Case Study Analysis Of Walmart’s E-commerce Strategies

Background of Walmart’s E-commerce Business

In the time when digital mediums have to billions of hands, it has become essential for the firms to take the routes of e-commerce. It is seen that companies such as Walmart which was known for its Brick and Mortar kind of business has added online platforms through which they are doing their business. Walmart Inc. is a multinational retail company from America that has large numbers of supermarkets, grocery stores and discount department stores (Walmart, 2019). Due to adoption of digital business, new market strategies, revenue models, business models, value prepositions have to be applied so as to target their market segment. This can be done by analysing the environment for business. This report will highlight the case of Walmart while concentrating on the different aspects of their e-commerce business. It also provides the industry analysis in terms of environment.

This American based company is highly successful in the retail business. It is operating with more than 11,348 stores which are operational in more than 27 nations under the 55 different brand names. This company is world’s largest company in terms of revenue with more than US$500 billion and it has more than 2.3 million employees. This company has come into the e-commerce business in the year 2007 by launching its website Walmart.com (Matusitz and Reyers, 2010). This was a site to store service that enabled consumers to do purchase by online mediums and picking up merchandises in stores. In very few years of time, this company has been able to make huge amounts of profits from its business. With the help of business processes such as Walmart Pay and addition of online retailers such as Jet.com, this company’s online market has boosted up incredibly. With so many online acquisitions in different parts Walmart is now able to sale high amount of their products through this medium at the worldwide level. Best example in this regards is purchase of Flipkart which has made it an valuable player in the Indian market.

In ecommerce business, there are different kinds of strategies and approaches being used by the company. Some of the features of Walmart’s e-commerce are:

Strategy/ Approach: Walmart is committed towards providing the best experience to its customers. For this, they have adopted different set of strategies. This company is acquiring digital brands that are resonating with the shoppers of younger age. For reaching to new customers in new destinations, this company has hired local retailer companies. Some of the famous digital brand that has been acquired by Flipkart is Jet, Shoebuy, Bonobos, Bare Necessities, Moosejaw, Eloquii etc. As a part of their ecommerce strategy, this company has reinvented its apparel offering. Celebrity Brands & Private Labels is another strategy used by them where they have did partnership with celebrities such as Ellen DeGeneres and Elizabeth Stewart (Chuang, et al. 2011). They have improved their supply chain management so that products are available in the near most warehouses. This has become essential for improving the speed with which they deliver their products.

Features of Walmart’s E-commerce

Value propositions: Walmart’s value proposition is defined through its innovative thinking. They have a commitment to save the money of their consumers; they have planned their services in such as a manner that they have become leader in the way they do their business. Their ecommerce value is being supported by supply chain management where they ensure timely delivery of the products. With the advancement in the online technologies, this value proposition has gone to higher levels (Stankevi?i?t?, Grunda and Bartkus, 2012).

Revenue model: Currently this company is generating 3% of its total revenue from their e-commerce platform. There primary source of sales is their brick and mortar business but in the years to come, this value is going to increase considerably. Most of their sales are done by their website Walmart.com while sales are also made through Apps and third party sites such as Jet.com, Flipkart and many other sites that they have acquired (Rogers and Makonnen, 2014).

Target markets: Target market of this company is very huge. They sell all the type of commodities for every segment in the society. Since they offer products at relatively lower prices hence they can target people from all the classes of the society from any occupation. They have targeted people between the age group of 14-65 years as they are doing different types of purchase. People who seek cost advantage or are cost conscious are highly targeted by the company (Bonanno and Goetz, 2012).

Business model: Walmart’s business model is highly advanced. They have large numbers of customer segments and they have their segments on the basis of different kinds of variables. Multiple demographics are their segments. Value proposition is provided by its competitive pricing, multiple sales network, accessibility, flexibility as well as its domestic and international reach. There are several digital channels that they utilise for doing the sales. Customer relationship has been their priority for which they are using their digital mediums effectively (Etail, 2018). Their key activities selling of retail products. At the same time their key partners include suppliers and sourcing partners, marketing and affiliate partners, channel and joint partners, strategic and alliance partners. Their key resources include intellectual property, mobile platforms, advanced technologies, their partners and personals. It also includes their trademarks and patents. Their cost structure suggests that their cost remains on the lower side. Its revenue stream includes products from different categories i.e. grocery, health and wellness, Entertainment, Hardlines, Apparel and home products.

Industry Analysis of E-commerce Market

Ecommerce marketing strategies: There are different types of ecommerce marketing strategies that are being used by Walmart. These strategies include content marketing, social media marketing, website optimisation techniques, search engine optimisation, app based marketing, pay-per-click marketing. In this search engine optimisation and App based services are the two major strategies being used by the company (Zhang, et al. 2010).

Online retail industry has grown widely and it has become essential for the organisations to ensure that they are competitive in the market (Laudon and Traver, 2013). Most of the companies are taking online mediums so as to do maximum sales. In 2017, the worldwide sale through online mediums was around 2.3 trillion dollars which is expected to reach to 4.88 trillion US dollars in 2021.

The growth of the industry is projected to remain high. Alone the data from China suggests that 19% of their retail sales are done through online mediums and mainly through mobile devices. In the broader context it is seen that almost all the company irrespective of the industry is selling their products through e-commerce market (Watson, 2011). In future which the increase in the speed and bandwith of the online technologies, it is expected that large numbers of people are going to get connected with these technology. It increases the scope of the Walmart to do better ecommerce business.

Walmart has wide range and numbers of stakeholders attached with it. Their stakeholder’s group include investors, Customers, Employees and Suppliers. Investors and customers have been their priority. This is because this company is aiming to become the leader in the e-commerce market also which is not possible without doing lots of acquisitions (Cheng, 2018). In their strategies, role of investors is very high and hence they are paying attention to their benefits. Strategies are made checking the benefits that stakeholders want to achieve. They also have different kind of benefit programs for employees which help them in achieving higher employee satisfaction. They also give supplier free hand hence it helps the firm in maintaining the supply and demand balance. For Walmart it is crucial to manage the support from suppliers. This is because it helps them in enhancing the pace of their business operations.

It is essential for any organisation to do industry analysis as it enables the firms to do analyse the way in which they need to transform their business process so as to achieve success. Industry analysis suggests about the trends in the market at the same it tells about the opportunities and threats present in the market. In the industry analysis porters analysis can be analysed.

Stakeholder Management of Walmart

• Threats of substitution: There are large numbers of ways available with the customers to make purchase. There are several substitute services available with the customers and hence their threat remains on the higher side (Michelson, et al. 2018). Only in ecommerce market there are different types of technologies available and these are capable of increasing the sales in the market. In future more substitute products are going to come in the market hence this threat remains on the higher side.
• Threat of competition: There are large numbers of competitors that are becoming serious challenge to the business of Walmart. There are businesses like Amazon which has become a first priority of the people. This has forced the company to invest huge amount money in the ecommerce market. Competition has also increased because of the fact that every company has adopted online mediums to sell their products. This has increased the threat to alarming levels. In the future whole battle is going to be on the online mediums (Thomas, 2018).
• Threat of new entrant: Highly advanced technologies are available with the firms and these technologies are helpful for the new firms to come into the market. With the innovative ecommerce model, it has become easier for the companies to come into the industry. Even the SME are coming to the ecommerce market and are able to reach to larger numbers of people and the scope of these big companies to increase its sales decreases. This threat is bigger in the local markets where larger numbers of options are available with consumers (Mohapatra, 2013).
• Bargaining power of suppliers: There are large numbers of suppliers in the market both bigger and smaller. Today even the small suppliers are able to sell to high quality products. These products are available at lower prices hence companies like Walmart are able to sell products at lower cost. This is the major reason why Walmart maintain a healthy relation with their suppliers. This increasing numbers of suppliers in the market has reduced the bargaining power of suppliers to the lowest of levels. In many countries, these suppliers are selling products with least profits (Brown and Dant, 2014).
• Bargaining power of customers: There are large numbers of companies in the retail ecommerce market. These companies are capable of changing the trends in the market. It is also seen that these companies are providing products at highly lower prices. This increases the bargaining power of customers. In ecommerce there is a choice with people to easily switch from one company to another and check the prices. The decision making becomes very smart as people can compare the products and the value at just one site (Wang and Ren, 2012). With the increasing speed and reach of internet facilities, it has become easier for the organisations to have value to their products and services that can give them competitive advantage over the rivals. These kinds of facilities have increased the bargaining power of customers to reach to highest of values. In the future the amount of competition that is projected is higher hence this bargaining power is going to get further higher.

It is also crucial that company understands its internal and external environment so as to understand their capabilities to deal with the challenges they are facing.

Strengths

• They have huge amount of money that they can invest in their ecommerce design which will help them in improving the position in the market.
• They have a huge brand name in the market which makes their expansion plans easier.
• They have large numbers of suppliers attached with them and hence they are able to provide products at lower cost.
• Highly efficient supply chain has made it possible for the Walmart to deliver the online ordered products at much faster rate. This supply chain is available to them at the global levels.
• Their technology infrastructure is highly advancement and with the use of technologies such as data management software and artificial intelligence they will be easily able to capture the larger part of the market share. For this they will have to use the information they have collected in so many years (Nudelman, 2011).
• Lots of acquisitions have been done by the company in the last few years and will enable the company to make sure that they have larger market share to capture.

Weakness

• Due to lower prices, the profit margins have reduced to much lower levels and hence their revenue has not grown to higher levels.
• It is not having a business model that not imitable. Anybody with huge resources will be able to copy this business model.
• There are better ecommerce sellers in market like Amazon and Alibaba as well as many other ecommerce retails in different parts of the way. This gives them competitive advantage over the rivals (Curty and Zhang, 2013).

Opportunities

• This company has huge opportunities in the developing nations especially in the Asian region (Tsai, Raghu and Shao, 2013).
• They need to have opportunities the quality standards.
• They need to improve their resources like human resource and technology to improve their competitiveness.

Threats

• It is facing threats for aggressive competition in the market.
• Online customers have lower loyalty when compared to other form of business (Peters and Zelewski, 2013).

Some of the issues that can be identified are:

• Technological advancements are too fast and matching this technological pace requires huge capital investments. This can reduce the cash crunch available with the firm.
• There is use of artificial intelligence by competitors which gives them competitive advantage to the rivals.
• Decreasing customer loyalty due to increased choices available with the consumers is an issue for the company especially when they have to ensure their position in the market and reach to newer markets. Retaining customers can be a serious challenge for Walmart (Cheng, 2018).
• Ensuring profitable long term growth can be a challenge in this industry.
• Choosing the best technologies and partners can be a difficult so as to achieve maximum sales (Bonanno and Goetz, 2012).
• Finding the right product to sale at the same time finding perfect customers might be difficult. Even one wrong customer review can take many customers from the company. This is difficult as generating targeted traffic can be a tough job for new retailers in the ecommerce market.
• The business model for any company is easily imitable. This is a threat to the companies as any new player in the market might be able to take over the market (Thomas, 2018).

On the basis of the issues that has been analysed in the above part of the report, it is recommended that Walmart need to invest a huge amount of money in the technological advancements at regular basis. Company must focus on the technologies such as artificial intelligence that is seriously backed by data they have collected in over the years. It is also recommended that this company do aggressive online marketing so as to increase their brand presence in the ecommerce market (Michelson, et al. 2018). In order to ensure customer loyalty company must provide some kind of discounts and loyalty cards. Walmart needs to make quick adjustments in the supply chain so that they can be ready for the increasing ecommerce demands.

References

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