Key Strategies of Walmart Inc.

Walmart Inc.

Introduction

The Fortune Global 500 ranked Walmart as the largest company in term of revenue (about 572.8 billion USD). Walmart is a popular eCommerce company that uses an amazing concept to rival other business behemoths. Since the company’s early days, it has been known for its two primary business principles:

1. Single-stop purchasing

2. Everyday Low Price (EDLP) or Everyday Low Cost (EDLC)

However, the evolution of technology seems to have instigated minor alterations  in its business approach.

Everyday Low Price (EDLP), according to Walmart, is one of their core pledges to manage costs. It has a universal channel available so that its clients can access a large selection of products from anywhere in the United States and across the globe. In order to become and remain market leader, the company has invested in certain strategies.

E-commerce Investment Strategy

Seeing the expansion of eCommerce, Walmart Inc. has been making significant investments in its digital platforms as a business approach to generate more revenue in addition to its enormous physical infrastructure. Launched in the year 2009, Walmart marketplace is a well known e-commerce platform operated by Walmart.

On this e-commerce website, Walmart partners with several marketplace vendors and offers its customers a large number of brands and products.

In essence, Walmart Marketplace is similar to Amazon or eBay in that it allows third-party vendors to list their products on the platform.

Selling on the Walmart marketplace is an amazing way to advertise your products due to the large audience that frequently visits the website.  Walmart’s e-commerce website continued to expand and generate more revenue.  Walmart International net sales from e-commerce platforms spiked reaching a whooping $6.7 billion and $25.1 billion in total e-commerce sales revenue in the 2019 fiscal year. According to Forbes, during the global epidemic in 2020, Walmart’s online sales rose by 74 percent, propelling them past eBay to become the second-largest online retailer in the world. According to Walmart, 220 million people visited its website each week to shop at more than 10,000 of its stores and clubs spread across twenty-one different nations. The number of customers shopping on Walmart e-commerce platform kept rising due to the fact that more people worked remotely or at erratic hours. By the end of January 2022, Walmart’s e-commerce revenue had climbed by about 90% since COVID-19 first appeared. Prior to COVID-19, Walmart’s website was growing quite steadily, compared to the pandemic’s explosive expansion. Here are some stunning numbers that provide more information about Walmart’s overall e-commerce income.

Walmart reported total revenue of $152.87 billion at the conclusion of the first quarter of the fiscal year (January 31, 2022), a rise of 0.5 percent over the first quarter of the previous year.

Investment

The company’s primary business model consists of 3 crucial units:

-Walmart USA (which generates roughly 64% of its net revenues)

-Walmart International (generating about 24% of its net revenue)

-Sam’s Club (making about 12% of its net sales).  

Walmart’s largest sector, Walmart U.S successfully operates in all fifty states of the United States as well as Puerto Rico and Washington, D.C. About 64% of the net sales for 2018 came from the United States alone.

Second to Walmart US, Walmart Inc. International comes in as the unit that generates the second highest revenue. Walmart International is scattered across the globe in about 27 different countries. It can be subdivided into three other units which are the wholesale, retail and others. These subdivisions are further classified into supermarkets, super centers, e-commerce, warehouse clubs and so on.

The last subdivision is the Sam’s Club which consists of only membership based warehouse clubs that spreads across 44 states in the US along with its e-commerce.

The company has channeled huge amounts into this three units in order to maintain the smooth running of the units.

Investment in Ads and Healthcare

Asides Walmart Inc.’s physical stores and online infrastructure, the company plans to generate revenue through other means. The company considers its greatest resource as its ability to reach millions of people and also considers using this resource as a growth strategy to graduate the business beyond retail to health care. Talking about the company’s greatest resource, Walmart Inc. receives above 140 million clients or customers across the globe via their website, application and stores. The billion-dollar company plans to seize this opportunity to not just sell groceries and other merchandise, but chase bigger opportunities like becoming an influential healthcare provider as its retail industry might not be enough to power the future. The company also runs an ads business and renamed it of recent. Walmart Inc. made it known to CNBC that it has clear intentions to grow this unit by more than ten percent in the next half decade. In addition to that, it has launched over 20 health care centers with minimal priced health care services like therapy meetings, dental checkups etc. and plans ahead for further expansion.

The CEO and President of Walmart (Doug McMillon) emphasized that the company has to be at alert and ensure it is some steps ahead because he no longer sees the retail industry as the future due to the rapid and perpetual effects the pandemic had on customers . He added that, though people will shop in retail outlets, in most occasions, people will embrace the idea of ordering and having their products delivered to their doorstep but nevertheless, this is a problem the company has prepared for. He further added the there would be certain investments in transforming some stores to mini warehouses that uses employee and robots to ensure customer’s orders are met and pickups and delivery runs smoothly. This investment is expected to draw more customers to subscribe to the Walmart subscription service(Walmart+) because  customers are really into home delivery.

As of 2021, Walmart Inc. embarked on an investment of about 14 billion dollars. This investment had its main concentration on automation, supply chain, customer-facing initiatives and technology. It further added that it will extend capital to units such as automation and capacity in FCs, DCs and market centers. This whooping sum paved way for a lot of criticisms with a lot of people saying the amount is too heavy. Nonetheless, the company eventually came out to the public on the investment plan. It said that the current financial strength of the company makes it the perfect timing to invest in important areas that will restructure and define the incoming generation of retail.

Investment in Technology

Owing to the evolution of time into the technology era, Walmart Inc. has been investing a lot in technology and also labor-force including software engineers, data engineers, data scientists, product managers, technical program managers, architects, developers, and so on. A while ago, Walmart Inc.’s sole aim of delving into technology was to find solutions to specific issues and the new technologies (like AI, blockchain, IoT and so on) did the company a huge favor by assisting it overcome those issues but recently, the company plans to create a revenue flow from it. Some of the issues solved via technology were inability to manage data on proprietary servers. To curb this issue, Walmart entered a five year deal to curb this issue. Just like Amazon, Walmart Inc. invested in the drone delivery struggle. As a matter of fact, it has signed three contracts with drone operators in order to improve home delivery satisfaction. The first struck deal was with Flytrex and second deal with Zipline to deliver groceries and healthcare products respectively. The final deal proved to be successful. This deal was with DroneUp. In the race of drone delivery between Amazon and Walmart Inc., I strongly believe that Walmart has the upper hand owing to the fact that it has more stores spread across the globe.

Another technology related investment Walmart has embarked on is the metaverse. Walmart Inc. joined a long list of businesses with intentions to stake a claim in the metaverse, including top companies like Facebook, Nike, Ralph Lauren, Bumble, Disney and so on.

Like many companies, including Facebook, which changed its name to Meta last year and made public announcements about its plans to invest in and expand into the metaverse, a virtual world where users can communicate with one another using avatars, Walmart is also focusing on the virtual world. The company plans to create varieties of NFTs (non-fungible tokens) and its very own cryptocurrency payment method. In the month that marks the end of 2021, Walmart filed some trademarks that shows its intentions to sell virtual products like electronics, toys, sporting goods, self care products and so on. This applications were made public by the CBNC. In addition to the this, the Walmart division located in India (Flipkart) launched a unit which it named Flipkart Labs, a lab designated to study and explore Web3 and the Metaverse.

Acquisition of Other Companies

Asides technology, Walmart has been acquiring several companies and generating revenue from it. The first company to be acquired was ‘Jet.com’(3.3 billion dollars). It also acquired other companies like Moosejaw, Bonobos, Hayneedle, ShoeBuy, ModCloth (all retail industries) and Parcel which is a logistics company. The largest acquisition ever embarked on by the company was the acquisition of Flipkart (16 billion dollars). The company has invested over 21.9 billion dollars for its acquisitions. It should be noted that all the acquired companies are a revenue stream for Walmart.

Conclusion

A lot of people ponder if it’s a good idea to invest in Walmart due to the fact that the world is evolving into the technology era where people won’t need to come out to their houses to physical infrastructures to shop. This is an issue Walmart Inc. has identified and put forth measures to curb in the nearest future. Based on research and analysis, I strongly suggest that with all the investments and strategies put forth by the company, it’ll eventually become and possibly remain market leader and it’s totally worth investing in.