Do you remember a decade ago you had to go to different stores to buy different products? One had to go to a grocery store to buy groceries and several other stores to buy different products that you need at your home. But you have noticed that this has completely changed in the last several years. Today you have supermarkets where you can buy all kinds of items. You can buy anything from ice cream to a microwave oven. Not only that there are also supermarkets where you can even buy things like clothes and footwear. This makes it very convenient for customers to go shopping. The reason for this is that they don’t have to go around the town to different stores to get the items they need. Because of this, they are able to save a lot of time and energy.
There is no debate on which one you would choose if you are given an option to go to a supermarket which would have all the things you need or go to different retail stores to buy different things that you need. It is quite an easy answer. People would definitely like to go to supermarkets because they don’t have to travel around to get all the stuff they need. If you choose to do that then this is a time-consuming process. Another great thing about going to these supermarkets is that you would get all the things for cheaper prices than usual. This is another great thing about these supermarkets. The best example of this type of supermarket is Walmart. There is no need to explain why people love Walmart so much. If you ever wondered how Walmart manages to earn money then this article is for you.
What is Walmart?
There is no need for an introduction to Walmart if you are an American. But for others who don’t what Walmart Inc is, it is a retail corporation that has stores in many parts of the world. This is a multinational retail chain corporation that was founded in America. It all started in 1945 when a businessman named Sam Walton bought a branch that belonged to Ben Franklin stores. Ben Franklin stores are retail chains that sold hardware products and products related to arts and crafts. Sam Walton bought it with the aim of selling products for cheaper rates. The idea was to sell products with low-profit margins. But he wanted to do it on a large scale. This because he knew that if he could sell large quantities of products at low-profit margins he would be able to earn a lot more money quickly than selling them at retail prices.
But it was not an easy journey for him. He had to face a few setbacks in the beginning as the cost of leasing the store was expensive. However, he was able to find suppliers who would give him products for lower prices compared to other stores. This has turned out to be great for Sam Walton as his business witnessed a 45% increase in sales in the first year. Within five years his store was able to generate a quarter of a million dollars each year. It has changed its name from Walmart Stores to Walmart Inc in 1970. By the time of its 25th anniversary, Walmart had nearly 1200 stores in the US. In the mid-’90s the company started opening stores in other countries. Walmart is currently the world’s largest private employer. It has come up with many innovative ideas over the years to provide their services.
Business model of Walmart
If you think that Walmart is just a company that has retail stores around the world then you are completely wrong. Like many big companies, Walmart also owns several other businesses. But the main business of Walmart is selling products in its supermarkets. So let’s take a look at the key aspects that this business is based on.
Selling products at low prices
This is the single most important reason why Walmart is where it is today. It sells products at cheaper rates. This makes it the go-to retail chain for people. Who wouldn’t want to get goods for cheaper prices? This something everyone likes whether they are a middle-class family or a super-rich family. Everyone wants to save money on the products they buy and they have a great opportunity to do that at Walmart. The great thing about Walmart is that it has everything that people are looking for. You can hardly think of anything thing that you cannot find at a Walmart store. It sells all kinds of things like electronics, furniture, groceries, clothes, footwear, toys, jewelry, pet supplies, products related to beauty and health as well as fitness and sporting goods.
Walmart has is partners with almost all the companies whose products are sold in its stores. It does this so that it can place a large order to get those products. This allows Walmart to negotiate with the companies to drop prices on their products. They encourage companies to produce goods at lower prices. This allows Walmart to sell Products for lower prices than usual. If you do not partner with the companies whose products you are going to sell then you cannot get them for lower prices. Walmart does place the orders in a big scale so the companies are willing to make products for cheaper prices. Without this the whole business model of Walmart would not have survived this long.
How does Walmart make money?
As mentioned earlier like any other big companies Walmart also owns several other businesses. It has a movie streaming service that runs on a subscription-based business model. Apart from that it also has another segment called Sam’s club which is exclusive for the people with membership. But one the most important thing it focuses on is the service it provides. Walmart ensures that it provides a great experience for its customers. They ensure this by providing the customers with all types of products. You will have a variety of products in large quantities to choose from. It also makes sure that they have products that suit the taste of the locals. This allows Walmart to cover a large portion of the customers.
Till now you have seen the key aspects of Walmart’s business model. Now it is time to know the various ways in which Walmart gets its revenue. It is already discussed that the company has more than one source of revenue. So you are going to look at what are the different sources that Walmart earns money from. Let’s go through them one by one.
This is the first and major source of Walmart’s revenue. It is the largest retail brand in the United States. In the US Walmart offers its services to its customers both online and offline. Not only that over the years Walmart has come up with several different ways to provide services to its customers more efficiently. It has combined its pickup and delivery services so that it can deliver groceries to its customers. In 2020 Walmart was able to deliver groceries to more than 75% of the US population. This goes to show its reach in the US. Not only that but it has managed double the number of stores in this year. It operates in three different formats namely supercenters, discount stores, and neighborhood markets. By 2020 the net sales in the US are over $330 billion.
Walmart International refers to the retail stores of Walmart that are present in different countries around the world. This is the second-largest revenue source of Walmart. Walmart currently operates in over 26 countries. These Walmart International stores are also categorized into three categories that are wholesale, retail, and others. They try to provide their services through various mediums. You can always find them as physical stores but they also provide services online. Walmart International provides services through e-commerce platforms. It not only uses its own e-commerce platform that is walmart.com.mx, Flipkart, asda.com, and several other sites. In order to increase their customer base, they have to adapt to the country’s tastes. So they partner up with local brands to make sure that they have all the products that the locals need. The net sales of Walmart International are over $118 billion.
It is a warehouse club that also has a website called samsclub.com. This club operates in nearly 44 states in the US. It is for members only so you have to pay to get a membership. The plus members of Sam’s club can get cash rewards. These members get most of the products delivered without the shipping costs. The net sales of Sam’s club is over $60 billion.
This is the business model of Walmart. It is mostly a brokerage business model. But it also incorporated a subscription-based business model through Sam’s club and it’s movie streaming services. If you are interested to know about the business models of other companies then check out other articles at Zeen. You can learn about other business models like the business model of Trivago.