WALMART

INTRO:

 Walmart is known as America’s favourite retail brand and the reason behind it is
that nobody sells at lower prices than Walmart. At 221.1 Billion dollars market
capital ( as of May 2017), the brand was among the top 25 most valuable brands of
the world in 2017 (Forbes list). In 2020, it was against at the top of the Fortune 500
list.

 It has continued to expand its operations globally and is now found in 26 countries
operating through 54 of its banners, serving more than 240 million people each
week. It operates more than 11,400 retail stores globally and employs more than 2.3
million people. 1.6 million of them are employed in the US alone (January 2021).

 Walmart has a presence in almost every market segment and a reach to a very wide
customer base. It certainly helps that there is a Walmart outlet within 15 miles of 90%
of the American population.

 Apart from its higher sales, the brand is also known for having generated large-scale
employment. All of this has come from cutting down operational costs and in the
past, the company was notorious for paying its employees low wages. However,
these things have improved in recent years and despite everything, it has remained
the most popular retailer in the US for its everyday low prices. However, a leadership
position in the market cannot be obtained without having some great sources of
competitive advantage.

 Walmart is also offering its customers an omnichannel experience and apart from
its physical stores, it is serving them through e-commerce websites and apps. In
recent years, the company has experienced a surge in sales from e-commerce
channels. Walmart is the second largest e-commerce brand in the US after Amazon.
It also acquired Indian e-commerce brand Flipkart to strengthen its e-commerce
capabilities.

COST ADVANTAGE
 Walmart is the world’s largest company by revenue. Today Walmart contributes
about 2% to the US economy. Walmart achieved their success in large part due to
their Everyday Low Price (EDLP) strategy, a strategy that offers low prices to
customers throughout the year instead of offering these low prices only on sales
events. This strategy increases both sales and customer loyalty.
  EDLP results in Walmart having less costs incurred for advertising as they advertise
on a more regular basis and therefore incur less cost per advertisement. Consumer
demand becomes more predictable as their prices change less frequently and
predictable demand leads to having fewer incidents of overstocking/understocking.
High-low pricing, the pricing strategy of offering goods at less prices during sales
events is adopted by many other companies. High-low pricing may benefit more
frequent shoppers who can exploit sales promotions. However, people are shopping
less frequently in these market segments and therefore prefer having a low price
whenever they visit the store.

 Prices are also lower because of the effective implementation of money saving
schemes, such as, the use of Information Systems that enhances the sharing of
information between different groups of stakeholders

 But, There is also a side effect of the EDLP price strategy. When you are trying to
keep prices very low, you are bound to sacrifice profit margins. This is also the case
with Walmart. the company keeps its profit margins lower but the enormous level of
sales more than makes up for the lost profit margins and that’s how despite its
lowest prices, the company has managed to remain highly profitable.

WALMART EFFECT

 The Walmart Effect is a term used to refer to the economic impact felt by local
businesses when a large company like Walmart (WMT) opens a location in the area.
The Walmart Effect usually manifests itself by forcing smaller retail firms out of
business and reducing wages for competitors' employees. Many local businesses
oppose the introduction of Walmart stores into their territories for these reasons.

 Despite the low-cost benefits to the individual consumer, the Wal-Mart effect is
widely criticized for its social repercussions. Some argue that larger stores with more
efficient operations benefit consumers by lowering prices. Others argue that larger
stores disrupt communities' social fabric and damage their welfare in the long run.

ADVANTAGES AND DISADVANTAGES

Walmart’s positive effects on local economies

 When a Walmart moves into a retail space, it serves as an anchor store that’s
attractive to other businesses trying to choose the right business location. The
store’s low prices attract consumers from nearby communities, and when consumers
are in the area, they’re more likely to spend money at surrounding businesses.
 Companies flocking to a Walmart mall may draw business from people who might
not otherwise be in that area.

 Walmart is also beneficial to rural areas that otherwise might have trouble getting
the food and household items they need. It’s convenient to access a wide variety of
goods in one place, and customers don’t have to travel far to buy what they need, or
order online and wait for shipments.

“Walmart can offer lower prices than other small retailers, and we would expect that
to have an additional effect with both costs and benefits,” said Christopher Fowler,
the economic impact expert who conducted the research for Puget Sound Sage, in a
press release alongside the study’s publication. “In some rural areas, it can be argued
that Walmart is fulfilling unmet demands. The number of places in the country
where people are currently unable to purchase groceries is limited, though.”

Walmart’s negative effects on local economies

“Walmart may say they help people ‘live better,'” said David West, executive director
of Puget Sound Sage, in the press release. “But this study shows that communities
will be much worse off with lower wages and less money in the community after a
Walmart opens.”

The losses are tied mainly to the low wages Walmart pays its employees.
Researchers found that Walmart pays lower wages to its hourly associates than what
other local businesses pay comparable workers, estimating that the wage difference
is at least $3 per hour.

“When Walmart comes to town, it is going to reallocate sales, and its impact is going
to be a function of the difference between what is currently being paid in wages at
the existing stores and what Walmart pays,” Fowler said.

The researchers estimated that redistribution of sales to be $25 million annually.

Did you know?Did you know? Despite Walmart’s history of paying employees low
wages, it is the largest private-sector employer in the U.S.

Compromising local economies

“We now know the true economic impact a Walmart store has on a neighborhood
when it moves in,” Fowler said. “The research shows that the negative impact is due
to the use of the Walmart business model. A new ‘generic’ grocery store does not
equal economic harm, but a new Walmart does