Wal-Mart: The High Price of the Low Cost

Today’s Brew is for Wal-Mart
Brew date: 20th July
Type: Served Hot, to be Consumed a.s.a.p.

From Made in America to Made for America – Transforming Uncle Sam’s vision, improvising Wal-Mart’s Consumer centricity.

To understand the business model of Wal-Mart, check out the following links:
      a)     http://www.walmart.com/

With the Consumerism reaching new heights and Consumer Expectations heading North, The Brew feels that its time for Wal-Mart to introspect and answer an inevitably simple, but fatefully decisive question: To focus only on the Discount segment or to be a Complete Retailer. The Brew believes that its time for Wal-Mart to reinvent itself from a Low Cost store to a Complete Retailer while leveraging Consumerism, Technology and it’s Competence.

The Brew as well recommends Wal-Mart to explore The Brew Framework for Enterprises, with respect to its macro – capabilities of Innovation, Value Creation, Value Enhancement and Purpose to chart out its next growth story.

The Brew will analyze Wal-Mart on the following parameters:
a)    Business Analysis

       1)    The Forces in Retail – Prices, Convenience and Consumer Experiences:
Apart from availability, the forces, which play key decision making role in Retail segment for fulfilling the consumer needs, are Price, Convenience and the Consumer Experience. With Consumerism raising its standards, the Retail segment is as well witnessing splurge in all these dimension with players scaling in sole dimensions to establish their respective USP’s.

Betting aggressively on price formed Wal-Mart’s key success factor when it started out, and it as well forms its key driver to the current setup, however the scale at which Wal-Mart operates along with the Competences it has developed, the Business Model should now mature in being a more Complete Retailer along with non – discounting of its Key Success Criterias.

By focusing on the Continuum of Consumer Needs, Wal – Mart needs to realize that its existence as a Retailer who also offers discounted / value for money solutions rather than a discount player in the retail industry.

The Brew lays strong emphasis calling a shift of the business model strategy of Wal-Mart, offering discounted prices to restoring it as a Pricing Strategy or Growth Strategy for the following reasons:

a) a Pure discounting proposition though effective for a rapid scale ups and growth hacks, is ineffective to build a strong relationship model with consumers and the brand.

b) Moreover, Wal – Mart derives these benefits from internal measures of efficiency and effectiveness, predominantly, Huge Economies of Scales, Exceptional Logistics and Supply Chain mechanisms on a strong technology backend which supports these 2 drivers to deliver value to Consumers. Effectively, Wal – Mart is able to deliver high value due to internal measures, and hence it does not form a part of its Business Model, though it is a strong driver enabling feeding into itself propelling higher growth. The Key – success factors of its Business model are Connecting directly with the Manufacturers and Creating an efficient and effective Framework for value transfer to Consumers.

c) In the current wave of Consumerism, Convenience and Consumer Experience as well play a very critical role, needless to say, the Consumer Needs have expanded in these forces and it certainly offers a huge market to not cater to, and given Wal – Mart capabilities, creating space and sticking with these propositions will generate high value for Consumers (and for the Waltons !!)

      2)    Re-inventing the Wal-Mart Model & Impact of Forces:
Extending the above point, Wal-Mart needs to possibly go from ‘Save Money, Live Better’ to ‘Live Better’ and/or ‘Save Money’. The point being, in the course to become a complete Retailer serving higher market spreads with higher spread to Consumer Needs Continuum, enabling Wal – Mart to continue delivering on its proposition with its business model strategy, of directly encompassing the value creators to the consumption end.

The Only change in the revamped model is, that of Wal – Mart leveraging its E – Commerce business to target these markets spreads along with the existing lines of discounted offerings. Wal – Mart needs to understand that E-Commerce is possibly not going to be a logical extension to its Stores, rather its going to be a critical tool to transform and re invent itself and the Consumer Chapter of the American Dream.

The only difference in the Store Model and E-Commerce Model being, the former follows the Inventory Model whereas the Ecommerce model can either be a direct transfer or with the fulfillment done by Wal – Mart, powered by its strong logistics and SCM connectivity.

      3)    Competence:
Wal – Mart’s competence is its logistics and SCM networks enabling a high transfer of value and scale. Incidentally, the Consumerism wave is as well powered by manifold Logistical developments and driven by E-Commerce.

And it is this Competence which can pivot Wal-Mart to growth hack and its next big story of value creation.

      4)    Competence led Strategy for creating the Impact:
With the Business Model of connecting directly with the Manufacturers, and powered by its Competence, Wal-Mart is well poised for redefining the Consumer Experience of On – Demand prompt delivery (Wal-Mart SCM enabling a Hub to Hub transfer, and local players from hub to doorsteps), along with driving better economics by connecting with Manufacturers.

The point being either Wal-Mart acts as a Fulfillment player (where it has no impact on the pricing, but is able to create a great Consumer experience by Prompt Delivery mechanism) or by driving higher economies and impacting the down south for prices, generating value for consumers. Infact, The Brew is confident of Wal-Mart delivering on both premises, enabling the Made For America and Consumers dream of Walton Sr.

Please drop in your comments or reach out on [email protected]

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  1. The point that essentially is driven home is that Walmart needs to come out of its discount based offering in retail and capitalize on its retail experience and its USP.

    However, discounting is the way to go to gather critical masses to visit your stores and experience it. I think a multi forked approach of discounting in new markets and enriching the retail experience in markets where they have a longer presence might be the right way forward.

  2. Absolutely Kartik, The Brew as well pitches for the same, rather than playing only for Value, its time Walmart gets in Experience, Convenience and Value for Completeness of Retail for Consumers. Appreciate Your Thoughts and Feedback, Cheers !!!