Learning from business cases >>> Walmart

Background of the case:

Walmart, the giant chain of discount stores, is the third largest company in the world, with over $400 billion in revenue and 2.2 million associates (or employees). The key success of Walmart, was originated by Sam Walton, is the idea of “selling the same products as his competitors but kept prices lower by reducing his profit margin”. Walton’s EDLP (Every Day Low Price) strategy remains the foundation of Walmart’s success today. In order to survive from other retailing competitors, Walmart relies on three basic beliefs and values; “Respect for the Individual,” “Service to Our Customers,” and “Striving for Excellence”. Walmart’s marketing strategy has evolved over the years. Early marketing efforts were based on word of mouth, positive PR, and aggressive store expansion.

Identifying the problem of Walmart Case:

During the Year 2000 to 2005, Walmart’s stock price fell 27 percent and remained low until 2007. One of its competitors, Target, reemerged on retailing business. Target revamped its stores, merchandise, and marketing strategy to appeal to a more aspirational discount buyer and stole some of Walmart’s top-tier customers. During the time, from 2003 to 2007, Target outperformed Walmart in same-store sales growth by 1.7 percent and profit growth by 5.7 percent. According to the case, Marketing Excellence >>> Walmart, “One analyst stated, “Target tends to have more upscale customers who don’t feel the effects of gasoline prices and other economic factors as much as Walmart’s core customers might.”, Marketing Management by Kotler, P. (p.94-95).

Application:

Let us now introduce you the theory from chapter 3, which is “The Measures of Market Demand”. Basically, there are four major productive ways to break down the market; which are the potential market, the available market, the target market and the penetrated market. During 2000-2007, which is the period when US market were facing with economic crisis, almost every Walmart’s marketing strategies were specially designed for the target market and the penetrated market, which are the medium and low class customers who also served as the major group of customers. Seemingly, this target group was heavily and badly affected by the economic crisis during that time. They were losing their purchasing powers. In contrast, those upscale top-tier customers, or Walmart’s potential and available market were less likely to be affected by the economic crisis. During the time, these small percentages of customer were considerably having high power in purchasing. By unintentionally overlooked to these upscale shoppers, Target successfully stole Walmart’s potential and available markets and gaining some profits from them during that time. After several years, Walmart realized what that the company had done huge mistake and came up with new campaigns and tactics in marketing, in order to bring back those upscale shoppers from Target.

Conclusion:

What we had learned from studying the Walmart’s case is that a marketer should pay his/her attention to every group of demands in the market. Not only just the target market and penetrated market that need to be focused, but also the potential and available market as well. None of them should be overlooked. Otherwise, overlooked in small percentages of demands in the market can cause the company a dramatically loss. Even it just happens in only a short period of time, the damages can also be severe.