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What is Walmart’s Business Model?

July 12, 2023 in Case Studies

Walmart is the world’s most valuable and highest-revenue company, with over $500 billion market value. The Walton family runs the publicly listed, family-owned company, which relies primarily on traditional storefronts but rapidly expands online.

Walmart has about 11,500 outlets (including hypermarkets, supermarkets, and department stores) under 56 flags in 27 countries and e-commerce websites in 10 countries. They serve almost 270 million clients annually and employ 2.2 million people worldwide, including 1.5 million in the U.S.

So what makes this company so successful? Let’s analyze Walmart’s business model.

Walmart’s Business Model: Core Concept

The global Walmart’s business model can be broken down into four distinct parts:

American Walmart market

Serves the whole United States of America, including Puerto Rico. It accounts for over 60% of the company revenue, including brick-and-mortar and online outlets.

Worldwide Walmart

Includes 26 other nations’ activities, including supermarkets, warehouse clubs, plus online sales (in 10 countries). About 25% of total net sales are produced by this method;

Store Like Sam’s (or Sam’s Club)

We can find stores of this membership-only warehouse club in 44 of the 50 United States and in Puerto Rico (and in e-commerce). About 12% of total net sales can be attributed to this factor. Sam’s Club is a warehouse store that sells food and household items, clothing and accessories, gadgets and electronics, health and wellness products, and automotive necessities.

Mobile App for Walmart

This is an additional Walmart’s business model. One can shop in one of three primary categories via the Walmart website or use the Walmart Mobile App (iOS and Android).

walmart's business model - app

Customers can use the app to browse Walmart’s product catalog, make purchases, and even make payments directly from their mobile devices.

See Also: Importance of Digital Marketing

A quick look back at Walmart’s past

Sam Walton christened his first Arkansas variety store Walton 5-10, in 1950. Walmart began here. From managing a similar store, he saw the market potential. After his success, he founded Walmart in 1962.

walmart's history

 

Sam carefully put Walmart as a discount retailer serving suburban and rural clients because other shops compete for city businesses. Walmart opened 24 Arkansas locations in 1962 and sold over $12 million by 1967. New states were added a year later. After the 1972 IPO provided much-needed funding, 125 stores opened in three years.

In 1983, Walmart built its first Sam’s Club, becoming the nation’s largest wholesale retailer. Five years later, the first “supercenter” sold everything. It was the most profitable store that year. Walmart was the first to earn $100 billion in 1996.

Who Owns Walmart?

The Walton family continues to this day as the sole proprietors of Walmart Inc. Samuel Robson “Rob” Walton, Sam Walton’s eldest son and Walmart’s chairman from 1992 until 2015, is still the panel president even though Doug McMillon has been the official CEO since February 2014.

Walmart’s business model for generating profits

Walmart’s revenue comes mainly from product sales and a small proportion from its services.

Sales of Products

Products sold in Walmart stores, both under the company’s name and under the names of other manufacturers, domestic and foreign, account for the vast majority of the retailer’s total revenue.

Expenses and Income from Providing Services

Walmart also generates some income from providing services, albeit a negligible amount. The following items fall under this category:

Financial Services

These include money orders and wire transfers, check services, payment services, and card payments.

Movies on Demand with VUDU

Movies and T.V. show streaming services are available on demand for a monthly fee.

Clinical Services and Health Insurance

Some preventive and routine health examinations which don’t require immediate medical attention fall under clinical services provided by Walmart.

Strategy for Walmart’s Business Model

The reason behind Walmart’s success is its fantastic business strategy;

Price Leader

Walmart’s commitment to low prices, making its goods and services available to as many people as possible, is a defining feature of its business strategy. Walmart can do this because it has the most outstanding supplier network in the world and buys in such enormous quantities that it has significant bargaining power, allowing it to negotiate the best possible prices.

walmart's business logo

 

The company also uses cross-docking, which is most noticeable with Sam’s Club. It’s a well-thought-out and well-organized method for getting inventory out to stores and consumers as soon as possible after it’s received. There will be a massive reduction in logistics expenses due to this.

Separate Yourself with Accessibility

One of Walmart’s initiatives is to expand into underserved areas of the country, despite the brand’s common association with large shopping malls and supermarkets. This is why Walmart is spending money on them:

  • Markets have a limited selection of fresh foods;
  • Promotion and sales in the digital sphere, emphasizing improving e-commerce while also bridging the gap between online and offline shopping experiences.
  • And offerings that are otherwise hard to get by; Walgreens is the sole American retailer with its chain of pharmacies and wellness centers. It provides free health screenings and recommends appropriate preventative measures for customers.

Vary Your Offerings to Rival Shops

Walmart puts a lot of money into a wide range of brands and products, both domestic and foreign, for sale in its physical stores and on its website.

To Provide a Superb Interaction

Walmart is well-aware that providing customers with a positive shopping experience is the most excellent way to keep them returning to the store. Additionally, management understands that a happy workforce is essential to maintaining a loyal clientele. 

As a result, the company aims to provide competitive salaries and engage in employee development. Furthermore, Walmart has a money-back guarantee policy: if consumers are unhappy with the services given, they can get all their money returned.

walmart's business model: walmart's store

It’s important to recall that everything that Walmart does in business stems from Sam Walton’s “10 rules for establishing a success”:

  • Give your everything to your company;
  • Treat your employees like partners and split the revenues evenly;
  • Stir up your associates’ enthusiasm;
  • Share as much information as you can with your collaborators;
  • Be grateful for the hard work your coworkers put into the company.
  • Enjoy your accomplishments;
  • Pay attention to what the staff has to say;
  • Exceed the expectations of your customers;
  • Spend less than the competitor thanks to your expert cost management.
  • It’s a futile swim upstream.

See Also: What are Market Leader Strategies? 

Frequently Asked Questions

What is Walmart's business model?

Omni model: Over $555 billion will be generated in net sales by 2021 thanks to the company's signature Omni business model, which includes Walmart U.S., Walmart International, plus Sam's Club (12% of net sales), a membership-only warehouse club.

What is Walmart's plan?

Everyday deals with a Huge Selection of Products. Their business model is predicated on providing consistently low prices (EDLP). Their clientele prefers dealing with a single company.

Why does Walmart do so well?

According to Sam Walton, Walmart's success can be attributed to the company's 'Merchandise-Driven' instead of the 'Operation-Driven' sales model. One way to save expenses and increase productivity is to take an operations-driven approach.

Four P's of Walmart?

The marketing mix is a set of tools used to promote a company's brand or product. Price, Product, Promotion, and Place are the four Ps of the marketing mix.

Conclusion

Walmart’s business model strategy constantly adapts to the changing market and technological landscape. However, it still has roots in the original vision of its founder from around fifty years ago: contributing to society by spending little.

Walmart, a retail behemoth with thousands of locations throughout the globe and more than two million employees maintains a balance between the ideals of its founders, the success of its business practices, and, most importantly, the happiness and contentment of its customers.

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Rahul Gupta More posts by Rahul Gupta