By Faryal Virk
Imagine a store where you can get everything you need. A one-stop shop where you can get your weekly groceries, have the car oil changed, pick up the kids’ school supplies, and while you are waiting to have a prescription filled, get a haircut too. This is the ubiquitous world of Wal-Mart, where you can get all these things done and more.
Wal-Mart is the world’s largest retailer, with sales from its four retail divisions in excess of $374 billion for the fiscal year ending January 31, 2008. (As a comparison, Pakistan’s GDP for 2007 is projected at $476 billion.) It employs 1.9 million people in over 6,800 stores worldwide, and boasts 180 million customers per week in traffic. As a mass-discounter, Wal-Mart’s strategy has been to keep its prices low and to make up margin through volume sales.
Customer satisfaction is a primary objective, and this is done by ensuring a wide range of quality merchandise, guaranteed product satisfaction, convenient store hours, ample parking and an overall pleasant experience. Wal-Mart also boasts an enviable logistics and supply chain management system, through which costs are minimized, allowing low product pricing.
Wal-Mart’s stores are built according to corporate design specifications, with changes made to accommodate local planning and zoning laws if necessary. Parking is plentiful, and access to and from the store is convenient. Stores feature a number of check-out lanes, and a recent addition has been self-checkout, which has reduced staffing needs. Product placement is standardized so that customers know where they can find what they are looking for. An interesting feature is the in-house television system that provides information ranging from special offers to recipes.
Wal-Mart’s Super Centers offer a wider range of products than its other stores, which has made them the most popular choice of consumers. Sam’s Club is the corporation’s wholesale club, targeting both individuals and businesses. On a personal note, I have been a latecomer to the Wal-Mart bandwagon.
During my two years in graduate school, I bought a few items from Wal-Mart, but only because I was strapped for cash. At that time, the perception among my peers was that Wal-Mart was for rural, trailer-home occupying poorer Americans, and as budding yuppies, we would avoid the store. These were the days of the dot-com boom, when I could pay $4 for my Starbucks coffee without blinking.
I was single, and with only myself to think about, I would frequent fancier stores where I would pay much more than Wal-Mart for the very same item. If I had to use a discounter, I would prefer Target, which is more upscale than Wal-Mart and targets middle-market consumers. I became a Wal-Mart convert when I moved to rural North Carolina, stopped working and started a family. With just one income to rely on, and a small child with a never-ending need for clean diapers, I became a Wal-Mart junkie and discovered the joys of saving money. I also began frequenting Sam’s Club, where I could buy products like formula, diapers, detergent and paper towels in bulk and save even more. And then I discovered electronics were cheaper at Wal-Mart, as were car tyres and contact lenses, and I was addicted. But I still have a thing about clothes and footwear, which I buy from other stores.
Because of its stature as a retail juggernaut, Wal-Mart faces intense criticism too. Much of this focuses on its ability to keep prices so low that smaller stores in the area who do not have the same buyer power and cost structures cannot compete. With the US economy facing recessionary pressure, the fact that Wal-Mart makes much of its purchases abroad (especially China) is becoming an issue. This has become a Catch-22 situation, since the very people raising this issue are also consumers demanding lower prices, and so products will continue to be imported.
The future of Wal-Mart appears to be assured. The declining US economy is causing more consumers to migrate towards its lower prices, and high-end retailers will be hardest hit in the short term as they lose customers to discounters. International expansion into growth markets through acquisitions, joint-ventures (such as in India) and de novo operations will fuel further Wal-Mart’s growth into more communities around the world.
Faryal, who lives in Texas, has an interest in banking and finance. (Pun intended)
This article was originally published in the print edition of Valuemag, issue 1, May 2008.