Walmart

• Walmart is more than just Earth’s largest retailer

• The finances, footprint, and personnel of this behemoth dwarfs entire industries and countries

• Walmart’s epic 400+ billion annual revenues eclipse the GDPs of more than 170 countries and its 2,100,000 employees would form the second largest standing army on the planet

How does Wal Mart compete?

• Walmart went to small towns and rural areas• Walmart knows its competitors and adopts

their best practices• Merchandising is tailored to individual

markets and even to individual stores• Local store managers have a lot more

leverage with prices inorder to maximise local sales

How does Wal Mart compete?

• Opened discount stores at locations where they could expand in the future

• They have always maintained technological superiority over their competitors

• Introduced the concept of cross docking• Stores are grouped together and hence

resupply by trucks is easy• Vendors also operate in Walmart territory

How does Wal Mart compete?

• Inventory is reduced because they share point of sales data with their suppliers and that helps in quick replenishment

• Profit is actively shared with employees• Shrink incentive plan• ‘Yes we can Sam’ program

How does Wal Mart compete?

Supercenters• Limited number of brands and SKU’s• Open 24 hours a day, 7 days a week• Have salons, delis, seafood shops, photo labs, dry cleaners

How does it differentiate from other retailers? Walmart• Walmart build their own warehouse & bought in volume at attractive prices• Located stores in isolated rural areas & small towns which every other retailer

ignored• In mid 1980s, Walmart was located in areas which were not served by any of its

competitors• Kept prices lower than everybody else’s• Walmart knew its competitors intimately & copied their best ideas

Other discount stores• Other discount stores charged gross margin 10-15% lower than conventional

departmental stores• But fixtures were unluxurious, in-store selling was limited, ancillary services such

as delivery and credit were scarce

How does it differentiate from other retailers? Merchandising• Merchandise was tailored to individual markets/stores through “traiting”• Promotional strategy of “everyday low prices”• Walmart had few promotions. Offered only 13 major circulars per year• “Satisfaction guaranteed” policy where merchandise could be returned to Walmart

stores with no questions asked

Store operations• Leased about 70% of Walmart stores • Rental expense was 3% of discount store sales compared to 3.3% for direct

competitors• Sales per sq.ft of $300 as compared with Traget’s $209 & Kmart’s $147• Devoted 10% of its square footage to inventory as against industry average of 25%• Introduced scanning of uniform product code(UPC)

How does it differentiate from other retailers?

Distribution

• Cross-docking transferred products directly from in-bound vehicles to store-bound vehicles without ever sitting in the inventory

• Walmart used technology effectively to reduce inventory costs & increase sales

• It spent 1.5% of discount store sales on information systems as compared with 1.3 % for direct competitors

How does it differentiate from other retailers?

Diversification Sam’s Club• Warehouse clubs used high-volume, low-cost merchandising, minimum handling cost• Limited no. of SKUs resulted in high inventory turnover rate• Sam’s club opened clubs close to one another without giving competitors any openings in

many market places Supercenter• Supercenter was a combination of super markets & discount stores, which offered limited

packaged sizes & brands in order to keep costs low• Walmarts Supercenter comprised of a huge grocery section along with the discount section

which gave them profits of $50 per square foot Going International• Walmart entered the growing economies of the world to grow their business globally• Mexico, Canada, Argentina, Brazil, Singapore, Hong kong and China were the new centers of

Walmart

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces

Weak Bargaining powerLargest account for most of the producers

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces

Threat of new entrants is weakWal-mart’s great scale of operationsIt would take years or may be decade to for a new player to be on the same levelToday even big players also have extreme difficult time matching the costs and prices Wal-mart provides

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces

Weak bargaining power of buyersBroad base of customers and a significant demand for low prices

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces

Low threat of substitute productWal-mart exerts a great deal of effort in making sure they are innovative & meeting customer demands

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces

Fairly weak competitorsEven though market is crowded Wal-mart has the lowest costs, prices

Will it Continue?

• At this time of economical crisis of unprecedented scale, concept like Wal-Marts is everybody’s delight

• Wal-Mart has been aggressively trying to expand internationally, this is the right time for them

• People worldwide will kill for cheaper alternatives for their daily requirements

Will it Continue?

Success Enablers• Favourable macro-economic conditions• Absence of “direct” competitors• “Associates” v/s “Employees”• The “Wal-Mart Culture”• Operational Efficiency

Will it Continue?

Behind Every Successful Store…• Clear Vision• Shared Dream• Sheer “Economy of Scale”• Technological Superiority

Will it Continue?

Stumbling Blocks• Legislation• “Overly” Efficient• Brand Image:-

– Annihilation of “Local Business”– Destroyer of “Way of Life / Culture”– Promoter of “Sweatshops”– Promoter of “Foreign Produced Goods”

• Brand Perception:-– Low Cost v/s Quality & Buying Experience– Relation with “U.S.A. Global Image”