Walmart by Bryan Roberts and Natalie Berg

This article was inspired by Bryan Roberts' and Natalie Berg's Walmart . If you enjoy this article then consider purchasing or borrowing the book.


Lessons from Walmart

“People think we got big by putting big stores in small towns. Really we got big by replacing inventory with information.” - Sam Walton

As new technologies allowed food to be better prepared and stored, emphasis was put on education and consumer credit was embraced, Walmart took advantage of the U.S.’s changing conditions. Founded the future retail giant in 1962, Sam Walton realized that the problem with national retailers was that they served only suburbs rather than rural areas. Intending to provide national brands at “Everyday Low Prices,” Walton’s strategy paid off, as Walmart became the largest U.S. retailer by 1990.

Manufacturers cannot survive today without Walmart, and this retailer takes advantage of the relationship. Vendors will reach more customers by going through Walmart, but they will have to lower prices in exchange.

Walmart not only offers national brands at low prices, but also private labels. For example, Ol’ Roy dog food beat out Nestlé’s Purina shortly after being released. While private labels make up less than 25% of the US market, this strategy is especially useful in the UK, where the Walmart’s Asda division owes half of its sales to private labels. When Walmart’s Great Value brand experience difficulties in Brazil, the retailer changed tactics and released the Bom Preço line.

The effect Walmart has had on the economy is so profound that by 2010 Americans spent half as much of their disposable income on food as they did in the 1960s. Walmart’s “Everyday Low Prices” are probably responsible for this change, as competitors had to lower prices to keep up. Before Walmart, suppliers had all the power. Now, suppliers have to change marketing strategies and lower prices when Walmart demands it.

Eliminating intermediaries, Walton confronted vendors directly. By making friends with Procter & Gamble vice president Lou Pritchett and Jack Welch of General Electric, Sam Walton guaranteed that he would have high quality suppliers. Walmart not only supports environmental efforts, but also pressures its vendors to do the same. While Walmart’s critics point out the retailer’s habit of bullying suppliers, no one can argue with the success of those who go through Walmart. From Smucker’s to Activision, vendors have grown because of this relationship.

After spending over $18 billion on Chinese merchandise in 2010, Walmart received even more criticism. By working with both governmental and nongovernmental agencies to address poor working conditions in China, Walmart met critics’ protests that the products wouldn’t have good quality.

With over 40 “Regional Distribution Centers” (RDCs) in the US, Walmart derives its power from its supply chain. Technology has allowed this retailer to put itself ahead of the competition and maximize efficiency. With 90% of its stores worldwide using the same IT architecture, Walmart demonstrates and understanding of the importance of consistency.

With a presence in 28 markets and 60 different store types, Walmart demonstrates an understanding of adapting to changing times and being flexible. Most importantly, Walton learned how to provide quality goods at low costs.

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