Walmart business model has turned the retail company in the largest supermarket chain in the United States, with more than 11,500 stores (including hypermarkets, supermarkets and department stores), under 56 banners in 27 countries and e-commerce websites in 10 countries.
They employ approximately 2.2 million associates around the world (1.5 million in the U.S. alone) and serve nearly 270 million customers. Walmart is also the largest company in the world by revenue, with an accumulated capital of more than 500 billion dollars.
The brand, which is a publicly-traded family-owned company under the command of the Waltons, involves a retail chain that, today, still has its business model heavily based on brick-and-mortar retail – but its e-commerce has been expanding rapidly.
The entire Walmart operation, since its founding in 1962, continues to follow the driving force of founder Sam Walton, “saving people money so they can live better”. But how does this business model based on leading on price work? Let’s check it out!
The entire Walmart operation in the world is divided into three main segments:
Walmart U.S.: operates in all 50 American states and in Puerto Rico. It represents more than 60% of the corporation’s sales, summing up physical and e-commerce stores.
Walmart International: covers operations in all 26 other countries, with supercenters, hypermarkets, supermarkets, warehouse clubs, and e-commerce (in 10 countries). This generates around 25% of net sales.
Sam’s Club: this membership-only warehouse club is in 44 states of U.S. and Puerto Rico (and in e-commerce). It represents about 12% of net sales. Sam’s Club offers grocery and consumables, home and apparel, technology and electronics, health and wellness, and also fuel and similar.
Walmart Mobile App: in addition to the three main segments and their e-commerce, there is also a Walmart Mobile App (for iOS and Android). The app allows the customers to search and buy products of Walmart.com and even pay from their phones. The app also helps create shopping lists, check prices and availability, and even find the locations of the merchandise in the aisles.
Locally, in the States, Walmart has 157 distribution facilities. Internationally, it operates through 188 distribution centers located in Argentina, Brazil, Canada, Central America, Chile, China, Japan, Mexico, South Africa, and the United Kingdom.
Walmart business model’s strategy
Lead on Price
Perhaps the main characteristic of Walmart’s business model is the commitment to keep its prices as low as possible so that they are accessible to practically the entire population.
To achieve this, Walmart has the largest network of suppliers in the world, from which they make purchases in large volumes, in order to guarantee a bargaining power that allows them to reach the lowest possible price.
Another tactic applied by the corporation is cross-docking, especially with regard to the Sam’s Club. It is an intelligent and organized redistribution system, in which the goods received in a warehouse, instead of being stored, are sent directly to the customer or point of sale. This allows for significant savings in logistics costs.
Differentiate on Access
When we think of Walmart, the image of big centers and supermarkets always comes to mind. But one of the corporation’s strategies is to diversify access to the population. For this reason, Walmart is investing in:
- small-format stores, with fresh food;
- digital marketing and retail, by enhancing its e-commerce experience and also connecting physical and digital (the customer can buy online and get in the store);
- and services that are difficult to access, being the only American retailer to have its own pharmacy stores and clinics, where it offers preventive health care checkups and wellness products.
Compete on Assortment
Walmart invests heavily in a variety of products and brands, from local products to international names, both in its brick-and-mortar and online.
Deliver a Great Experience
Walmart knows that the best strategy for customer retention is to offer them the best possible experience so that they can buy again in their stores. And the company knows that satisfied customers rely on motivated employees. Therefore, it seeks for paying its employees well while investing in personnel training.
Besides, Walmart has a policy of money-back guarantee. It offers a 100% money-back guarantee if the customer is not satisfied with the services provided by the company.
It is worth remembering that the entire Walmart business strategy goes back to Sam Walton’s “10 rules for building a success”:
- Commit to your business.
- Share your profits with all your associates, and treat them as partners.
- Motivate your partners.
- Communicate everything you possibly can to your partners.
- Appreciate everything your associates do for the business.
- Celebrate your success.
- Listen to everyone in your company.
- Exceed your customers ’expectations.
- Control your expenses better than your competition.
- Swim upstream.
Walmart Business Model Canvas
Customer Segments of Walmart
Walmart’s customer segmentation is done especially due to its primary low-price strategy. Therefore, its customers tend to be people who are looking for low-cost but good quality products, whether they are low-income people or just looking for the best cost-benefit.
Value Proposition of Walmart
The value proposition of Walmart is a reflection of its business policy: providing its customers with a wide variety of products, at the lowest price and in the most convenient way possible.
Distribution Channels of Walmart
Walmart’s channels are widely known: the brick-and-mortar stores themselves, their website, their mobile app, social and mass media.
Customer Relationship of Walmart
Walmart’s customer relationship is also entirely based on its value proposition – cheap, good and varied merchandise, easily accessible, and with the best service. For this, the processes are as automated and simplified as possible.
Revenue Streams of Walmart
Walmart’s revenue streams are based, as we saw above, on its retail sales (national and international) and the Sam’s Club. But the company has also increased its list of services. See below.
Key Resources of Walmart
Walmart’s biggest key resources are its own brick-and-mortar stores, its distribution and storage system, its virtual infrastructure, with the e-commerce store and the mobile app and, of course, its human resources.
Key Activities of Walmart
Walmart’s key activities include, first, buying and delivering goods, while controlling the costs involved. In addition, the company invests in customer service, inventory control, and distribution management.
Key Partners of Walmart
Walmart’s key partners are certainly its suppliers, as they are the ones that allow the company’s value proposition to be delivered, by guaranteeing low-cost products and services, as well as access to different parts of the world.
Cost Structure of Walmart
Walmart’s cost structure is certainly not “lean”, as it has more than 11,000 stores (including supercenters) worldwide. However, its operations involve a financial discipline that allows reducing such costs to the maximum, so that these savings can be passed on to the final customer.
How Walmart Makes Money
Retail sales encompass almost all of Walmart’s revenue and include products distributed under its own brand or other brands, both national and international.
There is also a small percentage of Walmart’s revenue from services. These services are:
- Financial: money orders and transfers, check cashing, bill payments, and prepaid cards.
- VUDU Movie Streaming: on-demand streaming service, by subscription, for watching movies and TV shows.
- Clinical: some preventive and routine health checks, which can be performed without urgent or emergency care.
- Health insurance.
It can be seen that even though Walmart’s business model is always seeking to update itself on the market and available technologies, the base of its business remains grounded on the initial idea of its founder about half a century ago: making people happy, by spending little.
With a giant chain of stores, a worldwide operation, and a team of more than 2 million workers, Walmart keeps in harmony between the beliefs of its founders, business strategies, and, above all, the experience and satisfaction of its audience.