Walmart Case Study(Business Model) How Walmart Earns?

Walmart Case Study (Business Model):

2 Minute Summary

Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores, headquartered in Bentonville, Arkansas. It was founded by Sam Walton and Started in 1962. Walmart has 11,368 stores and clubs in 27 countries, operating under 55 different names. In 1978, they introduced their IPO in the market and now they have acquired more than 14 companies and still counting. Walmart core Business Model is Cost Leadership. It has 3 Verticles  Walmart U.S., Walmart International, and Sam’s Club Segment(Online). They have high sales volume through which they have high earnings. The net revenue of Walmart grew from $500.3 billion in 2018 to $514.4 billion in 2019. Walmart has started a premium subscription service called Jetblack. This was developed last year by Marc Lore, who joined Walmart when WMT acquired Jet.com in 2016. Walmart has acquired Flipkart for $16 billion which is considered as the world’s largest e-commerce deal. Full detail in Blog.

BIG NEWS!! Walmart has acquired Flipkart for $16 billion which is considered as the world’s largest e-commerce deal.

But What does Walmart(WMT) does?

According to Wikipedia, Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores, headquartered in Bentonville, Arkansas

Did you know that Walmart has 11,368 stores and clubs in 27 countries, operating under 55 different names? ( as of April 2017)

After reading this detailed Walmart case study, you’ll get to know everything from the Business Model of Walmart to its Marketing Strategy.

What’s in it for me?

1. Walmart Business Model

Started in 1962, Headquartered in the U.S., Walmart began its business as a retail store with its USP of providing products at a cheaper rate than what is available in the market to the Consumers.

 It was founded by Sam Walton.  In 1978, they introduced their IPO in the market and now they have acquired more than 14 companies and still counting.

Walmart started its new vertical of providing services such as groceries, food items, Healthcare services and Medical Services as well.

They work on a business model which eliminates the Middle Man from all the Distribution Channels in business, also provides benefits to the ultimate consumers by providing them products and services with the lowest prices.

Walmart has the main motive to enter every segment in the market and dominate them by offering the lowest prices to the consumers.

Walmart core Business Model is Cost Leadership.

Cost Leadership is a part of Michael Porter’s Generic Strategies, Check out the blog.

Everyday low cost (EDLC) is Walmart’s motto to manage overheads.

Walmart has three core verticals:

a) Walmart U.S.,

Walmart U.S. segment operated in the United States. It provides customers with products and services that are not present in the physical stores at low prices and services online through its e-commerce website and Mobile Applications.

The Ecommerce website includes a special feature that allows the third party to sell products on Walmart.com.

It does business across various Store formats such as supercenters, discount stores, neighbourhood markets and Walmart.com.

b) Walmart International

Walmart International segment includes three categories which are retail, wholesale and other.

These categories have various formats such as supercenters, hypermarkets, Warehouse club, home improvement, speciality electronics, apparel stores and drug stores as well as digital retail.

c) Sam’s Club Segment

With its online portal “samsclub.com”, Sam Club provides various benefits to its customers in the form of a variety of Merchandises, which are not found in its club and services online at samclub.com, and by its Mobile Application.

It also provides services such as Club Pickup.

2. How Walmart Earns?

Walmart follows the principle of buying the whole lot in a single go. In this manner, the company gets a quantity discount from the Manufacturer and sells in small quantities to the ultimate consumers at a low price.

They have high sales volume through which they have high earnings.

By following the principle of Everyday low prices, they penetrate the market with their Business Strategy.

Customers always focus on three aspects: Convenience, Product Quality and Low Prices.

These aspects are kept in mind by the company when they sell a particular product to the potential consumer.

The Bargaining power of Walmart makes it an unbeatable player in the market.

Revenue Generation of Walmart

Walmart generates its revenue from selling its products and services directly to the consumers and Business. It has two Sources of Revenue Generation:

A) Product Revenue:

Walmart deals in Grocery, Health and Fitness, Hardlines, Apparel, Entertainment and Home Products.

• Grocery Consists of a bakery, deli, dairy, frozen foods, floral, produce and consumables such as health and beauty aids, baby products, household chemicals, paper goods and pet supplies.
• Health and wellness include Pharmacy, Optical services, clinical services.
• Entertainment contains electronics, toys, cameras and supplies, photo processing services, cellular phones, cellular service plan, movies, music, video games and books.
• Hardlines consist of Stationary, Automative, hardware and paint, sporting goods, fabrics and crafts and seasonal merchandise.
• Apparel Includes apparel for women, girls, men, boys and infants as well as shoes, jewellery and accessories.
• Home Includes Home Furnishings, houseware and small appliances, bedding, home décor, outdoor living and horticulture.

B) Service Revenues:

Walmart generates revenue from services as well:

• Financial Services and related products:

It includes services like money order, prepaid cards, wire transfers, money transfers and Bill payments.

• VUDU Movie Streaming Service:  This includes subscription revenues for renting, buying, and watching movies, and TV shows on demand.
• Clinical Services: Clinical Services of Walmart includes Primary Care, Illness and Injuries, Management of Ongoing Conditions, Physical and Wellness Checks, Lab tests and Immunizations.
• Health Insurance Services: They accept the following Insurance Plans:

3. Marketing Strategy

Marketing is the core aspect of any business whether its scale is small or large. It is important to make an effective marketing strategy for long term growth and development.

Walmart follows the principle of Market Penetration which involves capturing the whole market by offering lower prices or competitive prices to the consumers.

Cost Leadership is a concept that helps the company to make a huge impact on the market.

 As consumers are Price sensitive, they want the product at a low price with maximum satisfaction.

The consumer is treated as the king of the market and that is what captured by the Walmart to maintain its customer relationship.

 According to Walmart, four factors drive a customer’s choice of retailer. These are Price, access, assortment & experience.

4. Success Story of Walmart

Walmart has a large customer base and scale of operations. It has been possible due to its core objective which is providing good and services to consumers at a low price.

Four important factors drive the success story of Walmart.

• Large Sales Volume: Walmart core agenda is to make goods and services available to the consumers at a low price. This drives their sales many folds and hence increase their sales volume.

 Walmart understands the needs and wants of consumers and help them make their buying decisions quickly by offering a monopoly price for a particular product or service.

The net revenue of Walmart grew from $500.3 billion in 2018 to $514.4 billion in 2019.

• Supply Chain Management System: Walmart’s distribution system is the largest in the world. It focuses on three aspects Lower Cost for Inventory Storage, reduced transportation costs and products spend less time in transit.
• Introduction to BARCODE: To manage huge inventory efficiently and effectively, Walmart introduced the concept of “BARCODE” which is a process of collecting and representing the data in a Computer-readable format.

This helped Walmart to manage its huge and diversified inventory into a systemized format and create a system of STOCK IN and STOCK OUT.

Barcode Scanner scans the barcode labelled on the product and save that detail in the computer so that in future if that particular product is out for sale, then it can be easily identified using that special code.

• Low Operational Costs:  Walmart always prefer to use standard and less number of parts.
• It manages to keep its operational cost low because it always manufactures the goods in those countries where the labour cost is cheap.
• This helps him to gain a competitive advantage in his domain. It controls production costs, advertising costs.

5. 12 Amazing Facts About Walmart

Walmart averages a profit of $1.8 Million Every Hour( Data May vary).

37 Million People Shop at Walmart every day; that’s more than the population of Canada. ( Data may vary)

Walmart’s $288 U.S retail sales exceed those of Kroger, Target, Costco combined.

The Average Walmart Supercenter sells 140,000 items. (data may vary).

Walmart’s top-selling item in 2014 was the Banana.

90% of Americans live within 15 minutes of a Walmart.

If Walmart were a country, it would be the 28th largest economy in the world.

Walmart has 2.2 Million employees, that’s more than the population of Houston.

(Data May Vary)

Source: Business Insider

6. Walmart Initiatives

Now, in this Walmart Case Study, let’s have a look at some of the interesting initiatives of Walmart.

Walmart has started a premium subscription service called Jetblack. 

Jetblack offers customers a personal shopper-like experience and costs its subscribers around $600 per year.

This was developed last year by Marc Lore, who joined Walmart when WMT acquired Jet.com in 2016.

Walmart(WMT) is also focusing on its online-advertising business(Digital Marketing). It is hoping that it can replicate Amazon’s success in advertising.

While Walmart(WMT) has been trying to catch up with AMZN in this area for a few quarters, it is now making some bold moves.

Walmart App: Store Assistant

In 2016, Walmart set a new goal to reduce emissions in our supply chain by 1 gigaton (1 billion metric tons) by 2030.

To achieve this goal, Walmart is launching Project Gigaton – an opportunity for suppliers to join Walmart in reducing greenhouse gas (GHG) emissions in the global value chain.

Deepti Chauhan is one of the thousands of farmers across the world overcoming the challenges of a traditional market.

With resources that educate and empower her business, she can take care of her family in a better way.

What if learning a job was as easy as downloading an app?

Walmart New Gaming App, designed to teach key management skills from the backroom to the sales floor. Coming soon to Walmart Academies nationwide.

Optimizing tasks like scanning shelves for inventory means Walmart associates can spend more time with customers on the sales floor.

Bossa Nova Robotics increases efficiency and support associates in 50 stores.

In 2005, Walmart partnered with the National Fish and Wildlife Foundation to create Acres for America, with a commitment to conserve one acre of wildlife habitat for every acre of land Walmart developed.

The original commitment of $35 million over 10 years was recommitted in 2015.

How is Walmart using innovation and GPS technology to assist customers in finding their favourite items?

Implementing Visual Light Communication to assist associates and customers alike.

The list is long……..

7. SWOT Analysis

STRENGTHS                                                                                               

• Thin Business Model
• Easily Copied Business Model
• Competitive Disadvantage against high-end speciality sellers

WEAKNESSES

• Global Organizational Size
• Global Supply Chain
• High Efficiency of Supply Chain

OPPORTUNITIES

• Expansion in Developing Countries.
• Improvement in Quality Standards.
• Improvement in human resource practices to develop competitiveness in the labour market

THREATS

• Healthy Lifestyle Trend.
• Aggressive Competition
• Online retailers of Various Sizes

8. Walmart-Flipkart Acquisition

In 2018, US retail giant Walmart Inc. picked up 77% stake in India’s largest online retailer Flipkart for $16 billion marking world’s biggest purchase of an e-commerce company.

Flipkart is an e-commerce company headquartered in Bengaluru primarily into the sale of consumer electronics, fashion and lifestyle products is leading Indian Ecommerce Brand.

On a call with analysts on May 9, Walmart CEO Doug McMillon and COO Judith McKenna stated three main reasons for acquisition:

Flipkart’s leadership in some lucrative segments, its payment platform and the company’s Talent Pool

9. Financial Statistics

Number of Employees: 10001+

Established in year: 1962

Number of Acquisitions: 21

Number of Investments: 6

Number of Lead Investments: 5

Founder: Sam Walton

Founded Date: Jan 2, 1962

Operating Status: Active

Legal Name: Walmart Inc

IPO Status: Public

Stock Symbol: NYSE: WMT

Company Type: For Profit

Web Traffic by SimilarWeb: Ranked 102 globally with 343,839,241 monthly web visitors

Patents and Trademarks: The intellectual property of Walmart includes 58 registered patents primarily in the ‘Computing; Calculating’ category.

Additionally, Walmart has registered 93 trademarks with the most popular class being ‘Advertising; business’.

Number of Exits: 1

IPO Date: Jan 13, 1978

Competitors by Owler: Target, Costco and Amazon.

IT spend: This year Walmart is projected to spend $8.5 B

on IT.

Number of Current Team Members: 142

Number of Board Members/Advisors: 20

Number of Sub-Orgs: 14

Number of Events: 12

Number of Articles: 24321

Company Tech Stack by Siftery: Walmart uses 220 technology products and services including Google Analytics, Word Press, and Vimeo.

Mobile App Metrics:

Downloads Last 30 Days: 3,450,283

Monthly Download Growth: 3.65%

App Name	App Store	Monthly Downloads
Walmart-Save Time and Money	Google Play, Itunes Connect	2,347,381
Walmart Grocery	Google Pay	534,767
Walmart Grocery Shopping	Itunes Connect	404,265
My Walmart Schedule	Itunes Connect	80,185
My Walmart Schedule	Itunes Connect	43,398
Spark City	Google Pay	20,487
Spark City	Itunes Connect	9,489
Walmart Perk Pick up	Itunes Connect	4,416
WMT Events	Itunes Connect	2,361

Website Tech Stack by Builtwith:

Walmart is actively using 148 technologies for its website. These include Viewport Meta, IPhone / Mobile Compatible, and SSL by Default.