As Victor (a classmate) mentioned in his first blog, Walmart is able to attain and sustain competitive advantage by their cost leadership strategy. I totally agree with Victor because Walmart has been so efficient to reduce all of their costs, which allows them to reduce the prices. Unlike other stores like future shop, Walmart can really offer low prices and provide values at the same time for consumers. Just by a quick glance at the parking lot, from the type of cars we can tell that not just the low income groups shop in Walmart, a lot of high income consumers also make purchases in Walmart because everyone likes a good deal! The reason behind Walmart’s low pricing is because Walmart has low supply, operation costs, they make centralization purchasing from the buyers to reduce the operation costs of transporting the goods to different stores and they call this “hub and spokes”. They also implement a 2% rule which is no suppliers can supply more than 2% of the overall amount of the goods, which is to reduce bargaining power of suppliers. Walmart is a large distributor nowadays so they attract many famous brands like Coca Cola and Pepsi to be their suppliers to ensure product quality. Thus, they are able to offer low prices and still provide high quality and valued goods to consumers.
Here is a video about attracting consumers to low prices
Second reason for Walmart’s competitive advantage is their differentiations. Walmart stores exits from popular shopping malls to rural places. It is accessible to everyone and the stores can hardly be missed by everyone passing by. Walmart is everywhere! Within each stores, they use 10% of the space as inventory and 90% for sales where the industrial average is arranged as 25% and 75% respectively. Within each square foot of sales area, Walmart is able to generate $300 per square foot which is also significantly higher than their competitors. Besides these advantages, Walmart also differentiate to offer membership and build supercenters. Sam’s club which named after the former CEO of Walmart, Sam Walton is also about low-cost merchandise with high margins and inventory turnover. A supercenter is a combination of supermarket and discount stores like bakeries, delis, and convenience shops such as portrait studios, photo labs, dry cleaners, optical shops, and hair salons. Walmart is currently expanding into international markets. In my opinion, Walmart’s extreme efficient management is truly an amazing factor that allows them to outstand in this intense and mature market.
reference: https://blogs.ubc.ca/vicyou89/