SWOT analysis of Walmart (16 Key Factors in 2018)

Ovidijus Jurevicius | April 24, 2018

This Walmart SWOT analysis reveals how the largest company in the world uses its competitive advantages to dominate and successfully grow in the retail industry. It identifies all the key strengths, weaknesses, opportunities and threats that affect the company the most. If you want to find out more about the SWOT of Walmart, you’re in the right place.

Keep reading.

Company Background

Key Facts
Name Walmart Inc.
Founded July 2, 1962
Logo
Industries served Retail
Geographic areas served Worldwide (11,718 stores in 28 countries)
Headquarters Bentonville, Arkansas, U.S.
Current CEO C. Douglas McMillon
Revenue (US$) 500.343 billion (2018) 2.98% increase over 485.873 billion (2017)
Profit (US$) 9.862 billion (2018) 27.7% decrease over 13.643 billion (2017)
Employees 2.3 million (2017)
Main Competitors Alibaba Group Holding Limited, Amazon.com, Inc., Costco Wholesale Corporation, Dollar General Corporation, Dollar Tree, Inc., Kohl's Corporation, Macy's, Inc., Sears Holdings Corporation, Target Corporation and many other retailers/wholesale companies.

Walmart business description taken from the company’s financial report:

“Walmart Inc. ("Walmart," the "Company" or "we") helps people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce. Through innovation, we are striving to create a customer-centric experience that seamlessly integrates our eCommerce and retail stores in an omnichannel offering that saves time for our customers. Each week, we serve nearly 270 million customers who visit our more than 11,700 stores and numerous eCommerce websites under 65 banners in 28 countries.

Our strategy is to lead on price, invest to differentiate on access, be competitive on assortment and deliver a great experience. Leading on price is designed to earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices ("EDLP"). EDLP is our pricing philosophy under which we price items at a low price every day so our customers trust that our prices will not change under frequent promotional activity.

Price leadership is core to who we are. Everyday low cost ("EDLC") is our commitment to control expenses so those cost savings can be passed along to our customers. Our omni-channel presence provides customers access to our broad assortment anytime and anywhere. We strive to give our customers and members a great digital and physical shopping experience.

Our operations comprise three reportable segments: Walmart U.S., Walmart International and Sam's Club.

During fiscal 2018, we generated total revenues of $500.3 billion, which was primarily comprised of net sales of $495.8 billion.”[1]

You can find more information about the business in Walmart's official website or Wikipedia’s article.

Walmart SWOT analysis

Strengths

1. Being the largest retailer in the world, with unmatched scale of operations and strong market power over suppliers and competitors

Walmart is the world’s largest company by revenue and the largest retailer in the world.[2] It is also the world’s largest private employer, with more than 2.3 million staff. The company is a retail market leader in the U.S. and is a major competitor in all geographic markets in which it operates.

Figure 1. Comparison of the top 5 retailers in the world in 2018
Walmart Carrefour Costco Tesco Amazon.com
Revenue (in US$ billions) 500.343 94.760 126.172 62.433 177.866
Locations 11,718 12,300 746 6,809 80
Countries served 28 35 11 9 14
Employees 2.3 million 378,923 239,000 460,000 566,000

Source: The respective companies’ financial reports[1][3][4][5][6] (Walmart reports its revenue for 2018, but most of its financial year is in 2017, so we compare the company’s 2018 data with other businesses’ 2017 data.)

Walmart’s revenue reached US$500.343 billion in 2017, more than Carrefour, Costco, Tesco and Amazon.com revenues combined. The company employed twice as many people and owned about 5 times more retail space than its top 3 rivals.

Forbes listed Walmart as the 24th most valuable brand in the world in 2018[7], worth US$24.1 billion. No other direct competitor, except Amazon, has made it to the Forbes list of the top 50 most valuable brands.

What does ‘being the largest retailer in the world’ mean to Walmart?

  • Economies of scale. The company can share its fixed costs over many products, which makes Walmart one of the cheapest places to shop.

  • Efficient and effective use of resources. Walmart can use its resources, such as distribution facilities, information systems, knowledge and other capabilities and skills, more efficiently and effectively over a large number of locations.

  • Huge gains from implementing best practices. The company can identify better ways of performing tasks, managing stores and hiring new employees and can achieve huge gains by implementing these best practices in its vast network of stores.

  • Experimenting with less risk. The company can engage in many experiments within its stores or in new store formats without the risk of losing a substantial amount of profits or revenue.

  • Market power over suppliers and competitors. Due to its size, Walmart can exercise its market power over suppliers by requiring lower prices from them. The company can also affect the competition by selling selected items at a loss, thus driving competition out of the market.

2. International presence

Walmart went international in 1992 through a joint venture with Cifra, a Mexican retail company, opening a Sam’s Club in Mexico City.[10] Since then, the company has expanded globally to become the largest international retailer (by revenue), operating 6,360 retail units in 27 countries outside the U.S. The company operates under different brand names, such as ASDA in the U.K., Walmex in Mexico and Seiyu in Japan. Walmart’s non-U.S. revenues reached US$119.763 billion or 23.9% of its total sales in 2018, a significant source of revenue.[1]

Walmart strongly focuses on its international segment as this provides an opportunity for growing the company’s operations. The company added 47 new supermarkets/stores in Central America, 15 in Chile, 4 in China and 11 in the UK in 2017, which allowed it to grow the international sales.[1]

Walmart’s international expansion strategy not only helps the company to grow, but also strengthens the company’s retail leadership position. By growing internationally, the company diversifies its income sources, gains valuable new experience and further benefits from economies of scale.

3. Large merchandise selection in its many physical stores helps it to develop e-commerce channel sales faster and with lower costs

Retail sales in physical stores compared to e-commerce channels are slowing. Many retail companies, including Walmart, are focusing on establishing themselves as electronic commerce retailers.

In 2017, Walmart’s total (includes domestic and international sales) e-commerce sales grew to over US$16 billion. The company did not report its total e-commerce sales for 2018, but revealed that Walmart U.S. segment’s e-commerce sales grew by 44% over the previous year to US$11.5 billion in sales. Walmart.com is the 5th most visited e-commerce website in the U.S.[11]

Figure 4. Walmart’s total e-commerce revenue 2014-2017 (in US$ billions)

Walmart's e-commerce revenue grew from US$10 billion in 2014 to US$16.11 billion in 2017.

Source: Walmart’s quarterly earnings[12]

Walmart as an electronic commerce retailer cannot compare to Amazon.com yet, but the company is significantly expanding its e-commerce operations. In 2018, Walmart increased its merchandise offerings to 75 million SKUs.[13] The company constantly invests in new fulfillment centers and has developed new mobile apps for its e-commerce sites across the world.

The driving force behind Walmart’s strong e-commerce growth is its low prices, achieved by huge economies of scale and the use of their existing assets for selling items and fulfilling orders.

In addition to its low prices, Walmart’s existing assets such as its physical stores and wide merchandise selection help the company to expand its Internet sales with little additional cost. There was no need for Walmart to build many costly fulfillment centers, the company converted many of its superstores to fulfillment centers instead. If the company’s e-commerce operations continue to grow, Walmart can easily convert more of its stores to fulfillment centers.

By shipping from the store, the company also reduces product delivery time to the customer. Lastly, if some of the items are out of stock in Walmart’s online store, their single information system can easily check if the same items are available at any of its physical stores and if so, ship the product straight from the shelf.

Walmart is still less experienced in ecommerce than Amazon, but it already has some of the strengths that even Amazon.com cannot match.

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Published: April 24, 2018
Format: PDF + PowerPoint
Pages: 26
Words: 5,100
Charts/tables: 15
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Table of contents

  • Company Overview
  • SWOT Analysis
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
  • Sources

Sources

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About Ovidijus Jurevicius

Ovidijus is the founder of SM Insight and the lead writer since 2013. His interest and studies in strategic management turned into SM Insight project, the No.1 source on the subject online. His work is published in many publications, including two books: ‘The Art of Opportunity: How to Build Growth and Ventures Through Strategic Innovation and Visual Thinking’ and ‘Introduction to Human Resource Management’.