Walmart has been at the forefront of discount retail market within and outside the US. The firm has maintained positive growth trends over the years based on its effective pricing and distribution strategies.
The company has an international presence in many continents and employs about 2 million workers in about 6500 stores. The excellent pricing strategy used by the organization has made many small companies view the giant discount retailer as a destroyer of small and medium sized enterprises (Keller 23).
The low pricing strategy was conceived in 1950 by the founder of the business who thought that he could thrive in business by charging low prices and making customers buy more products. The founder aimed to get better prices from his product suppliers (direct-from-manufacture approach). Therefore, he decided to improve sales volume while making customers benefit from reduced costs of goods.
That philosophy has enabled Walmart to become a global giant in retail marketing. The approach may not seem an appropriate innovation in a contemporary business world.
However, it worked in those early days of Walmart, and it has made it continue gaining competitive advantages and significant market shares in new and old markets across the world. A study conducted in 1994 showed that low pricing strategy adopted by Walmart in the US improved its sales volume by 3% (Keller 65).
Lower purchasing prices
One of the approaches that have helped the business adopt a successful pricing strategy is through lower purchasing costs. The management has always been keen on getting products from manufacturers and suppliers at reasonably low prices. Therefore, Walmart offers the products at lower prices than other retailers (Ailawadi and Keller 341).
Low prices from the suppliers have been maintained by the ability of the firm to establish and retain a network of committed suppliers and manufacturers. This is an essential part of business operations because business establishments that pay their suppliers are marked by continued flows of goods and services. If a firm cannot pay suppliers in time, then they may discontinue supplying it with goods.
Lower operating costs
The low pricing strategy has also been based on lower operating costs, which enables the firm to offer the same goods at lower costs than its business rivals. Through this, the firm is able to scale up its sales volume at a faster rate than all its rivals.
The competitors of the company are marked by significant higher prices, which discourage customers from buying their products. As a result, they sell goods at lower rates compared to Walmart (Ailawadi and Keller 342; Peters and. McKay 51).
Consistency of the low pricing strategy
The everyday low price business philosophy adopted by the business has always aimed at ensuring consumers low prices of products throughout the year (consistent approach). This is unusual in many businesses that focus on sale price events or other sales promotion events. The low pricing strategy has been used by the retail store to save the financial resources that could be used in marking down prices during sales business events.
Also, the retailer saves the money that could be used to market the sale events in different parts of its markets. In fact, in 1994, it was reported that Walmart could place adverts in newspapers once every month while its business rivals could advertise their products in newspapers on a weekly basis (Peters and McKay 51). In addition, the approach has made consumers develop loyalty toward the giant retailer.
Ailawadi, Kusum L., and Kevin Lane Keller. “Understanding retail branding: conceptual insights and research priorities.” Journal of retailing 80.4 (2004): 331-342. Print.
Keller, Kevin Lane. Strategic brand management: Building, measuring, and managing brand equity. Upper Saddle River, NJ: Pearson, 2013. Print.
Peters, Daniel A., and Douglas R. McKay. “Are you Holt Renfrew or Walmart? Applied economics in pricing plastic surgery.” The Canadian Journal of Plastic Surgery 20.1 (2012): 51. Print.