It is 50 years to the day since the first Walmart store opened. Here we examine the most significant ways that that retailer transformed the stores sector.
1 Direct relationships
The retailer created a model alien to most in the industry in the 1960s and 1970s, opening a dialogue directly with suppliers and cutting out the middleman, which could be wholesalers or agents. “Initially suppliers were quite wary but as Walmart gained scale they were more keen and Walmart was able to cut out what it saw as wasted margin,” says Bryan Roberts, retail insights director at Kantar Retail and co-author of Walmart: Key Insights and Practical Lessons from the World’s Largest Retailer.
2 Serving the underserved
Walmart’s policy from the outset was to target smaller, rural locations not served by larger retailers, allowing it to quietly become a multi-billion dollar business.
3 Everyday Low Prices
Walmart’s pioneering EDLP pricing policy is one that has been copied by many other retailers looking to communicate a long-term, low price message assuring customers that it was not in the business of short-term price promotions. In 2007, it adopted the tagline ‘Save Money Live Better’ instead of ‘Always Low Prices, Always’.
The company that Roberts describes as “data obsessed” invested $24m in 1987 in what was at the time the largest private satellite communications network, to allow the corporate office to track inventory and sales to stores instantly.
5 Changing local retail environments
Walmart has been criticised for entering towns and taking trade from smaller, family-owned stores. However, its policy has been to only enter areas it believes there is not the choice, price and quality that consumers desire. Critics have accused it of closing local stores, while commentators have countered that other industries have followed it to rural locations.
6 The acquisition of Asda
For UK retail, the $10bn acquisition of the Leeds-based grocer was a pivotal moment and led to further growth in market share for Asda. Roberts says however that the initial plan was to use the UK for further expansion. “It was supposed to be a bridgehead into Walmart having stores across Europe, but there haven’t been the right acquisition opportunities,” says Roberts.
7 Entering Africa
Roberts describes Walmart’s entry last year into South Africa with Massmart as an important moment for the industry. The retailer is the first of the large global players to enter the market, which has huge potential, according to Roberts.
Walmart is famous for working closely with suppliers to develop new products and work innovate in its supply chain. “In the late 1980s, Walmart moved from an adversorial relationshiop to a collaborative one with suppliers. You still have to have a difficult conversation on price but it works much more closely with suppliers than Carrefour or Tesco,” says Roberts.
Walmart founder Sam Walton admitted Walmart has often copied or followed with technology however the introduction of uniform product codes and barcodes in the 1980s revolutionised retail.
Minimising costs and leveraging scale were two of the key components of the Walmart business and are feeding through to its international subsidies. Tight control of costs was essential in order to deliver EDLP.