Walmart

CASE STUDY

It's the world’s largest retailer. As such, Walmart presents an interesting study in both online and in-person shopping. It has gone from a one-store operation to an international sensation in half a century. Now, there are 11,500 brick-and-mortar stores in 27 countries. Additionally, eCommerce sites are available in 10 countries. This case study will explore how Walmart rose to success. It will discuss strategies it has implemented to stay relevant. Finally, it will discuss how it keeps a strong in-person and eCommerce presence.

Company Founding and Purpose

Since its founding in 1962, Walmart has been driven by a simple phrase—Every Day Low Price (EDLP). Sam Walton opened the first Walmart store in Rogers, Arkansas. His goal was to offer every day items at low prices. To succeed, he would need loyal customers. So, he prioritised exceptional customer service. It was a relatively simple strategy. Yet, it required hiring and training the right staff. He needed employees who would deliver quality service to encourage customers to return. In exchange for their service, Walton offered profit sharing. He rewarded employees when the store succeeded.

In the company’s early years, Walton focused on building new stores in rural areas. He recognised the need that rural communities had for a convenient grocery store. Other major retailers were building in urban and suburban areas. Walmart stores started opening in outlying and rural areas. This allowed Walton to serve an underserved niche market with minimal competition.

Low prices differentiated Walmart from other similar stores. Walton kept finding new ways to save on costs. Walton envisioned his store as a one-stop-shop. People could get groceries and other necessities without going from store to store. He built warehouses near stores to keep costs low. This made it easier, faster, and cheaper to re-stock stores.

Soon, Walton started to experiment with other types of stores. Sam’s Club launched in 1983 in another rural town, Midwest City, Oklahoma. This was the first iteration of what today is considered a Walmart Supercenter. It had everything from tires and tools to clothes, groceries, and electronics.

Like Walmart, Sam’s Club centred on offering low prices on everyday items. The difference was that Sam’s Club catered to entrepreneurs and business owners. They didn't have a convenient place to get business-related products and services. These two separate businesses helped Walmart grow. Sam's Club also let Walton compete with the emerging model of membership-based stores.

Business Model and Strategy

The heart of Walmart’s business model is a commitment to low prices. Its initial focus on rural areas helped people of all walks of life get essentials easily.

Today, Walmart’s business is comprised of three primary units: Walmart U.S., Sam’s Club, and Walmart International. Today, these three units all rely on both in-store and online sales.

Walmart takes a multi-channel approach to sales. It is forced to as a response to growing markets. Two threats it faces are eCommerce sites and food delivery mobile applications. Recently, Walmart introduced Walmart+. This came as a response to other eCommerce businesses offering free two-day delivery. With Walmart+, registered customers can get free delivery on all online orders. They can also get free same-day grocery delivery from their local Walmart.

Besides convenience, Walmart differentiates itself from other brands through its many store formats. Walmart stores come in the form of supercenters, discount stores, and neighbourhood markets. Supercenters have a little bit of everything, from tires to groceries. Discount stores stock general merchandise, such as clothes and office supplies. They also have limited groceries. Neighbourhood stores have mostly groceries. They have a limited supply of general merchandise.

Sam’s Club takes a different approach. As a membership-only store, much of Sam’s Club’s revenue comes from selling annual memberships. People pay for a yearly membership. In return, they get exclusive access to discounted prices on bulk goods. Only members can enter the store or shop online. Members can shop in-store or online. To get free shipping, members need to upgrade their membership to a “Plus” membership.

Sam’s Club's items fit into one of five categories: groceries, health and wellness, home goods, technology and entertainment, and car parts and repair.

Inventory, Distribution, and Logistics

Walmart has had to add an online component to both the Walmart and Sam’s Club brands. The company already had a distribution strategy. Locating warehouses and distribution centres near stores decreased shipping costs. Those strategic placements have proven invaluable in eCommerce.

Walmart distribution centres operate 24 hours a day, seven days a week. Each distribution centre is 1 million square feet. They need all that space because one centre supports 90 – 100 stores in a 322-kilometre radius. Walmart utilises a massive fleet. It employs over 7,000 drivers. They operate 55,000 trailers and 6,500 tractors worldwide.

All Walmart’s logistics operate in-house. The company does not rely on another vendor to deliver goods. Instead, it owns its own fleet and hires its own drivers to move goods from distribution centres to store shelves. On average, each Walmart driver travels 160,934 kilometres a year. As a whole, the entire Walmart fleet drives on average 1,126,540,800 billion kilometres a year.

The basic principle of keeping costs low applies to shipping and logistics. Every route is carefully planned to maximise efficiency. Walmart uses state-of-the-art scheduling technology to minimise its carbon footprint. This strategy ensures that as little time and fuel as possible are spent transporting goods from one place to another. The cost savings are passed on to the consumer.

Walmart has a successful distribution process. It can be attributed in large part to the commonsense approach Sam Walton took back in the 1970s. He did not have the same advanced technology of today’s eCommerce businesses. He had to develop the process from scratch. It started by hiring distribution managers, not salespeople, to oversee distribution operations. Taking this people-first approach to business has proven to pay off for Walmart.

Staying Competitive Through Technology

Walmart has had to innovate throughout the years to stay ahead of the competition. Sam Walton stayed on top of the latest trends. He knew technology would be available soon to help solve several challenges. So, he enrolled in a class for executives at IBM in 1968. This led to a partnership between Walmart and IBM. The result was unmatched tech advances.

Walton hired people from IBM to develop Walmart’s computer infrastructure. He continued to follow IBM. Soon after IBM invented the UPC scanner in 1973, Walmart was introducing it to 25 stores. Walton’s thirst for innovation has resulted in over 1,000 patents so far. These include autonomous robotic systems, in-store inventory trackers, and smart shopping carts.

Technology is not limited to online applications. Its brick-and-mortar stores are an advantage Walmart has over its strictly eCommerce competitors. With the Walmart mobile app, shoppers can search for an item. The app offers in-store directions to it. The app also makes it easier for customers to pick up groceries when they use the Walmart same-day pickup grocery service.

Walmart is still committed to making technological advancements. It has launched a subsidiary devoted entirely to the idea. Walmart Global Tech develops and tests new ideas. Based on results, it decides what to install in stores. To date, two Walmart stores in Northwest Arkansas have turned into test labs. Here, they run real-time tests. An example of a test is changing signage and using a direction-based app. The goal is to help in-store shoppers fulfil grocery orders faster.

Other advancements on the horizon include a fleet of self-driving vehicles for at-home delivery orders. In November 2020, Walmart announced its partnership with Cruise. This Arizona-based autonomous car company uses all-electric vehicles. In 2021, Walmart plans to start rolling out a self-driving fleet of cars. This will improve efficiency for at-home grocery delivery orders. It will also reduce car emissions.

Building a Strong Employee Base

Walmart is a company that relies heavily on person-to-person interaction. As such, it has always been concerned about how it treats employees. Sam Walton offered employees profit sharing to reward them for exceptional performance. That transitioned to a 401K plan in 2011. Walmart will match up to six per cent of an employee’s contributions to their 401K plan. Eliminating profit sharing also left more money for employee bonuses and medical benefits.

Employees need more than a retirement plan to perform their job well. Walton understood how important quality employees were. He knew that employees who delivered an exceptional customer experience were uncommon. He needed them, though, for customer retention. Seeing familiar faces reinforces a sense of community, so retaining employees is important.

One way Walmart encourages employees to stick around is by promoting from within. In 2020, Walmart promoted over 200,000 employees to higher-paying jobs. Along with higher pay, they received more generous benefits. According to their website, more than 75 per cent of all mangers started as hourly employees. The company rewards those who show up to their shifts and put in the time. Anyone has the potential to enjoy a long-lasting career at a management level (or higher).

Employee recognition is an integral part of Walmart culture. Local managers highlight exceptional employees on social media pages and in-store flyers. Walmart recognises that its employee base extends beyond customer-facing cashiers. In a 2018 ad that premiered during an NFL game, Walmart highlighted its fleet drivers’ work. Its special “thank you” video recognised the hard work of fleet drivers who spend their days on the road.

Keeping a robust customer-facing employee base is critical. It is also unique to Walmart compared with other eCommerce businesses. The high bar Sam Walton set for managers has helped Walmart continue to hire and promote talented people. This extends to all aspects of the company. In-store personnel, fleet drivers, and Walmart Tech employees are all vital. The organization also listens to employees. It has made seemingly small changes based on feedback. Employees can wear jeans to work, and the thermostat was raised one degree. These important changes add up to a more enjoyable work environment.

Walmart’s Online Marketplace

The next logical step for Walmart was to expand operations. It needed a way to compete with other eCommerce giants. Walmart’s Marketplace launched in 2009. By 2019, it had grown to include 45 million items in the online product catalogue from over 28,000 sellers.

Most of the Marketplace’s growth happened after 2016. It spent seven years barely treading water. It was unable to compete with larger and more established eCommerce websites. In 2016, things changed with the acquisition of Jet.com. With that move alone, the Marketplace exploded from 500 sellers to over 8,000 sellers. In the same year, the Marketplace grew from five million to over 17 million products.

One hurdle Walmart faced was resolving customer issues that resulted from third-party buyers. This resulted in unhappy customers. They were not always aware that they were purchasing from a third-party. The Marketplace appears on Walmart.com. As such, users may not be expecting to interact with a third-party seller. Many were caught off-guard when they had a problem with the order. Until 2018, customers had to settle disputes directly with the seller. In 2018, Walmart started accepting Marketplace returns in-store.

It took over a decade for Walmart to make the Marketplace a destination of choice for shoppers. During that time, it continued testing. It also studied consumer behaviour. In 2020, Walmart announced a partnership with the eCommerce site Shopify. This move lets small business owners on the Shopify platform to open their market to the Walmart Marketplace. Shopify store owners can sell their products on both their Shopify sites and Walmart.com.

Since its founding, Walmart has focused on innovation, technology, and customer satisfaction. This has helped it become the largest store in the world. Its future seems bright. Walmart continues to adopt new technologies and form partnerships. These will allow it to compete with other eCommerce sites.

Are you ready to launch an eCommerce business? Let us help you get started! Our free training video will give you a quick overview of everything you need to know. Learn how to build a website, find customers, and make money in 90 days or less.

Get your free training

If you feel like you’re ready to step up and become an eCommerce store owner get our free training by clicking the button below.