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Essay: Can Walmart Innovate Itself in the Age of E-Commerce? A Look at Its Downward Spiral.

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  • Subject area(s): Marketing essays
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  • Published: 1 October 2019*
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  • Tags: Walmart essays

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As competition between retail and e-commerce grows fiercer by the day Walmart, the world’s leading superstore, leaves consumers wondering if they will be able to innovate itself in order to not be overcome by competitors such as Amazon. Currently the world’s largest company by revenue, with approximately $514 billion, as well as the world’s largest private employer of 2.2 million employees (1), consumers would not expect this family-owned company to be is on unsteady grounds. Although Walmart is still staying afloat, there has been a 32.4% decrease in profit in the most recent fiscal year, as part of an ongoing downward trend started in the early 2010s. (2) With the emergence of e-commerce markets such as Amazon, as well as competitors such as Target, Walmart faces a lot of pressure to regain their footing. With the closure of 22 locations in the USA/Canada, as well as less than 10 new stores opening, Walmart’s position stays stagnant on the market at the moment. (3)
Perhaps the two most consequential factors that led to Walmart’s downward spiral would be the tough competition that they have faced in the e-commerce market, as well as their many failed ventures in the international market. Due to the hardships that Walmart continued to face, it was evident that there would be major losses on their financial statements. As seen in Exhibit 1, Walmart’s net income decreased almost 50% from $13,643 million in 2017 to $6,670 million in 2019. As the market conditions changed, with consumers leaning towards online shopping, Walmart did not adjust fast enough, leaving them in a precarious state.
The conditions that Walmart is still currently facing provide an interesting perspective, as this large and powerful corporation is shaken due to the changing market conditions. While retail stores are being traded for e-commerce, it brings to light the need for corporations to listen to their consumers and continue to innovate their brand regardless of their position in the industry. Other retailers can use this case as an opportunity to educate themselves upon market needs and consumer needs. They can create a learning opportunity, in order to innovate and avoid going down the same path as Walmart.
Literature Review
Walmart, a generations old household name, was initially founded in 1962 by Sam Walton as a “five and dime” shop in Rogers, Arkansas and was based on Walton’s strategic vision: the lowest price anytime, anywhere. In only five years, Walmart had expanded to 24 stores, raising about $12.7 million in sales. The next decade or so, the 1970s, was filled with substantial growth for the company as it prepared to go national, proving that Walton’s vision had a widespread appeal. (4) Customers were provided with a unique experience during the early stages of the company that no other retailer could reciprocate – the ability to purchase the goods in a higher volume at a lower price. Walmart was fortunate as they were able to find low-cost suppliers to provide them the necessary goods, in order to gain a higher profit margin. This allowed them to stay ahead of the competition during their time of rapid growth. They understood the needs of consumers, so they were able to effectively target particular market segments and providing them with a solution to their needs.
By the 1990s, Walmart was considered America’s top retailer, having redefined the concept of one-stop shopping. Throughout the 2000s, Walmart continued to make improvements to its brand reputation by contributing to different charities, committing to environmental sustainability, as well as offering a low-cost drug prescription plan. Their customer segment had been established by incorporating their consumers ‘ desire to be able to buy everything they need in one central location instead of having to go to different stores to buy different necessities, especially considering the Everyday Low Price (EDLP) pricing strategy that was being conducted at Walmart. (5)
Ever Changing Customer Needs
Over the years, Walmart has continually used consumer insight to analyse changing market dynamics and values, all in order to focus their efforts more efficiently on the most profitable consumers. Companies exist to make a profit after all, so any attempt to adjust to meet consumer needs would be helpful to the growth and overall competitiveness. Walmart had the ability to know exactly what the needs of their customers were – a high volume of low-cost products, as well as a place where consumers could find everything they wanted.
Walmart continued to venture into foreign countries near the beginning of the 21st century to implement the products and services on their shelves- but this was not a good move for the company. As Walmart sought to develop globally, major issues were at hand. E-commerce had finally begun to pick up pace at the start of the 2010s, and Walmart made no concerted effort to increase their online presence. This move eventually contributed to the slowing down of Walmart’s profit when they eventually started upgrading and innovating their website and presence online, however as they were late to the game, they remained the incredibly efficient Amazon system. (6)
This is what sparked the shaky grounds that Walmart had landed upon, as this retail giant failed to adapt to changing times and customer needs on time to prevent incurring a loss.
Lack of Innovation
Stuck in the mindset that revenue would remain constant or even rise with an increased range of products stored on store shelves, Walmart failed to innovate their channels of distribution as the retail market changed. While Walmart understood their customers’ needs, they did not understand how customers were prepared to find solutions to their needs. In fact, at this point in time, Walmart had some impact on the online retail market; but, in this sector there were so many rivals. Because of the company’s lack of differentiation, buyers had no real incentive to choose their products over competitors ‘ goods.
How could a giant industry suffer such a decline while its rivals are experiencing significant growth? The reason is that the needs of consumers and market trends have changed more than ever, and the difference is that one business has focused on protecting its traditional marketing strategy while the other is responding to changing times and developments.
Target Market
For decades, Walmart has been using techniques for psychographic and demographic segmentation. They realised they would cater to many different individuals, so they used an undifferentiated marketing strategy to appeal internationally to the markets. (7)
RECOMMENDATIONS
The loss of Walmart’s position as the world’s top sales corporation may be earlier than anticipated, and if this is the case, the decline of a business leader like Walmart will be one for the books. This is because consumer needs are constantly changing, and it is likely that the needs of today and tomorrow will be different. If they are unable to respond to the ever-changing needs of customers and the marketing departments are not forward-focused, companies are likely to fall back without realising until it is too late.
Since the establishment of Walmart, it has offered many goods at a low price, achieved through getting high-volume sales at a lower profit-margin. Walmart continued in this manner without much innovation throughout the years, however their competition had grown quite considerably, and had significantly become much harder to compete with.
Some of the competitive factors include price, product, quality, and the overall potential product, as well as the ample amounts of different retailers offering similar goods at comparable prices. Walmart began to encounter competition throughout the retail industry: from other department stores to online retailers and everyone in between. There were major adverse effects on Walmart’s performance with competition of this scale, especially as e-commerce started to dominate in the retail industry.
Walmart’s decline could be attributed to many reasons, however the largest would be due to their inability to become a successful online retailer in time to keep up with other online retail giants like Amazon and Alibaba, as well keep up with the growing and relentless market changes. Walmart’s intentions have always been evident in their statement: “We save people money so they can live better.” (5) Their initial driver to success prided itself on convenience and value, bringing shoppers an all-in-one shopping experience. It has been clear for years that in the near future the e-commerce sector will take over the entire retail industry; however, Walmart did not feel the need to re-evaluate and restructure its tactics to keep up with the changing times.
Customer Needs
In order for a company to successfully incorporate its value proposition into the ever-changing market, market research, market segmentation, and strategic marketing is important for companies as this unique combination would allow the business to understand its consumers. Without this crucial step in a marketing plan, adverse effects may occur, such as treating each customer the same and either over-serving or under-serving the market. In a world where online retail is becoming increasingly common every day, it is essential to keep the company on top of market trends and evolving customer needs so that marketing tactics can attract and retain customers effectively.
One of the negative developments that contributed to Walmart’s downward trend was the rapid pace of shifts in the market’s macro-environmental patterns, the key one being technological innovations that allow consumers to buy any variety of goods and services by clicking a mouse. A cardinal rule for keeping ahead of the game is to continually attract and maintain new customers, but it’s a mistake Walmart didn’t realise they had made until it was too late. For the last 20 years or so, Walmart has struggled to get their online presence right, and though they are taking steps in the right direction, they stay lagging behind the well-oiled machine that is Amazon. (8)
Since time cannot be reversed and Walmart cannot rescind the actions that led to lagging of the company, other Walmart-like retailers could learn from the misapplications of their marketing strategies to further prevent a similar occurrence. Retailers currently on the market must move some of their resources to concentrate on their digital operations and focus on keeping up with market trends, such as shifting away from traditional brick and mortar retailers. In Walmart’s case, their target market is quite broad as they aim to cater to all demographics, however with the emergence of Generation Z Walmart attracts millennials via effective integration of social media marketing into its marketing communications strategy. (9)
Competitor Analysis
At the outset, Walmart was effective at keeping contenders under control as they gave clients all that they required – one focal retail store where they could buy products at modest costs, bringing simplicity and convenience to the market. As innovation advanced, Walmart’s rivals started to make up for lost time to their prosperity, particularly regarding its online retail activities. Indeed, even before Walmart encountered a downward trend, their incentive was not very different from those of their rivals, as every one of them offered generally a similar potential item – a wide variety of mid-range quality goods with modest/normal pricing that could be found in one location. The way to accomplishment of a business keeping up a situation in front of their rivals is to separate themselves here and there, making a worth that different contenders don’t have in their items.
If they had the chance to turn back time, a suggestion they could recognize is to differentiate their business somehow or another, particularly regarding their products. There are various varieties of Walmart, retail establishments or even rebate stores that sell everything that a client might need or need. Something that could have maintained a strategic distance from Walmart’s descending pattern is included worth that no other contender could give, for example, a motivating force for clients to continue returning, which could be as straightforward as offering trade-in to clients. (10)

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