If you’re just getting into the e-commerce scene, you might have recently heard about Walmart. That’s because they’re making moves on the rival e-commerce giant, Amazon.
However, you might be wondering to yourself how could a retailer like Walmart pull off something like that? Just what type of business is Walmart and how is it growing its customer base? We’ll tell you all that and more in this article, so keep reading!
The Simple Answer
To put things simply, Walmart is a multinational retailing corporation with its headquarters based in Bentonville, Arkansas that was started by Sam Walton more than 60 years ago. They are a business that allows you to buy pretty much everything from groceries to televisions and even items like ATVs.
While most people know Walmart for its supercenters, where you can find just about anything, there are also different branches of Walmart. That’s right, the supercenters are not the only types of stores that are operated by Walmart. In fact, there are four different types of stores that sell different varieties of products.
These stores vary in size and operation scale greatly. We’ll go over them so you can see how these creative ideas have helped the retail giant.
The Types of Walmart Stores
Starting off with what is probably the most well-known type of Walmart store, supercenters are huge hypermarkets that can be as big as 260,000 square feet in size. These stores are branded simply as “Walmart” and sell a variety of general merchandise as well as having a supermarket within them.
They have all sorts of groceries as well as things like gardening supplies, car services, eye care, photo processing, salons, and even banks! On top of that, some of these stores also offer food services such as Subway. To add to the already long list of services these hypermarkets provide, some of them even have gas stations.
Truly, these hypermarkets can meet almost every need someone has.
This is another type of retail store you will see simply branded as “Walmart” however, it has some very key differences when compared to its big brother. For one, the stores are smaller and average at about 106,000 square feet. Like the superstores, the discount stores carry general merchandise as well as groceries. Albeit, the grocery selection in these stores is limited compared to the bigger ones.
There are newer models of this store that actually have expanded grocery departments. These stores also offer services similar to the superstores. These services include garden centers, pharmacies, eye care, photo processing, fast food, banks, and sometimes gas stations. A fun fact about these stores is that they were the original model for stores that Walmart used, which ended up being surpassed by the bigger superstores.
Walmart Neighborhood Markets
Next, we have Neighborhood Markets. This store format is usually branded as “Neighborhood Walmart” or “Neighborhood Market by Walmart.” This type of store is a lot smaller than either of the two previous stores. In fact, the average size is about 42,000 square feet in, less than half the average size of a Discount Store and a fifth of the size of a Supercenter.
This store focuses primarily on groceries, instead of general goods. Additionally, these stores also have pharmacies and sometimes have gas stations. These stores are essentially an attempt by Walmart to focus more on grocery sales. They have everything that you’d see in other grocery stores such as produce, bakery items, pre-prepared foods, dairy products, etc.
But what makes these neighborhood grocery stores different from competitors, you might ask? Well, these ones actually provide the same low prices that are seen in the bigger Walmart stores. By doing this, Walmart has an edge over other grocery store companies.
Something you may not be aware of is that Walmart actually owns Sam’s club. They first opened these stores back in 1983. They are essentially warehouse clubs like Costco, offering memberships where you can buy groceries and general merchandise in bulk. The difference between this store and Costco is that its membership prices are lower. However, it has been noted that the prices for products in Sam’s club cost more.
Walmart and E-Commerce
While knowing about all the different types of Walmart stores is all well and good, you’re probably more concerned about how the retail giant handles e-commerce. After all, we live in a digital age where websites like Amazon dominate markets and make a lot of money. Thankfully, Walmart does have a place in this market and is doing pretty well.
Walmart actually does a lot of online orders and pickups through their very own website, walmart.com. They support a variety of distributors besides themselves and even have something called the Walmart Marketplace where third-party sellers can partner with Walmart to sell all sorts of things.
Because Walmart is such a huge company, the number of partners and customers they have is steadily increasing and is giving other e-commerce websites a run for their money. Additionally, Walmart has taken other steps in order to compete with Amazon. Namely, they’ve started their own premium service similar to Amazon Prime known simply as Walmart+.
Much like Amazon Prime, the service gets rid of shipping costs and there’s no order minimum. Additionally, you can get free deliveries on grocers and more! Walmart+ also has other unique features. Namely, you can get certain prescriptions for very cheap prices or even for free at Walmart pharmacies.
Additionally, you will be able to save 5 cents per gallon at Walmart fuel centers as well as member pricing at Sam’s Club. Finally, the subscription allows you to check out while you are shopping in the store. Truly, this service is doing its best to compete against Amazon. Walmart has also acquired different e-commerce websites like Flipkart, Moosejaw, and jet.com to keep the pressure on.
Walmart’s Business Model
Now that you know about the goods and services that Walmart provides, you must be dying to know what exactly their business model is. How can they cover so many aspects of life and make so much money off of it? We’ll first look at the three segments that make up Walmart’s business model.
First up is Walmart’s largest segment, which manages all of the stores that are found in the United States and Puerto Rico. This segment is in charge of all of the different types of stores that we talked about earlier. This branch offers all of the services we mentioned when talking about the stores as well as a few other things. In total, there are over 10,000 stores in the United States alone.
This branch is also in charge of certain financial services. This can be anything from money orders, prepaid cards, wire transfers, and even bill payments. This sort of thing is what you’d find available in Walmart supercenters, mostly. This branch also covers the e-commerce aspect as well.
Something that may be a surprise to Americans is that Walmart has plenty of stores outside of the United States. In fact, there are 24 countries in total that Walmart operates in. However, the stores that are in these other countries are not solely owned and operated by Walmart. In fact, these stores are operated via joint ventures between Walmart and other companies.
These stores also allow the customers to shop digitally, like in the United States. They do offer services that are found locally in the country they’re created. Walmart has been able to get a pretty strong foothold in countries like China, Brazil, Mexico, Canada, India, South Africa, and the United Kingdom. They are continuing to expand thanks in part to the growing necessity of online shopping. In fact, the corporation has over 11,000 stores worldwide in these countries.
This is something we’ve already mentioned before, but felt needed to be addressed. Sam’s Club is actually a subsidiary of Walmart and thus has its own branch within the company that it is handled by. Sam’s Club does not operate in every state, nor does it have a presence overseas. You can find it in most states and even Puerto Rico.
As we talked about, Sam’s Club is a membership-only warehouse where people can buy all sorts of things in bulk. It also has an online service, samsclub.com, where people can order things online and pick them up at the store. The nice thing about this is that the website supports the actual stores with this service.
Now that you’ve taken a peek at the different branches under Walmart’s control it’s time to talk figures. You’re probably itching to see just what are the results of this business model. Strap in, because you’re about to be blown away. As of right now, in 2021, Walmart pulled a net income of 559.2 billion dollars in profits this fiscal year.
Over half of this huge net sales number was made just within the United States based stores, while international stores and Sam’s club made up the other half. But what does the company do to bring in such crazy profits? Well, there are two strategies that they employ to make sure that they maximize profits.
Before the market changed significantly, Walmart employed two primary strategies, Everyday Low Cost(EDLC) and Everyday Low Price(EDLP). These two strategies were meant to keep the cost of products low while also ensuring that customers would save money. These strategies ultimately helped Walmart bring in a lot of profits so that it could easily become the largest retailer the United States, or even the world, has ever seen.
Lead On Price
Now, the chief executive officer, Doug Mcmillon, along with other executives like Brett Biggs have decided to use different strategies to keep up with the changing market and to keep their stores modernized. One of those new strategies is something they’ve called “Lead On Price.”
Essentially, they want to keep their prices low so that their products can be affordable for everyone and encourage customers to return. This is similar to their older EDLP strategy. But how do they manage to keep their prices so low? Well, this has to do with the fact that Walmart has one of the largest supply chains the world has ever seen.
Specifically, they employ a strategy known as cross-docking. This involves putting the inbound shipments they receive from suppliers into their outbound delivery trucks at their distribution centers. It’s a brilliant strategy that ultimately keeps their prices so low and gives them an excellent edge over other retailers.
Invest To Differentiate On Access
The next strategy actually involves the reason that they opened up different types of stores. Walmart has realized that in order to deal with competition, they need to invest in different ways to reach the different sectors of the retail business. Therefore they’ve come up with something known as “Invest To Differentiate On Access.”
Essentially, this boils down to making stores more accessible for consumers. Therefore, they decided to invest in making stores like the neighborhood ones. This type of store prevents small businesses and grocery stores from driving away business from Walmart. Smaller stores aren’t the only type of consumer access that Walmart has invested in.
They’ve also heavily invested in online shopping and e-commerce. As you all know, online shopping has become a huge trend in recent years and many markets are dominated by it, especially recently due to the pandemic. As we’ve talked about, Walmart has created user-friendly online retailer websites as well as their own premium subscription service, like Amazon.
They’ve actually had to upgrade their technology to keep up with this change in the market. The final thing that Walmart has decided to invest in is different services. They’ve decided to invest in health services of different types. These can include eye care, pharmacies, and other wellness services.
Some Walmart stores have even begun opening basic clinics for things like checkups and basic healthcare.
This is something that you might have already noticed about Walmart. Their particular business model encourages having a very wide variety of products both in normal stores and online. By doing this, they can cater to the needs of almost everyone. This effectively makes Walmart, especially the superstores, a “jack-of-all-trades”
The final strategy that Walmart employs is giving its customers an excellent experience while shopping. This is something that should really be common for all retailers, as it encourages the customers to return. But how do you ensure that your customers have a good shopping experience?
Simply put, happy employees make this goal easily obtainable. That’s why Walmart has said that they plan on increasing their wages for employees. Additionally, there will be extra training for their workers and an increased effort to keep them working at their stores. Their hopes are that investing in their workers will ultimately return happier, loyal customers.
Walmart is an enormous and extremely wealthy retail corporation. They pride themselves on excellent strategies within the market to maximize profits as well as ensure customer satisfaction. With the combination of low prices and a huge variety of goods and now services, it’s no wonder that Walmart has become such a large corporation. Now, with their entry into online shopping, they are hopeful to give Amazon some competition.