walmart swot analysis

Walmart SWOT Analysis: Understanding the Retail Giant

Founded in 1972 by Sam and James Walton, Walmart has defined success in the hypermarket format. Its monumental rise from a small discount store to the world’s largest retail corporation makes for an inspiring case study.

This Walmart SWOT analysis attempts to look into the narrative of the company’s success. 

This business model analysis will help us understand how this retail mart became a symbol of global domination and inspired several such mart chains worldwide. 

 Walmart SWOT Analysis

Read on for a comprehensive Walmart SWOT analysis that analyses factors driving its success, identifies opportunities for growth, and highlights both internal and external impediments.

Strengths

What are the reasons that contributed to Walmart’s emergence as a dominant force in the retail industry? Let’s find out.

Global Leadership in Retail

It is impressive how a small Arkansas retail store now runs more than 10,500 stores and clubs in 19 countries along with eCommerce websites. With its steady international expansion, Walmart has established a global leadership in retail commerce.

They have adopted a multi-local, tailored approach in their expansion model. This has helped provide communities access to affordable products that are relevant to them.

Walmart has also created several job opportunities and helped its suppliers and associates the world over. As of FY 2024, the company employs

2.1 million associates worldwide, with approximately 1.6 million associates in the U.S according to the official website.

Walmart stores globally are synonymous with low prices and accessibility. Consumers are assured of finding great deals across various home and lifestyle categories at Walmart stores. This global leadership is a unique phenomenon created by Walmart Inc.

Strong Supply Chain and Distribution Network

A robust supply chain and distribution network are the hallmarks of a successful retail business. A well-designed supply chain management expedites the movement of goods and delivery to the customer. This increases productivity and contributes to business growth.

Walmart International has excelled in this aspect. It has managed to create an efficient network with superior warehouse management and inventory planning.

Since the beginning, Walmart Inc. has focused on bulk purchases by working directly with manufacturers and distributors. This has helped streamline the supply chain by eliminating the middlemen and creating fewer players.

The strategic long-term partnerships it has cultivated with vendors serve the goal of consistent quality and wholesale product prices. Their Vendor Management Inventory (VMI) model simplifies the supply chain by allowing vendors to manage their inventory on the Walmart shelves.

Apart from these factors, the solid integration of technology into every aspect of supply chain management has maximized efficiency. This digitization of the supply chain has enabled better demand forecasting, reduced expenditure, and affordable product pricing.

Advanced Technology Integration

Technology pervades every aspect of the Walmart business model. It has invested significantly in e-commerce, supply chain management, and artificial intelligence.  

It is leveraging blockchain and web tech in supply chain management to curb inefficiencies and improve quality control and traceability. Several digital platforms have been set up to aid collaboration and communication with the vendor network.

The Walmart company has made strides in e-commerce as well. To make this happen Walmart purchased a host of e-commerce companies including Jet.com (for $3 billion) and Bonobos ($310 million). Besides this, the company has also invested heavily in its mobile app, pick-up services, and quicker shipping.

Walmart Global Tech is utilizing conversational AI to improve customer experience online as well as in stores. Roving robots are being used in over 50 stores to maintain inventory on the shelves and find and replace missing items.

Internally, it has employed virtual training programs, and automation in truck loading and sorting inventory to aid associates and employees.

Brand Reputation and Customer Loyalty

The reputation of a brand is key to fostering customer loyalty. This intangible asset is the ultimate driver of profitability and long-term success.

Walmart Inc. has demonstrated great success in building a trustworthy brand reputation and enhancing customer loyalty.  Customers associate the brand with diverse offerings and low prices. As per estimates, a whopping 255 million customers visit Walmart outlets across the globe and prefer it compared to their local modern trade marts. 

Their loyalty program Walmart+ had a membership of over 59 million in 2022. It ranks as #23 in the Forbes Global 2000 list (2023) and has posted a revenue of $611.3 bn. 

This strong customer base is a huge asset to the commerce of a company. It enables them to secure better rates from suppliers, offers opportunities for experimentation, and helps gather customer preference data to improve services and offerings.

Weaknesses

Even the biggest brands suffer from inherent weaknesses as presented by the Walmart SWOT analysis. Below are Walmart’s soft points that make it vulnerable.

Public Perception and Controversies

In the minds of consumers Walmart Inc. is a low-cost and affordable retailer. While the price points are an attraction, consumers often assume that the quality will be compromised. The lack of high-quality customer service also puts a dent in the company’s image.

Apart from the services, the controversies Walmart has been embroiled in have led to a negative perception of the brand. The company’s labor practices are one such grey area.

It has been criticized for ill-treatment of employees, low wages, poor working conditions, and ignoring employee safety.  There was also a gender discrimination lawsuit filed against the company in 2007 challenging the pay structure.

It has also been sued in the recent past for its discriminatory store practices. The concern in the 2020 lawsuit was that while hair products for white people are unlocked, multi-cultural hair products are enclosed in locked shelves.

Such allegations have tainted the company’s image and impacted revenue. This can affect the market share of the brand. Walmart must ensure corrective measures in its business model to improve its perception amongst consumers and distance itself from such practices.

Dependence on the U.S. Market

Of the 10,500 global Walmart stores, 4,717 are located in North America. Together they account for $341 billion of the company’s revenue, thus comprising a major chunk. This over-dependence as evident in the SWOT analysis is making the company miss out on the immense opportunities presented by emerging markets.

A decrease in demand in the United States market commerce has the potential to upset Walmart’s revenue and growth. It also makes the company vulnerable to policy changes, economic downturn, and increasing competition in the US.

The way out according to this SWOT analysis is to follow an aggressive outward expansion to explore untapped markets. This will help Walmart reduce its reliance on the USA and focus on newer markets with greater potential.

Challenges in International Operations

Being a global leader is beset with its set of challenges that emerge from operating in international markets. These challenges can be cultural, competitive, legal, and regulatory.

Walmart has enjoyed some degree of success in the UK, Canada, and Mexico. However, its market entries into Germany, South Korea, Indonesia, and Hong Kong did not achieve the same triumph.

In many countries, the local stores and general trade marts continue to occupy a central place in people’s lives and commerce. The westernized shopping concept offered by Walmart has not been able to entice this traditional audience.

The regulatory frameworks also vary from country to country. In countries like Zimbabwe, the rules forbid Walmart from selling directly to the customer. Instead, they can only sell to other small businesses in the wholesale industry.

Such operational challenges require careful study and analysis and a thorough SWOT analysis before making investment decisions abroad.

Competitive Pressure

The retail industry is a highly competitive space. Walmart faces stiff competition from stores like Target and Costco. While Target offers similar products and better quality, Costco gives consumers wholesale rates on bulk purchases.

In the lucrative e-commerce segment, Amazon and eBay are Walmart’s direct competitors. Both companies have a strong presence online which Walmart is finding hard to challenge. Other than these, specialty retailers such as Best Buy, Walgreens, etc. appeal to customers for their niche offerings.

Walmart is under pressure to beat the competition and stay ahead while maintaining its low pricing. It needs to further strengthen its supply chain to maintain a competitive advantage. Simultaneously, new and innovative marketing strategies need to be integrated into the business model to retain its existing customer base and acquire new ones at minimum costs. 

Opportunities

The globalized world offers several opportunities for companies like Walmart Inc. which boasts of a worldwide presence. Let’s explore them in detail in this SWOT analysis.

E-Commerce Expansion

Having an online presence is imperative to any retail company’s growth and expansion. While Walmart does robust business at its brick-and-mortar stores, the future is online.

There is ample scope for the company to leverage its existing strengths and apply them to the e-commerce model. Since COVID-19, Walmart has invested in its online grocery and delivery services by expanding the area and offering same-day delivery.

However, much ground needs to be covered. While Walmart owned around 126 e-commerce fulfillment centers worldwide in 2021, Amazon owned 295. Walmart has the advantage of owning large stores that can be converted to fulfillment centers when the need arises.

An investment into e-commerce is the need of the hour to make rapid strides and leverage the boom in the retail industry.

Global Expansion

International growth can help companies acquire precious insights, diversify their source of income, and gain from economies of scale. A global expansion strategy coupled with a SWOT analysis will help Walmart reduce its risk and increase turnover. A first-mover advantage will help it stay ahead of the competition and establish a strong presence.

The US market accounts for a majority of the brand’s commerce and revenue. Entering new markets reduces this dependence. Besides, the price-conscious middle class in growing nations fits the Walmart target segment perfectly.

There is immense untapped human resource potential in various regions around the world like Latin America, Asia Pacific, etc. A diverse and talented employee pool is instrumental to a global company’s success. This will be made easier with worldwide expansion.

Sustainability Initiatives

Today, sustainability is a key concern among consumers. People are aware that their choices impact the environment. They wish to be associated with brands that promote eco-friendly practices and values.

Walmart has been proactive in this area. The company puts special emphasis on sustainability and conservation. They are committed to zero emissions across global operations by the year 2040. This includes using 100% recyclable or industrially compostable packaging.

The brand has been collaborating with businesses and communities for the past 15 years to transform into a “regenerative company”. This means; besides conservation, they intend to restore, renew, and replenish the resources.

Such steps by Walmart are laudable and will firmly entrench a positive perception of the brand in the consumer’s minds.

Technological Innovations

Technological innovation in the retail business is critical to improving operations and enhancing customer service and experience. Companies like Walmart that have a global reach rely heavily on tech to run smooth operations.

“Low costs everyday” is Walmart’s main proposition. To operate on wafer-thin margins and survive requires aggressive cost-cutting measures. The right technology fit is crucial in this aspect. Using technology can help minimize profit leakages that occur from inefficient supply chains, inventory management, store operations, etc.

Walmart SWOT reveals that the company employs tech like AI and machine learning to analyze customer data and offer a personalized experience. Supply chain management is also technologically advanced to handle the fast-paced movement of goods.

The brand must continue its efforts of technological innovation to respond to any challenges and deliver on customer expectations.

Threats

Although it seems that the retail behemoth enjoys unhampered supremacy, some threats could impede growth. Finding these threats is part of this SWOT analysis

Intense Competition

Walmart competes with several local, national, and regional retailers offering similar products in these fiercely competitive and diverse retail markets.

The competition is not limited to acquiring and retaining customers alone. Instead, it extends to a fight for access to associates, merchandise, store locations, etc.  

Besides the challenge from other brick-and-mortar stores such as Aldi, Carrefour, Target, etc., the competition comes from online stores like Amazon which is a global retailer. As the markets lean towards digitization, capturing a space in e-commerce is mandatory to maintain lean metrics in commerce and ensure growth.

Changing Consumer Preferences

Consumer preferences can make or break a brand. A grasp of these evolving trends is a deciding factor in a brand’s success. These changes stem from various cultural, societal, lifestyle, and environmental factors.

Using data analysis tools and tech to decipher these preferences can help Walmart remain relevant. By studying customer purchase trends, Walmart can adapt itself to change.

Environmental concerns, health consciousness, and inclination for online shopping are some trends that affect how consumers shop. By implementing processes in sync with these factors, Walmart can retain its loyal customers.

 Regulatory Challenges

The retail market is dynamic and governed by distinct regulations in different countries. These pose a constant challenge to executing comprehensive and global programs.

Regulatory hurdles range from legal scenarios (like anti-trust laws), economic environment, taxation systems, health & safety legislations, political systems, etc. As a global giant, Walmart must be prepared to deal with these diverse challenges.

While some of these threats like political instability may be out of control, others can be overcome by putting strategic systems in place. This is an area where Walmart needs to focus if it hopes for a profitable expansion.

Economic Fluctuations

Economic fluctuations have a considerable influence on the profitable sustenance of a business. Economic factors like inflation, wages, unemployment, supply & demand, etc., have a direct impact on business growth.

For Walmart, the challenge is also its widespread supply chain and distribution network. Economic fluctuations in countries where the company sources from can have a ripple effect on overall product pricing.

For a company that prides itself on low and consistent pricing, economic fluctuations pose a clear danger. In the long run, Walmart needs to balance these variations with policy mechanisms like cash flow management, alternative supply chain options, etc.  

Conclusion

Walmart has maintained its position and continued to grow over the years. A strong supply chain and well-thought-out marketing strategies have made the brand successful.

But in the changing times, the brand is facing some threats and challenges. These are being steadily overcome by implementing policies that will pave the way for a profitable future. 

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