At the end of 2022 Walmart’s revenues were $572.3 billion in sales in the United States.
Walmart’s gross margins were $143.7 Billion representing a gross margin percentage of 24.8%. Walmart’s gross margins have stayed constant over the past 20 years at 25%, except for the most recent 12 months where gross margins have fallen to 24%.
Net margins have also fallen from an average of 3.5% to 2.39% and the most recent trailing twelve-month margins have fallen to a low of 1.49%. This is because of rising Selling, General and Administrations costs that have escalated faster than revenue increases coupled with a decline in gross margins.
Walmart appears to be holding prices in the face of rising costs for both products and the cost of operations.
Walmart’s success is attributed to its well-crafted business strategy and pricing tactics that focus on providing customers with everyday low prices backed by their global scale and buying power.
Overview of Walmart’s Business Strategy and Pricing Tactics
Walmart, the world’s largest retailer, has established itself as a dominant player in the market through a strategic approach that prioritises customer value. The company offers its customers a wide range of services and products, including groceries, apparel and accessories, electronics, home appliances, furniture, home decor items, office supplies, and more.
The company’s core strategy is to remain the lowest-cost provider while providing a wide selection of goods. Through efficient supply chains, proprietary technology, and aggressive pricing tactics, Walmart has established a competitive advantage in the market.
Walmart employs proprietary technology to optimise its supply chain and manage inventory, ensuring that it can meet customer demand with minimal costs and shortages. Additionally, the company’s loyalty program plays a crucial role in the company’s strategy, offering discounts and rewards for frequent shoppers to keep customers coming back.
This approach also enables Walmart to better understand customer preferences and target products toward them to drive sales, providing a personalised shopping experience for its customers.
Walmart’s Core Strategies
Walmart has developed a range of strategies to ensure it is the leading global retailer, focusing on driving growth through low prices, leveraging its size to drive efficiency, and investing in technology. The company’s core strategies include the following:
Low Price Leadership
Walmart’s core strategy is low-price leadership, which involves offering goods and services at lower prices than its competitors. This has enabled Walmart to become the world’s largest retailer by selling many products at everyday low prices.
Low-price leadership is primarily achieved through Walmart’s extensive network of suppliers, which allows them to purchase merchandise in bulk at lower prices than competitors. Walmart’s efficient supply chain further enhances this strategy, ensuring fast delivery of goods from suppliers to stores, resulting in higher customer satisfaction and loyalty.
As such, the low-price leadership approach has enabled Walmart to offer customers value beyond price by making shopping more accessible and enjoyable.
Economies of Scale
Walmart’s business strategy is built around the concept of economies of scale. The company leverages its size to offer customers discounted prices by purchasing goods in bulk from suppliers, negotiating lower prices than what smaller competitors can offer, and spreading labor costs across multiple stores.
They also benefit from having a large customer base, enabling them to spread marketing and advertising costs across a broad base to minimize expenses. Through these tactics, Walmart can provide consumers with discounts without compromising quality or selection.
Walmart deploys employees across stores according to demand to maximize efficiency and optimize staffing levels. Ultimately, this strategy allows them to remain competitive while ensuring that customers always receive the best products at the lowest prices.
Advanced Technology
Walmart is harnessing the power of advanced technology to support its business strategies and pricing tactics. Through data analytics and automated ordering systems, Walmart can identify customer preferences and buying patterns to customize product offerings for individual customers.
Using robotics also helps improve store organisation and increase product availability, contributing to higher overall efficiency.
By leveraging these technologies, Walmart can reduce costs and remain competitive in a growingly digital marketplace while still offering low prices.
This investment in advanced technology has proven beneficial for the company and its customers.
