workers, this causes millions of dollars in lost revenue.