Walmart Inc. is a global retailer that operates a chain of grocery, supermarket, big-box, department, discount stores, and community stores. The company owns and operates wholesale and retail stores worldwide in countries including, but not limited to, the United States ,Canada, China, Chile, Mexico, and India. As of January 2021, the company owned 4,580 retail units and 762 leased retail units in the United States and 1,898 company-owned retail units, and 4,203 retail units internationally (MarketLine Company Profile: Walmart Inc, 2022). The size of Walmart Inc. today is a function of its market positioning and marketing strategy. One of the significant strategies in the early stages of the company’s development was to grow sustainably at low prices and low costs. As a result, the company entered the market with a low-price positioning, offering categories such as grocery and consumables, health and wellness, technology, office and entertainment, hardlines, apparel, and home. In addition, the company has also chosen to reduce unnecessary packaging of items and the use of organic ingredients as means that can lead to sustainability (Spicer, & Hyatt, 2017). These are all major competitive advantages for Walmart. Lower prices and equal or even more types of items compared to similar retailers have undoubtedly opened up the retail goods market for the exact purpose of Walmart and succeeded in developing a large number of loyal users. However, the sustainable strategy of selling more at lower prices is not without drawbacks. The particular reason for the circumstance is that there is often a conflict between sustainable development and cost reduction. This actively demonstrates that, with the difficulty of reducing the cost, Walmart’s low priceadvantage has become a stumbling block to the company’s operating income. This paper will discuss the positive and negative effects of Walmart’s low pricestrategy on the company’s operational performance.
Walmart operates in highly competitive retail industry where the factors that determine the level of competition within the industry include customer service and product, quality and price. Wal-Mart has achieved a stage of success in the competition with its low prices and high-cost performance. Nevertheless, with the development of technology, e-retailers came into the picture. Walmart’s competitors are not limited to the traditional retail stores in each region; the growing number of online retailers such as Amazon poses a threat to Wal-Mart that cannot be ignored. E-retailers have more flexible costs and better inventory flow than traditional brick-and-mortar retailers, which has undoubtedly led to increased price competition in the retail industry.
Low prices in retail stores are a major competitive advantage that Wal-Mart prides itself on. However, with a sustainable approach, the need to ensure that the materials used in products are safe, environmentally friendly and of high quality, limited cost savings can be made from the products themselves. This fact actively demonstrates that Walmart has had to reduce expenses outside of the product, such as labour, in order to be able to achieve low costs. The most common means Walmart uses to save money is to save money on the cost of labour. Walmart tends to hire part-time and hourly workers in order to reduce the wages they have to pay. Walmart pays its employees less than the minimum wage set by the ILO (Balser, 2007). In addition, Walmart created an organizational culture that was frantic to control its costs, thus squeezing its employees (Balser, 2007). With a new leader in place, Walmart allocated more energy to technology integration, which made the store more efficient. However, the focus on employees was more reduced, and when employees tried to get more pay and sought union support to defend their rights, they received threats of losing their jobs. When employees tried to sign union agreements, they were told that if the union won, the store would close, and the employees would be fired, as was the case in Quebec, Canada, when Walmart employees joined the UFCW union and the store was closed (Balser, 2007). The core values of the company changed as his actions were not only exploitative but in some cases illegal (Fishman, 2006). The thin margin strategy makes it difficult for Walmart to get a breakthrough in profitability. Once it loses the high volume boost, the meager margins from low product prices will not be enough to support Walmart to maintain the profitability level of the past. With the recent impact of COVID-19 and the war in Ukraine, the cost of fuel and labour have increased significantly, both of which are important cost-saving factors for Walmart Inc. According to the Wall Street Journal (2022), Walmart’s quarterly earnings fell 30 percent and single-day trading fell 10 percent, the largest single-day change since 2018.
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Spicer, A., & Hyatt, D. (2017). Walmart’s Emergent Low-Cost Sustainable Product Strategy. California Management Review, 59(2), 116–141. https://doi.org/10.1177/0008125617695287
The Wall Street Journal. WMT | Walmart Inc.. annual income statement – WSJ.. Retrieved June 14, 2022, from https://www.wsj.com/market-data/quotes/WMT/financials/annual/income-statement