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WAL-MARTS SUCCESS STRATEGY AND ITS

IMPLEMENTATION IN INDIAN RETAIL A STUDY OF
STRATEGIES AND CHALLENGES IN INDIAN RETAIL

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ABSTRACT

Wal-Mart is the biggest retail chain in the world, which provides a large number of quality
products under one roof. The company is theworlds third largest public corporation, according
to theFortune Global 500list in 2012, thebiggest private employer in the world with over two
million employees, and is thelargest retailer in the world. Most importantly, Wal-Mart holds the
distinction of being a hugely successful business model which has led to many other retailers
joining the bandwagon, trying to emulate its success.

In this paper, we discuss the reasons for Wal-Marts phenomenal success and the steps it takes
to ensure a leadership in the retail sector. We also discuss the present scenario of the Indian
retail sector and look at the ways in which some of Wal-Marts strategies can be employed in
India.

INTRODUCTION

Wal Mart is the biggest retail chain in the world which provides a large number of quality
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Wal-Mart is the biggest retail chain in the world which provides a large number of quality
products under one roof. Wal-Mart Stores, Inc., branded as Wal-Mart, is an
Americanmultinationalretail corporation that runs chains of large discount department stores
and warehouse stores.Major products include grocery, clothing, pharmacy, toys, hardware and
various CDs, DVD Musical instruments, consumer electronics, books and more. Every Wal-Mart
possesses McDonalds where people can eat and have a break while shopping. Founded by Sam
Walton, Wal-Mart remains afamily owned business, as the company is controlled by theWalton
family, who own a 48 percent stake in Wal-Mart. It is also one of the worlds most valuable
companies.

Sam Walton opened the rst Wal-Mart store on July 2, 1962 in Rogers, Arkansas. It is publicly
traded under the New York stock exchange and recognize by the symbol WMT. The secret of
the international economic aspect of Wal-Mart is hidden in the number of shareholders
associated to it, which are from many economically developed countries of the globe. These
shareholders till the end of this year are estimated to be around 333,604 as a common stock of
Wal-Mart. So Wal-Mart basically works in economic collaboration with other states where
consumers get a large range of discounted products that include mostly stocks and a small
percentage of premium products.

Over the past ten years, Wal-Mart has become the worlds largest and arguably most powerful
retailer with the highest sales per square foot, inventory turnover, and operating pro t of any
discount retailer. Wal-Mart owes its transition from regional retailer to global powerhouse
largely to changes in and effective management of its supply chain.

STRATEGIES USED

Wal-Mart employs a group of strategies to achieve its success and goals. These range from cost
cutting plans to sustainable development.

1. EDLP (Everyday low price):

According to this strategy Wal-Mart offers its customers a great quality of services and products
than its competitors. Setting low prices increased the sales volume to levels that could actually
give increased pro ts as compared to selling at a higher price. EDLP is a pricing strategy which
provides consumers with low prices daily instead of them waiting for a sale or promotional
discounts. This led to the low price reputation of Wal-Mart earning an increased number of
consumers and shoppers loyalty. This reduces the need of frequent advertisements. According
to this strategy Wal-Mart offers its customers a great quality of services and products than their
competitors. It relies on ve forces model:-

1. Buyer Power: Wal-Mart has the biggest buyer power in the market as it buys a large
percentage of inventories which is a major portion of earning for these companies and
hence they will do anything to supply inventories to Wal-Mart. It believes in creating
happy employees therefore creating happy customers.
2. Supplier Power: Wal-Mart achieves its dream of satisfying its customers with a wide
range of goods and services along with the best quality which indeed helps it in
maintaining its Supplier Power.
3. Threats of substitution: In order to remain in the highest racket of retailers, they keep on
innovating their products by providing substitute goods
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innovating their products by providing substitute goods.
4. Threats of Entry: They constantly do market research on what goods the customers are
buying so that they can also provide them with the same goods at low cost to remain in
the competition.
5. Rivalry: Wal-Mart sells its goods at very low cost which makes it dif cult for new rivalries
to come in retail chain market.

2. Technology:

Technology plays a key role in Wal-Marts supply chain, serving as the foundation of their supply
chain. Wal-Mart has the largest information technology infrastructure than any other private
company in the world. Its state-of-the-art technology and network design allowsWal-Mart to
accurately forecast demand, track and predict inventory levels, create highly ef cient
transportation routes, and manage customer relationships and service response logistics. Wal-
Mart was an early adopter of uniform product codes (UPC) at the point of sale which allowed
Wal-Mart to know the location of every item at all times. Wal-Marts investments in technology
helped enhance communication between headquarters, stores and vendors. Inventory costs
decreased and inbound logistics became more ef cient. Supply Chain Management ensures
that their customers get their goods in a timely manner. It also keeps the tracking of stockpile
and information. Currently Wal-Mart is using ERP which helps in improving Customer
Relationship Management.

3. Social Media Strategy:

Wal-mart provided 2,450 truckloads of supplies to Hurricane Katrina victims and donated more
than $2 billion to end world hunger. Umang Shah, director of Social Strategy for Wal-Mart
Corporate Affairs department is responsible for managing and promoting the reputation of the
worlds largest retailer through social channels. With twitter and Facebook rising, Wal-Mart
provides with information on major activities and initiatives from sustainability to diversity,
from healthier foods to charitable giving.

4. Vendor Partnership:

The idea of vendor partnership was developed for the business relationship to achieve
unprecedented coordination between Wal-Mart and its vendors by exchanging information
about sales and inventory levels. This model works well to reduce transaction costs and increase
ef ciency. Several hundreds of Wal-Marts major suppliers have permanent of ces near Wal-
Marts headquarters in Bentonville, Arkansas, to facilitate these relationships. Wal-Mart being a
major distributer is able to pressurize its suppliers to lower their costs. For example, in 1987 10%
of P&G sales went through Wal-Mart, however P&G represented less than 3% of Wal-Marts total
revenue.

5. Belief in Go Green Concept:

Since launching its sustainability program in 2006, Wal-Mart has reduced energy consumption
in its stores, installed solar panels on its rooftops, curbed emissions from its trucks and recycled
millions of tons of its trash.

Lee Scott, Mike Dukes predecessor as Wal-Mart CEOset out three aspiration goals:

To be supplied 100% by renewableenergy

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To create zero waste

To sell productsthat sustain people and the environment

In 2005, sustainability planners decided to change the lighting in stores freezer cases.
Replacing existing bulbs with more ef cient models served the dual purposes of reducing the
energy needed for lighting and for refrigeration, since LEDs dont heat up like incandescent
bulbs. It took three years from beginning the replacements in the U.S. until the last market
completed it.

In 2009, stores started doing the same with parking lot lighting. Early work turned out not to be
worth the effort in the continental U.S., where electricity is relatively inexpensive. Puerto Ricos
higher utility rates made the project pay for itself there. They retro tted the islands stores and
then moved on to some350 parking lots in Central America. By scaling this up one market at a
time, it helped drive down the cost of the technology, Zimmerman said. By the time they had
re-lit the rest of the world, the price had come down suf ciently that it nally made sense to do
the U.S. They completed the project globally in 15 months. For developing more sustainable
trucking eet they introduced two new types of commercial hybrid trucks and two different
types of alternatively fueled heavy duty trucks in the year 2009.

Retail in India

India has still not achieved what it can in the one stop multibrand retail sector. Shops like Big
Bazaar, Food Bazaar, Central (hypermarket) are some the few multi brand retail stores which
have ourished in India. But even these companies have failed to generate huge pro ts and
cater the needs of the whooping upper and middle classes which are ready to try new avenues
of shopping with world class quality, with their increasing purchasing power capacity.

The Indian Retail Industry is literally a gold mine due to its tremendous, still to be fully tapped
potential. Unlike its other counterparts, retail is relatively a new concept in India and as such
faces the delighting prospect of a vast potential market but with the added threat of
competition from foreign majors like Wal-Mart.

Challenges

1) Competition from Foreign counterparts:

The Indian retail sector needs to build retail as a brand rather than the other way round. The
foreign retail chains wishing to set-up in India are based in the highly urbanized metropolitans
to gratify the needs of the upper middle-class. Shopping from these chains also adds a status
symbol to the af uent Indian for whom a Western identity holds importance. The Indian retail
chains cannot compete with these foreign stores yet. However, India has many developing cities
and towns lled with the newly-rich who would welcome such stores in their cities which
provide value for money.

The Indian counterparts can take a cue from Wal-Mart, which started out in small towns and
has since spread into a huge network of stores which are situated within a few miles from the
nearest town. By the end of 2005, 46 percent of Americans lived within 5 miles of the nearest
Wal-Mart. A similar statistic in India would be hugely bene cial.
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2) Lack of Proper Branding Strategy:

The Indian retail industry has attracted a lot of players within a short span of time with the
result that similar categories of retail have got crowded so there is hardly anything to
differentiate between different retail chains. There is a dearth of innovative strategy that sets
one chain apart from the other. Also, in India, we have specialized retail stores- groceries,
electronics, clothing, music have separate stores. One of the biggest attractions of Wal-Mart is
that it gives a user the experience to shop for groceries, electronics, clothes, food or music under
one roof. It provides a complete shopping experience with its huge shopping centers. Indian
industry needs to take a note and come up with a similar alternative which offers a good choice
on different varieties.

3) Improve the variety of Products:

Indian consumer is accustomed to see and feel a product before purchasing it. But they dont
really have much to choose from. At their local stores, they have to ask for a product and the
shopkeeper shows about 2-3 varieties at the most and gets irritated if too many questions are
asked. Retail gives consumers a choice; it empowers them. Still, the Indian retail stores dont
have a huge variety of products and people prefer to shop at their local markets due to the
familiarity factor and are ready to let go of the minimal choices on offer. The quality and
quantity of products need to be improved. It has to be a complete shopping experience.

Big Bazaar

Big Bazaar out of all the new Indian hypermarkets has shown the maximum promise by
opening 214 stores across 90 cities. It basically focuses on the 14% consumer class which has
high disposable income.

Figure 1: Consumer classes in India

The major driving force with Big Bazaar is its Indian-ness which it constantly uses for its own
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bene ts. It encourages the fact that most Indian families like to shop together where shopping
is a fun activity unlike the west where shopping for retail items is considered to be monotonous
and an individual job. Also many Indian like to touch and feel their staple food so it allows both
sealed and unsealed varieties of staple food like rice, pulses, wheat, etc.

Offers like SabseSasteBoodhwar, Purana Do Naya Lo BadalDalo, Sabsesaste char din, etc.
helps to boost sales but if they need to compete with the growing domestic competition and
the possible upcoming international competition they need to learn something from their
international counterpart like Wal-Mart.

Some strategies used by Wal-Mart which can be implemented in India as well are:

Embrace the idea of EDLP (Everyday low price) completely as giving special discounts on
some days might attract crowd on a particular day but the rest of the days, its sales wont
be that much. Moreover, especially in smaller towns people visit just to buy discounted
items as the rest products are available on MRP. They still prefer to buy them from local
stores where they might get some discounts. By incorporating ELPD they can reduce
their dependencies on special discount sale to boost their sales and also will help them to
keep competitors away.
By eradicating the middle man and purchasing goods right from the company and also
purchasing fruits and vegetable right from the farmers. This will save them a lot of money
as the cost of middle man is reduced. Also this type of partnership is better for the farmers
as they wont have to share pro ts with the middle man.
Spend on the development of technology in supply chain management system and
infrastructure development by opening new self-owned cold storage, etc. Also they
should develop a information technology infrastructure with a network design that will
allow them to accurately forecast demand, track and predict inventory levels, create highly
ef cient transportation routes, and manage customer relationships and service response
logistics
Promote private contract based partnership with business man and entrepreneurs for
developing products in bulk which they can sell only in their store. This will ensure them of
good quality product at low cost as they can even keep a check on the product quality
themselves.

Conclusion

Some major strategies used by Wal-Mart were discussed. Strategies like EDLP, Technology and
Social Media Marketing strategy were further explored in detail. Also, the reasons for why the
Indian Retail Industry like Big Bazaar is not able to capture the enormous market were
examined. Some possible solutions by comparing it with Wal-Mart model were discussed and
how they can be implemented in Indian scenario. Some possible solutions are embracing the
idea of EDLP, eradicating the middle man and purchasing goods right from the company,
developing supply chain management and infrastructure and lastly entering into partnership
with business man for the development of new products.

By: Ayush Anand, Namrata Yadav, Nikhil Agrawal, Riddhima Ahluwalia and Rishav Ankit

References
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1. http://www.usanfranonline.com/wal-mart-successful-supply-chain-management/
2. http://money.howstuffworks.com/wal-mart.htm
3. http://online.wsj.com/news/articles/SB10000872396390443749204578048842451207454
4. http://warlmart.blogspot.in/2009/02/which-of-3-generic-business-strategies.html

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