With over $611 billion in net sales in 2023, Walmart operates a differentiated business model with three primary units: Walmart U.S., Walmart International, Sam’s Club (a membership-only warehouse club), and Walmart+. This subscription service includes free shipping, unlimited delivery from its stores, and discounts launched in 2021. The company reported a net income of $11.68 billion in 2023.
Walmart origin story
Walmart is an American multinational retail corporation operating hypermarkets, grocery stores, and discount department stores. It was founded by Sam Walton in Arkansas in 1962.
Walton was a military veteran who moved to Newport, Arkansas after his service ended in 1945. Walton and his wife Helen then purchased their first Ben Franklin variety store franchise.
After five years in operation, Sam had fulfilled his wish to make the franchise the top store in the state. He achieved this through exemplary customer service and low prices, a personal philosophy still important to Walmart today.
In 1945, Sam Walton built up from scratch what would later become the largest retailer in the world.
In 1950, the Waltons were forced to move on after the landlord refused to renew their lease.
Until 1962, Walmart’s founders focused on opening various stores. Only in 1983, did Walmart opens its first Sam’s Club, and by 1988, it opened its first supercenter.
By the 1990s, Walmart had become a giant in the US and started global expansion.
Starting in the 2000s, as e-commerce picked up, Amazon, once a startup, became a tech giant.
This also led Walmart in the direction of investing massive resources online.
To stay competitive, as the pandemic hit the world in 2021, Walmart also started to offer Walmart+, a subscription service, including unlimited free shipping, unlimited delivery from its stores, and discounts.
As the company highlighted with the launch of its subscription service:
Walmart+ uses the company’s unique assets to make life easier for busy families. Along with the power of its online presence, Walmart+ has the reach of more than 4,700 stores, including 2,700 stores that offer delivery as fast as same day. Members will receive unlimited free delivery from stores, fuel discounts and access to tools that make shopping faster for families. Membership will be available to all customers on Sept. 15. It will cost $98 a year or $12.95 a month and includes a 15-day free trial period. In the future, the company will leverage its wide-ranging strengths to add additional benefits for members in a variety of services and offerings.
The three main features of the service are:
- Unlimited free delivery.
- Scan & Go.
- And fuel discounts.
Walmart is an American multinational retail corporation operating hypermarkets, grocery stores, and discount department stores. It was founded by Sam Walton in Arkansas in 1962.
Walton was a military veteran who moved to Newport, Arkansas after his service ended in 1945. Walton and his wife Helen then purchased their first Ben Franklin variety store franchise.
After five years in operation, Sam had fulfilled his wish to make the franchise the top store in the state. He achieved this through exemplary customer service and low prices, a personal philosophy still important to Walmart today.
In 1950, the Waltons were forced to move on after the landlord refused to renew their lease.
The move to Bentonville, Arkansas
Walton then began scouring northwest Arkansas for somewhere to establish a new presence.
In Bentonville, he found a small variety store whose owner was willing to sell.
He called this Ben Franklin franchise Walton’s Five and Dime, marketing it as the “most up-to-date, modern variety store in Northwest Arkansas.”
Between 1951 and 1962, Walton would open a further 14 stores in small, rural towns.
He believed discount stores could thrive in these places provided products were sold at the cheapest price possible.
He went to Ben Franklin with this strategy, but they were uninterested after learning their margins would have to be cut in half.
As a result, Walton decided to strike out alone.
The first Walmart store and further expansion
The first Walmart store opened in Rogers, Arkansas in 1962.
Sam and Helen provided 95% of the required funding, so they had to make it work.
To increase their odds of success, Sam would travel the country and learn everything he could about discount retailing.
In 1968, Walmart expanded into Missouri and Oklahoma and opened its first distribution center in Bentonville.
The following year, Walmart Stores was incorporated and held an IPO. By 1972, Sam Walton had enough money to build 15 more stores.
Facing stiff competition from retail giants such as Kmart, Walmart stock was offered on the New York Stock Exchange on August 15 that same year.
By the end of the decade, Walmart grew to 276 stores in 11 different states. The company made several acquisitions during this time, including 16 Mohr Value Stores and the Hutcheson Shoe Company.
Coming of age
In 1980, Walmart through its business model became the fastest company to reach $1 billion in sales after just 18 years in operation.
As the company continued to expand into other U.S. states, so too did Walton’s aspirations.
The first Walmart Supercenter opened in 1988, at the time an experimental hypermarket selling traditional groceries alongside other services.
These included pet shops, garden centers, optical centers, pharmacies, and photo processing labs.
Sam’s Club was also created around this time, a membership-only retail warehouse club offering exclusive savings on shipping, fuel, and prescriptions, among other things.
In 1990, Walmart became the top retailer in the United States – a title it still holds over three decades later.
As we saw:
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- Walmart was founded by Sam Walton who started his retail career by operating a Ben Franklin variety store franchise. Walton believed in delivering value to the customer through exemplary customer service and low prices.
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- Walton would go on to operate 15 Ben Franklin franchises but decided to create his own chain after disagreements with the owners over profit margins.
- The first Walmart store opened in Arkansas in 1962. Expansion throughout the United States was facilitated by an IPO in 1969 and a debut on the NYSE in 1972. By 1980, Walmart surpassed $1 billion in annual revenue and began experimenting with hypermarket and membership-only retail models.Some key highlights of Walmart’s history:
Walmart’s Mission and Vision
Walmart’s Mission and Vision are expressed below.
Walmart is still tightly owned by the Walton family:
And below is a SWOT Analysis of Walmart:
Walmart organizational snapshot
The company operates three main store formats: supercenters, discount stores, and neighborhood stores.
While it offers three primary merchandise units:
- Grocery (grocery, snacks, dairy).
- General merchandise (entertainment, hardlines, apparel, and home).
- Health and wellness (pharmacy, OTC products, and medical products).
Walmart’s main motto is to “lead on price, invest in differentiating on access, be competitive on assortment and deliver a great experience by the motto of EDLP (every day low prices).“
Everyday low cost (“EDLC”) is Walmart’s commitment to controlling expenses.
Those savings can be passed along to customers. Walmart has an omnichannel presence to provide customers access to a broad assortment of goods at any time and in many locations in the US and internationally.
Besides its physical infrastructure, Walmart has also been investing in its digital platforms based on eCommerce.
Walmart comprises three main segments:
Walmart U.S.,
Walmart U.S. is the largest segment operating in all the 50 states in the U.S., Washington D.C., and Puerto Rico. It follows three primary store formats, as well as eCommerce. Walmart U.S. generated approximately 64% of our net sales in 2018.
The US segment follows what Walmart defines as a “differentiated Omni business model” which tries to lead the customers off and online.
Walmart International
Walmart International consists of operations in 27 countries outside of the U.S.
It comprises three major categories:
- Retail,
- Wholesale
- And other
These categories consist of many formats, including:
- Supercenters,
- Supermarkets,
- Hypermarkets,
- Warehouse clubs (including Sam’s Clubs) and cash & carry,
- As well as eCommerce.
Walmart International generated 7 approximately 24% of 2018 net sales.
Sam’s Club
Sam’s Club consists of membership-only warehouse clubs which operate in 44 states in the U.S. and Puerto Rico, as well as eCommerce. Sam’s Club accounted for approximately 12% of 2018 net sales.
As a membership-only warehouse club, membership income is a significant component of the segment’s operating income.
Sam’s Club offers merchandise in the following five merchandise categories:
- Grocery and consumables including dairy
- Fuel and other categories consist of gasoline stations, tobacco, tools and power equipment, and tire and battery centers;
- Home and apparel includes home improvement, outdoor living, grills, gardening, furniture, apparel, jewelry, housewares, toys, seasonal items, mattresses, and small appliances;
- Technology, office, and entertainment includes electronics, wireless, software, video games, movies, books, music, office supplies, office furniture, photo processing and third-party gift cards; and
- Health and wellness include pharmacy, optical and hearing services and over-the-counter drugs.
Walmart store formats
Walmart sells mainly through three store formats:
- Supercenters
- Discount stores
- Neighborhood markets
Supercenters occupy a larger area, compared to discount stored and neighborhood markets.
When it comes to merchandising, Walmart sold three main categories:
- Grocery accounted for 56% of Walmart’s net sales in 2018.
- Health and wellness accounted for 11% of its net sales in 2018.
- and General merchandise accounted for 33% of its revenues in 2018.
How does Walmart manage to be competitive with such low prices? Inventory management is the key
As specified in its annual report Walmart can develop, open, and operate units at the right locations and to deliver a customer-centric omnichannel experience.
That largely determines its competitive position within the retail industry. Walmart employs many programs designed to meet competitive pressures within its industry.
These programs include the following:
- EDLP (everyday low price): items priced at a low price every day so Walmart customers trust that its prices will not change under frequent promotional activity;
- EDLC (everyday low cost): effort to control expenses so that savings can be passed along to customers;
- Rollbacks: pass cost savings on to the customer by lowering prices on selected goods;
- Savings Catcher, Save Even More and Ad Match: strategies to meet or be below a competitor’s advertised price;
- Walmart Pickup: customer places order online and pick up for free from a store. The merchandise is fulfilled through Walmart distribution facilities;
- Pickup Today: customer places order online and can pick it up at a store within four hours for free. The order is fulfilled through existing store inventory;
- Online Grocery: customer places grocery order online and has it delivered to home or picks it up at one of Walmart participating stores or remote locations; and
- Money Back Guarantee: ensure the quality and freshness of the fruits and vegetables in Walmart stores by offering customers a 100 percent money-back guarantee if they are not satisfied.
How does Walmart distribution work?
For 2018, approximately 78% of Walmart U.S.’s purchases of store merchandise were shipped through 157 distribution facilities located throughout the U.S.
The remaining merchandise gets shipped directly from suppliers.
At the international level, Walmart utilizes a total of 188 distribution facilities located in Argentina, Brazil, Canada, Central America, Chile, China, Japan, Mexico, South Africa, and the United Kingdom.
Through these facilities, Walmart processes and distributes both imported and domestic products to the operating units of the Walmart International segment.
By January 2018, approximately 83% of Walmart International’s purchases had passed through these distribution facilities.
Also, Sam’s Club distribution facilities play a key role:
The principal focus of Sam’s Club’s distribution operations is on cross-docking merchandise, while stored inventory is minimized.
What is cross-docking?
As explained by Walmart:
Cross-docking is a distribution process under which shipments are directly transferred from inbound to outbound trailers.
In short, shipments typically spend less than 24 hours in a cross-dock facility, and sometimes less than an hour.
Sam’s Club uses a combination of our private truck fleet, as well as common carriers, to transport non-perishable merchandise from distribution facilities to clubs.
The segment contracts with common carriers to transport perishable grocery merchandise from distribution facilities to clubs.
Sam’s Club ships merchandise purchased by members on samsclub.com and through its mobile commerce applications by a number of methods from its dedicated eCommerce fulfillment centers and other distribution centers.
Walmart revenues breakdown
Key Highlights
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Walmart’s Origin Story:
- Founded by Sam Walton in 1962.
- Started with a Ben Franklin variety store franchise.
- Emphasized customer service and low prices.
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Expansion and Growth:
- Opened first Walmart store in 1962.
- Expanded into other U.S. states in the 1980s.
- Introduced Walmart Supercenters and Sam’s Club.
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Business Model and Strategies:
- Walmart’s motto: “Lead on price, invest in differentiating on access, be competitive on assortment, and deliver a great experience.”
- Focus on everyday low prices (EDLP) and everyday low cost (EDLC).
- Strategies include Rollbacks, Savings Catcher, and Walmart Pickup.
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Distribution System:
- Over 157 distribution facilities in the U.S.
- Internationally, 188 distribution facilities in various countries.
- Sam’s Club uses cross-docking and a private truck fleet for distribution.
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Organizational Structure and Store Formats:
- Walmart’s structure includes Walmart U.S., Walmart International, and Sam’s Club.
- Store formats include supercenters, discount stores, and neighborhood markets.
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Walmart+:
- Walmart+ launched as a subscription service.
- Offers unlimited free shipping, delivery from stores, and discounts.
- Utilizes Walmart’s extensive store network for convenience.
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Key Values:
- Customer service and low prices integral to Walmart’s ethos.
- Focus on making shopping affordable and efficient.
- Emphasis on adapting to changing consumer needs and technological advancements.
Read Also: Walmart Mission Statement, Who Owns Walmart.
Related: History of Amazon, History Of Apple, History Of Starbucks, History Of McDonald’s, History of WhatsApp, History Of Bitcoin, History Of Google.
Business Model Recap
| Element | Description |
|---|---|
| Value Proposition | Walmart offers a range of value propositions for its customers: – Everyday Low Prices: Walmart is known for its commitment to offering everyday low prices on a wide range of products, making it an affordable shopping destination. – One-Stop Shopping: Walmart provides a vast selection of products under one roof, including groceries, electronics, clothing, home goods, and more, offering convenience to customers. – Price Matching: Walmart offers a price matching policy, allowing customers to match competitors’ prices, ensuring they get the best deals. – Private Brands: Walmart offers a variety of private brands, providing quality and value to customers through products like Great Value and Equate. – E-commerce and Pickup: Walmart’s online shopping platform and pickup services offer convenience and flexibility to customers. – Community Engagement: Walmart engages with local communities through various initiatives, including charitable contributions and sustainability efforts. |
| Core Products/Services | Walmart’s core products and services include: – Retail Products: Walmart offers a wide range of products, including groceries, electronics, apparel, home goods, toys, and more. – Private Brands: The company features private-label brands like Great Value, Equate, and Sam’s Choice, offering quality and affordability. – E-commerce: Walmart operates an e-commerce platform that allows customers to shop online for a variety of products and have them delivered or picked up in-store. – Grocery Services: Many Walmart locations have full-service grocery sections, including fresh produce, meat, and bakery items. – Pharmacy Services: Walmart provides pharmacy services, including prescription filling and over-the-counter medications. – Financial Services: Some Walmart stores offer financial services such as check cashing, money transfers, and bill payment. |
| Customer Segments | Walmart’s customer segments include: – Budget Shoppers: Customers seeking affordable products and everyday low prices on a wide range of items. – Families: Families and households looking for one-stop shopping for groceries, clothing, household goods, and more. – Value Shoppers: Value-conscious shoppers who appreciate Walmart’s commitment to offering low prices and private brands. – Online Shoppers: Customers who prefer to shop online for convenience and access to a broad product selection. – Seniors: Senior citizens who value the convenience and affordability of Walmart’s offerings. – Local Communities: Walmart serves local communities through charitable contributions, job creation, and community engagement. |
| Revenue Streams | Walmart generates revenue through several revenue streams: – Retail Sales: The primary source of revenue comes from the sale of retail products, including groceries, electronics, apparel, and more. – Private-Label Sales: Revenue is earned through the sale of Walmart’s private-label brands like Great Value and Equate. – E-commerce Sales: Walmart generates revenue through online sales made on its e-commerce platform. – Pharmacy and Health Services: Revenue is earned through pharmacy services, including prescription filling and over-the-counter medications. – Financial Services: Some revenue is generated through financial services offered in select stores. – Membership Services: Walmart offers membership services through Sam’s Club, generating revenue from membership fees and sales. |
| Distribution Strategy | Walmart’s distribution strategy emphasizes efficiency and accessibility: – Retail Stores: Walmart operates a vast network of physical retail stores, including Walmart Supercenters, Discount Stores, and Neighborhood Markets, providing easy access to customers. – Private Brands: The company promotes its private brands alongside well-known brands, offering value-oriented options to customers. – E-commerce and Pickup: Walmart’s e-commerce platform allows customers to shop online and have products delivered to their homes or picked up in-store, enhancing convenience. – Grocery Services: Many Walmart locations offer full-service grocery sections with fresh produce, meat, and bakery items. – Pharmacy Services: Walmart provides pharmacy services, including prescription filling and health consultations, within its stores. – Community Engagement: Walmart engages with local communities through philanthropic efforts, supporting local initiatives and sustainability projects. |
