Walmart: from small rural store to the world’s largest retailer

Product offering, marketing spend, online presence, value for money and customer service. These are five ingredients that are considered essential for a brand to increase its marketing and financial value associated with its strength in the market, also known as brand equity.

Walmart* shows how a small rural retail store became the world’s largest mass merchant retailer in just over 50 years, with over $665 billion of sales in the past 12 months.[1]

Today, it comfortably sits in the top 10 in Brand Finance’s Global 500, a table that ranks global brands by brand value. When we talk about the concept of ‘brand’, we don’t just mean luxury. Monetary value, customer service and sales volumes also feed into brand value.

Walmart’s mission is to “help people save money so they can live better”.[2] In practical terms, this means Walmart’s higher volumes, cost management and efficiencies allow it to sell goods at cheaper costs.

Below are five key factors behind Walmart’s success:

1.     Exclusive subscriptions

Walmart+ is a programme that offers free delivery, exclusive member prices on fuel at select stations, and use of mobile scan & go, along with additional benefits granted by partnerships with enterprises such as Paramount+* and Burger King*. Customers on government assistance can access a discounted version called Walmart+ Assist. The goal is to improve customer retention and expand recurring revenues.

2.     Omnichannel experience

Walmart is located within 10 miles of 90% of the US population, and it can reach 97% of customers the same day or next day.[3] Walmart has created an omnichannel environment that integrates online and instore experiences that feature same day delivery, deliveries starting at 6am, express 30-minute delivery and even in-home deliveries, targeting customer convenience. In recent years Walmart has revamped its shopping centres and upgraded its offering to capture higher-income cohorts, but maintained lower-cost products to retain lower-income customers too.

3.     Modern logistics

Walmart has developed a strong distribution network with warehouses and fleets of vehicles, supply chain technology for data and tracking. Today, its third-party Fulfilment Services business line is part of its alternative profit pool, which also includes Walmart+ subscription, its advertising business, marketplace and data. This is a segment to which Walmart is paying close attention to expand profits and differentiate revenues by serving customers better.

4.     International expansion

In Mexico, Walmex started a transformation journey in 2017 to run over 400 omnichannel stores offering home-delivery, drive-through pickup areas and instore kiosks for shopping and cash-only customers.

Launched in China in 1996, Sam’s Club, Walmart’s membership-only retail store chain, offers wholesale prices on top brands. It was originally funded for entrepreneurs and small business but is now available for families in US, Puerto Rico and Mexico. The option of bulk purchases was particularly attractive during the COVID-19 outbreak, and inspired reliability, as customers could take advantage of this model to stockpile during that uncertain time.

5.     Actionable data for advertising

Walmart has created a tool to help suppliers better target advertising and improve customer experience, based on inventory availability in each store location and customer behaviour. Its retail media business, called Walmart Connect, is a platform that consumer packaged goods retailers can use to advertise their products and connect with customers. Walmart is expanding the reach of the platform to span to more product categories and give users more choice and a more comprehensive view of what products are available and at what price. This is a win-win with customers and supplier satisfaction.

These are some key factors that have led to Walmart’s success when building a strong brand and distinguishing itself among other players in the competitive retail market.

In the second part of this series, we’ll look at how these factors have fed into Walmart’s recent performance, as well as looking at how the retailer has capitalised on Black Friday spending.

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

 
[1] Source: Bloomberg as of 31 July 2024
[2] Source: https://www.walmart.com/
[3] Source: Goldman Sachs Research