Today, Walmart Inc is not only a household name for every shopper in the United States, but the Walmart stores have become a globally recognized chain in the retail industry worldwide. We know that the Walmart business model has primarily focused on developing a chain of brick-and-mortar retail stores across the world.
Hence, Walmart International currently owns a huge market share in the retail industry by operating a network of more than 11,000 retail commerce stores across 27 countries.
Founded in 1962 by Sam Walton, the Walmart company has a rich history spanning over five decades. It has grown exponentially and currently employs over 2.2 million human resources worldwide.
If we look at it superficially, then the Walmart business model’s success can be pinpointed on its everyday low price strategy, its strong supply chain management, and overall brand recognition.
Walmart SWOT Analysis
But the Walmart SWOT analysis that we will conduct attempts to deep-dive beyond these superficial factors. We aim to find what are the Walmart strengths and weaknesses.
Our business analysis also aims to find the internal and external factors that are currently bolstering the brand or posing a threat to its competitive advantage and market share. We’ll try to understand Walmart’s strategic direction and identify key areas for improvement.
Strengths
The first part of our Walmart SWOT analysis deals with the strengths of this global retailer. Here, we will list and try to analyze the internal strategic factors, marketing strategy, and every other element that has kept the Walmart business model afloat.
These Walmart strengths have played a crucial role in contributing to its topline, market share, and competitive advantage.
Global Leadership in Retail
Walmart is operating a chain of hypermarkets, retail stores, grocery stores, apart from its concepts of one-stop mart. It has also worked its way up the ladder as the largest retailer by operating a chain of subsidiaries like Jet.com, Bonobos, Shoes.com, Hayneedle, Modcloth, etc.
According to Forbes, Walmart ranked as the second-largest public company in the world with a market valuation of over $500 billion in 2020. Its dominance in the retail industry is unparalleled, and that has resulted in increasing its global footprint of retail stores.
A report by Deloitte says that the internal operations of Walmart International accounted for 23% of its revenue in 2020, and this says ample about its foothold in the retail industry.
Commanding a market share of 6.3% in June 2022 in the retail industry segment, Walmart Inc has developed a strong presence in North America, Latin America. It has also started expanding into emerging markets like those of Asia, Africa, etc.
Walmart stores have successfully executed their geographical expansion by adapting to the local consumer preferences and cultural norms. It has also leveraged popularity through private label brands like Sam’s Choice, Mainstays, Great Value, etc. which improve its overall sales margins.
Strong Supply Chain and Distribution Network
Walmart Inc’s global supply chain and distribution network has boosted its revenue and retail commerce success. This supply chain and distribution network, buoyed by strategic partnerships, advanced tech, and streamlined processes has been at the forefront of the Walmart business model.
If you’re wondering what Walmart has done differently to boost its retail commerce revenue, then the answer lies in its cost-saving approach.
By leveraging its global supply chain and distribution network of scale, Walmart can negotiate better deals with vendors, minimize transportation costs, and minimize inventory holding expenses. An industry survey found that Walmart’s supply chain and logistics operations are 30% more efficient than its peers.
We have identified another factor in our Walmart SWOT Analysis that has helped this retail store giant maximize its supply chain and distribution stronghold. That is the focus on strategic partnerships with various suppliers, manufacturers, and other sellers that has helped it increase its global supply chain and logistics network.
By FY 2020 end, Walmart had around 7300 pickup locations and 5200 delivery locations worldwide. It holds more than 160 distribution centers worldwide, commanding more than 100 million sq ft of space.
Advanced Technology Integration
Walmart’s focus on leveraging technology and automation has boosted all its efforts in the retail space. You might have been aware of the Walmart model of the JIT (just-in-time) inventory system. Here orders and products are received from suppliers only when they’re needed.
The above approach has helped Walmart maximize storage space, minimize inventory holding costs, and reduce need for markdowns. Other than this, Walmart has also invested in advanced innovations like automation, RFID tags, drones, racking and shelving models that have increased efficiencies of its warehouses manifold.
Using robots for inventory management, AR (Augmented Reality) for virtual try-ons, and testing autonomous delivery vehicles are some of Walmart’s consistent technology-focused advancements.
The use of Artificial Intelligence, Machine Learning, and advanced proprietary algorithms in Walmart’s inventory management have helped them improve delivery times and reduce wastes.
The innovations like Walmart+ - a new omni-channel shopping experience and the Walmart GoLocal - new delivery as a service offering have helped Walmart improve its lean supply chain and distribution model, increase employee satisfaction, and also enhance the retail industry experience while boosting its retail commerce figures.
Brand Reputation and Customer Loyalty
Although Walmart has been facing a constant push from other ecommerce biggies, its brand reputation and customer loyalty have always helped it retain a top spot in the retail industry.
Walmart’s brand reputation has increased significantly over the last few years, thanks to its constant e-commerce push, product quality improvements, and employee training investments.
A particular study by YouGov found Walmart stores having better brand reputation compared to its direct competitor brands like Amazon, Target, and Costco.
Whether it be the low price model they offer, or the unique layouts of their retail stores, Walmart has ranked #1 among grocery retailers in terms of customer loyalty.
It has commanded a loyal customer base, with more than 62% of a specific survey respondents saying they are “very likely” or “extremely likely” to recommend Walmart retail stores to others.
Walmart’s customer base in North America is loyal beyond a shade of doubt. Statista says that 90% of American households have shopped at this retailer at least once a year.
According to Walmart’s earnings presentation of Q2 in FY24, its customer loyalty program has seen significant adoption, with more than 20% growth in its weekly active users.
CEO of Walmart, Doug McMillon said that with consumers looking to adopt more budget-conscious methods, Walmart Inc continues to drive conversion across discretionary categories, and is witnessing significant growth in the curbside pickup business.
Weaknesses
The next section of our Walmart SWOT analysis deals with the external strategic factors and elements that contribute to Walmart weaknesses. Let’s analyze them in detail and find how they’ve shaken this retail industry giant.
Public Perception and Controversies
Walmart has consistently ranked low in terms of public perceptions and it is highly disturbing for the business model of Walmart Inc.
One of the primary reasons for this negative perception is the history of labor disputes and allegations of mistreatment of employees. These have plagued the company over the years, with it facing criticism for employee strikes in 2020 and encountering back-to-back US lawsuits even in 2023. Walmart employees demanded higher wages and better working conditions.
Additionally, this global retailer has faced backlash for perpetuating unfair employee policies and inequality in rural areas, where it has always been the most dominant employer.
The Economic Policy Institute in 2020 found that Walmart’s unequal employee and wage policies had a negative impact on local economies. It stunted economic opportunities and average wage structures.
Dependence on the U.S. Market
The Walmart Annual Report published in 2023 said that more than 69% of its net sales came from its operations in the US. Thus, this company’s heavy reliance on the domestic markets are slowly leading to its doom.
If you’re confused about how it challenges the entire framework of Walmart business model, let me explain this to you. The extreme dependence on the US market leaves the Walmart company vulnerable to changes in the global consumer spending habits.
With the drastic shift towards e-commerce more prominent in the post-Covid era, Walmart has struggled to compete with notable online retailers like Amazon that represent the bulk of its competitors.
Furthermore, our business model analysis also finds out that the over-dependence on US markets is a highly-flawed strategy for Walmart Inc.
It leaves the retail giant susceptible against domestic economic fluctuations like constant changes in currency exchange rates, trade policies, tax rates, and others. These can strike a heavy blow to the global retailer’s supply chain and profitability.
Challenges in International Operations
Despite its efforts to expand into global retail markets, Walmart has constantly faced challenges in entering, operating, and scaling its operations in foreign markets.
In 2020, Walmart announced that it will be closing its operations in Argentina, citing challenges in the country’s regulatory environment. This has rid Walmart of a chance to expand its market share in the emerging markets of Latin America.
Similar issues occurred in China, where Walmart has struggled to compete with the local retailers who were aware of the cultural inclinations of the customer base and kept offering lower prices and better deals. Walmart was also unable to deal with the strict regulations in China, and finally sold off its Chinese e-commerce platform called Yihaodian to a local rival.
Also, the constant criticism in response to Walmart’s international supply chain practices, especially in regards to environmental concerns and labor rights has slowed its expansion in the global retail markets.
Competitive Pressure
The constant pressure from a series of brick-and-mortar retail stores and even online e-commerce players have slowed Walmart’s growth.
Although Walmart has been slowly fortifying its online presence and ramping up its offerings online, Amazon has surpassed it as one of the biggest global online e-commerce platforms. In 2023, Amazon stands as the biggest online retailer in the United States, with its market share at 37.6%.
Apart from Amazon, other brick-and-mortar players like Target and Costco are competing with Walmart by improving their customer experience. These retail chains are constantly sharking on Walmart’s customer base and market share in the US.
The retail industry giant has also been facing severe competition from discount retailers like Aldi and Lidl. They have rapidly expanded their footprint over the past few years and their presence poses a threat to Walmart’s low price business model.
Opportunities
Although several internal and external strategic factors look to crumble Walmart’s presence, all is not lost. Our Walmart SWOT analysis has discovered several areas in which the retail giant can venture to reclaim the spot of the largest retailer globally.
E-commerce expansion
The inclination towards e-commerce is not a fad. With almost every company globally strengthening their digital offerings, Walmart’s strategic management has also carefully forayed in this direction.
Walmart has plans to expand its ecommerce operations further. The company has focused on improving its customer experience across digital platforms and ramping up its digital offerings. By 2025, the company has established an ambitious target of reaching 50% of its consumers across digital channels.
The company has also identified key drivers in its online e-commerce retail offerings. That’s why, in Q2 of 2020, Walmart’s e-commerce sales grew by 97%, with its online grocery pickup and delivery services contributing heavily to this growth.
Additionally, to accelerate its e-commerce expansion, Walmart has taken the route of mergers and acquisitions. It has already acquired notable e-commerce ventures like Jet.com and Modcloth to expand its online presence and reach new customer base across emerging markets.
Global Expansion
Although the stipulations across several regulatory and commerce landscapes on international soil has prevented Walmart from becoming a significant force, it’s not deterred.
Walmart International has expanded to more than 27 countries worldwide. Walmart plans to expand into the emerging markets of the retail industry like countries in APAC and Africa. It has become a key player by acquiring the second-largest supermarket chain in the UK called ASDA in 1999.
Its acquisition of a minority stake in the Indian e-commerce firm Flipkart has brought it in a head-on contest in the online retail space with Amazon, which is the next big competitor in this segment.
Walmart should focus on navigating multinational cultures and invest in learning various local and regional consumer spending habits. Only then, its global expansion will allow it to tap into the growing consumer demands in these emerging economies.
Sustainability Initiatives
The Walmart Sustainability report says that the company has made significant strides in its sustainable endeavors. When the entire world and especially consumers are becoming more eco-conscious, this move by Walmart will promise great rewards.
The company is aiming to reduce its environmental impact while improving its ethical sourcing practices. Walmart is also focusing on reducing greenhouse gas emissions, conserving water, and investing in recyclable product commerce.
It has set targets in reducing its greenhouse gas emissions by 18% by 2025 and sourcing 50% of its energy requirements from renewable resources too by the same year. It’s also aiming for 100% renewable energy by 2035 and achieving a net zero in emissions by 2040.
Walmart has not only committed to numbers, but you can witness their promise through practices. The company has already started installing solar panels on store rooftops and implementing energy-efficient HVAC and lighting systems.
Moreover, Walmart International has also launched programs in rural areas to reduce food wastes and improve sustainable agricultural practices.
Technological Innovations
Walmart understands the importance of technological innovations in building a better retail industry ecosystem and also catering to a more significant customer base. Their ethical and sustainable initiatives are all bolstered by constant technological investments which will help them command a bigger market share eventually.
You can see the company’s commitment to a more efficient supply chain and logistics system. It has invested in artificial intelligence, machine learning, and robotics to enhance store efficiency and customer experience. This has not only led to a leaner inventory management and restocking system, but has also freed up several employees and associates to nurture customers and focus on service.
The company has forayed into advanced technologies like proprietary algorithms, and apps using augmented-reality for helping customers with in-store item availability and virtual try-ons.
We feel that the company needs to invest heavily in tech and find better solutions to existing customer issues and other problems in the retail industry. These will help Walmart reduce its weaknesses and charge forward.
Threats
Although Walmart Inc has invested into technologies to increase employee satisfaction, improve customer experience, and create a more efficient ecosystem of supply chain and logistics, it’s still vulnerable to several threats.
Our last section of the Walmart SWOT analysis aims to find out these threats to help the corporation identify its challenges and invest in preventive measures.
Intense Competition
As already highlighted, Walmart’s brick-and-mortar retail stores model is encountering stiff competition from retail chains like Costco and Target which focus only on the physical store business model.
Besides these, in the e-commerce segment, Walmart faces constant threats from Amazon, which is expanding globally faster and adapting to multiple international regulations by hook or by crook.
Apart from the global e-commerce giant Amazon, there are other big players like Alibaba, eBay, Rakuten, etc. that constantly threaten Walmart’s e-commerce objectives.
When it comes to the grocery space, Walmart faces constant challenges and competitors from traditional grocers such as Krogers. New entrants in this business model like Shipt and Instacart are also positioning them as market experts and hence hurting Walmart’s aspirations in the domestic retail market share.
So the omnichannel strategy that Walmart has been leveraging to improve its bottom line is facing stringent competition on all fronts due to aggressive pricing, and innovative business models driving competitive advantage.
Changing Consumer Preferences
According to a study by Nielsen, consumer spending habits and online shopping preferences are evolving. They are more conscious about the environment and hence they’re prioritizing healthy and sustainable products which could hugely impact Walmart’s low price product offerings.
Also, Walmart’s traditional retail shopping model is at a threat. With more and more consumers appreciating experiential shopping, the constantly evolving store layouts and autonomous shopping is becoming a big hit. This is where Walmart is still lagging and needs to rev up to compete with others.
In addition, the changing demographics and population shifts need Walmart to adapt to newer strategies to cater to its customer base.
Regulatory Challenges
Walmart’s global expansion has decelerated due to regulatory challenges stemming from foreign economies and international policies that differ from the usual ones in domestic markets. Apart from these issues, Walmart has faced the brunt due to allegations of tax evasion, money laundering, and multiple labor law violations.
Yes, it’s true! In 2019, Walmart was also fined $137 million by the SEC for violating the Foreign Corrupt Practices Act.
Although it’s true that Walmart has significantly contributed to several communities through donations and philanthropic measures, local governments and community groups often oppose Walmart’s policies. They argue that in the bigger picture, Walmart Inc and its retail stores are negatively impacting small businesses and destroying local economies.
Economic Fluctuations
Walmart, as a business model, has an overt dependence on consumer spending patterns for its optimal performance. Now these consumer spending patterns are not constant, and they are susceptible to impact due to economic fluctuations like recession, inflation, tax rate changes, interest rate changes, etc.
The recent phenomenon of COVID-19 significantly impacted the overall Walmart sales. As consumers became increasingly aware and changed their spending habits, only looking for essential items - Walmart suffered a big blow.
Again, when you shift your gaze towards international trade, Walmart stands vulnerable there too! Its international trade dependence makes it susceptible to tariffs and trade policies, which can affect the cost of goods and supplies.
Thus, Walmart must monitor the global and domestic economic trends very closely to counter any impact that could arise in the near future.
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