How Walmart is Crushing Amazon in RETAIL BUSINESS ? | Walmart Business Case Study
There are such people in front of us which we all are willing to live like There are many billionaires and millionaires we think about what they have done that how they have achieved these many things What fate has God written we all watch such people succeed but we overlook their failure we want to be like them by watching their present but that ups and downs as they had faced in their past we don't want to face them a farmer's son who has to struggle day and night to afford a meal no one expected in their dream that one day he could build the world's biggest company. more than 570 dollars in revenue, more than 23 lakhs of employees, and more than 11,000 stores worldwide With all this, Walmart becomes the largest retailer in the world and interestingly Walmart is planning to do such a thing that in the upcoming days it will dominate amazon and lead the retail business and if you look very closely then in the last 50 years Walmart has done nothing extraordinary but still, it stands as the largest retailer in this world but how, how did this all happen? What does Walmart do that no one is able to beat them? And most importantly, what are the powerful lessons that we could learn and implement in our business 1985, Forbes magazine published a list 'The top 10 richest people of this world' And do you know who was at number 1 Mr. Samuel Moore Walton from America Everyone's senses were blown after reading this name. because no one had heard about this name ever everyone panicked to know who is he world's richest man and no one heard his name some reports reach the home of sam Walton to confirm this news reporters were shocked when they have seen an unexpected thing everyone thought there would be a luxurious house, a huge swimming pool, luxurious cars must have been parked but when the reporters reach Sam Walton's House they see a small house In which a normal man is sitting inside the house and a jalopy car has been parked in front of this house Walton has built such a company nowadays whose per hour profit is more than 1.5 million dollars And that is the reason that the Walton family is worth 215 billion dollar but the question is that how did a 27-year ordinary salesman do all of these? Well, to understanding this, it is important to understand these three things No.1, Roots
From where Sam Walton came from and how did the Walmart start? No.2, Key elements that form a retailing business. what are the key elements that lead to forming a retailing business? And 3rd and most importantly, Business plan of Walmart is to destroy the competition late 1940's the time when America came out of world war 2 the economy was very poor in the post-war situation and at the age of 7, Sam Walton had to work in different jobs to support his family financially To pay his school fees Sam used to sell newspapers and magazines there was a time when he had even worked as a waiter Walton opened his first retail store by taking 20,000-dollar loan from his father-in-law This store was a franchise of ben franklin in a few days, Walton realized that Ben Franklin is not performing well No matter how hard he works he would never be able to earn a good amount of profit but he found a way out till now Walton purchased merchandise for ben franklin store from their own suppliers which was very expensive for them so, he decided to go out and buy it directly from other suppliers Due to which In just a short time, the Ben Franklin store that built by them was making a good profit. Sam Walton's store was the only profitable Ben Franklin store everything was going fabulous but suddenly something happens that the ground slipped under Walton's feet 1945, leasing contracts were being created for ben franklin's store then no renewal claws were inserted over there And as a result, the store which Walton made profitable from scratch he had to leave everything and move back to hometown now everything destroyed Sam came to his hometown Bentonville and mortgaged the house and started again He opened a new store and this time he made sure that the leasing contract of his store should be 99 years And finally, once again, a store opens 'the Walmart discount store' some years pass and from one store to 2 stores, 2 stores to 5 stores, 5 stores to 20 stores and today Walmart is opening more than 100 stores one month But how? Well, you see in the very initial stages Sam understood the three key elements of retailing business No.1, Price to volume equation No.2, Outlet planning
And 3rd and most importantly, Consumer buying behavior To create price to volume equation these are the 4 things required No.1, Low prices and high volume Now how does this thing happen Now look at this very-very carefully There is a normal retailer that retailer goes to his supplier and places an order for 100 pens for which the supplier tells him the cost of a per pen is 10 Rs. So, that retailer goes inside the market and sells that one pen at Rs 12 So technically with 100 pens that retailer made a profit of Rs 200 But on the other hand, Walmart goes to the same supplier and places an order for 5,000 pens Now because he is buying 5,000 pens. So that supplier gives each pen to Walmart for Rs.8 and Walmart places it in its store for 10 rupees So technically, What is a retailer's buying cost becoming Walmart's selling price This is why no retailer can compete with Walmart But how is Walmart's buying cost so much lower than all these retailers? Well, if you look very closely So, this brings us to another thing and that is buying cost And to control its buying cost Walmart does these 3 main things No.1, Buying from Manufacturing Units
Walmart sources all of its stock from manufacturing units And that too, they also place multiple orders in manufacturing units for different products. No.2, Pre - Season Buying Whenever the season of something is about to come It is 2-3 months before that season Walmart buys and stores those non-perishable goods Like for an example, Winter comes inside Delhi in the month of October-November. So, Walmart within the month of June-July Will store winter items that are non-perishable goods And since June-July is not the season for winter items then at that time all the items are available to Walmart at even more discounted rates.
And third and most importantly, Volume Purchases Whenever Walmart buys something it buys in very large volumes And this large volume stock is divided into these 2 separate units No.1, Wholesale who comes in inside Sam's Wholesale Club Where all the retailers come to buy goods inside the wholesale quantity that too from Walmart And No.2, Walmart International inside which all the stores of Walmart come And this is where the stores and logistics cost come in 4 Things Walmart Did to Control their Store Costs No.1, Self service
The fewer people you keep inside the store the lower the operational cost. No.2, Metal shelves Metal Shelves Are Also Long Lasting Than Wood Shelves and are also much cheaper than Wooden Shelves That's why metal shelves are used everywhere inside Walmart stores. No.3, More billing counters
The more billing counters there are the more traffic will quickly enter and exit from Walmart stores. Due to which the store is not overcrowded too much And more and more people are able to enter the Walmart store and go shopping as quickly as possible. So, in less time Walmart sells you more And 4th, Square foot shelving Walmart sees how much stuff I can store within a per square feet area. And it tries to maximize the square foot shelving So that by storing more and more goods in less space be able to reduce your cost per square feet And then comes the logistics cost Now this is something very interesting So, to understand this very carefully In order to reduce its logistics cost Walmart uses a principal which is called Cross dock HUB spoking By using Cross dock HUB spoking Walmart connects these 2 dots The first dot is the manufacturer and the second dot is the store And connect this thing to Walmart's distribution centers The manufacturers who load a lot of items in the quantities reach to the distribution centers Inside Walmart's Distribution Centers Use the cross-dock HUB spoking Through that which item is needed within how many quantities in which retails store? It is cross docked and loaded under different trucks. From where all this stuff reaches to those retail stores Due to which the transaction cost of their per retail store is greatly reduced.
And not just this Walmart ensures that its manufacturers use a minimum of packaging materials So that the lesser the packaging material, the more will be the domino effect of shelfing. I'll tell you how this works Walmart tried this experiment with a frozen pizza manufacturer Because of their old packaging due to which a Walmart truck used stores 44,300 pizzas But as the manufacturer further reduced its manufacturing material 51,200 pizzas started coming in one truck. And as a result, Inventory shipping and labour of Walmart all of this cost was reduced with the final result being that Walmart saved $600,000 per year on each truck. But there is no use of doing all this inside any retail business if your outlet planning is not good.
With time Walton realized that if they wanted to satisfy their customers. The first thing he has to improve is the Walmart store And this is how he did it Inside a Planning of Retail Outlet These 2 things are such that can change the whole game No.1, Location Waltan opened big stores inside small cities Mainly for 2 reasons No.1, Cheap real estate
Real estate is much cheaper in those who are small cities Which allowed Walmart to opened big stores with less capital And No.2, High middle class traffic Most such populations live inside small cities. Who are looking to buy cheap And the store that will give the cheapest stuff, all the traffic will go to that And moreover, with time, Walmart starts hyper-cluster its stores So, if you see today In the US and in all other major countries where Walmart has a presence you will see a Walmart store every 10 miles So that people do not have to travel more and come to Walmart And if you analyze the layout of Walmart's store very closely then those are the store of Walmart's starting shelves There are always the cheapest items kept there So that as soon as you enter Walmart stores as a customer So, you don't have the feeling that things are expensive here Let you see cheap items in the starting And you Shop, Shop and Shop Walmart's growth is amazing Its stock value has increased by 67% in the last 5 years We all believe in the growth of American companies anyway Why? because we use their products on a daily basis You are watching this video on YouTube right now If you have to shop then you do it from Amazon, you have to watch movies then you watch on Netflix When we use the products of these companies on daily basis So why are we not taking advantage of their growth? Due to the correction in that US stock market these high growth tech companies' stocks for now, these are currently available at very low value.
And there are very high chances That in near future these stocks will go up in value This is the best time to invest in the US stock market There are 2 great reasons to invest in the US stocks. No.1, That whenever you invest in the Indian stock market then you have to buy that share as a share. But that is not the case with US stock market You can also buy a small portion of a share within US stock market. according to your pocket size And the second reason is Rupee to dollar value In 2011, the value of 1 dollar was 44 Indian Rupees which as of today has reached close to 80 Rupees.
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All you have to do is go to the description and the link given inside the comment box and download and signup the app of Ind Money. And after that you have to fund your US account for the first time After which you will get amazon stocks up to 1,000 rupees absolutely free With Ind Money you can start investing in your US stocks in SIP mode as well. Just set a specific amount monthly or weekly and then through SIP mode on a regular basis invest in US stocks You see from the point of portfolio diversification also you can start your investment journey of your US stocks with Ind Money now Go and check out Ind money The link is in the description and comment box And on an average, Every single customer who enters a Walmart store They end of spending 30 to 50 $ But how? And this is where the third element pops up And that is Consumer Buying Behavior Walmart understands you better than you do and I'll tell you how As soon as you enter a Walmart store then you will be handed a trolly at the start You will feel that this thing is being done for your convenience But it's a psychological play Once you took the trolly and you start to walk the store At the same time your mind initiates a buying behavior And moreover, you will never leave the store with an empty trolly Because psychologically you will get a feel for That what people will think, they will judge me So, you start shopping As you walk through the stores you see big banners On which is written Everyday low prices And if you look at it very closely So, each price is written in whole number + decimal because this is also a psychological play 7 dollars and 88 cents, 9 dollars and 44 cents Written from left to right Because we read from left to right And this thing works, whenever you look at these figures then psychologically your brain says That I should buy not 8 dollars, not 10 dollars but should buy 7 dollars and 9 dollars And we always find the purchase of odd numbers cheaper than even numbers. and then you take a step forward, and as you go on You tend to buy More and More and More Do you know why? One thing, Persuasion of Sequential Buying Behavior In simple words, Selling goods in a sequence through social analytics Walmart Using Software and Tools, Studying the Economic Environment Sequentially Places its own Products in Racks Tell me one thing, do you buy milk first or cornflakes? Majority, 95% of people buy cornflakes first and then buy milk That's why Walmart always places cornflakes first and then milk inside their stores.
So that any person who is buying cornflakes can definitely buy milk after reaching the next counter. Because as humans we tend to buy things in a sequence All Walmart systems are interconnected in this way through internal software That you will hardly find a product out of stock in Walmart But how? Well, all these things are done through VMI i.e., Vandor Managed Inventory Each Walmart store is linked to its nearest distribution centers and the distribution centers are linked to their suppliers So basically, The suppliers who are there get live tracking of their stocks that is, the suppliers get to know that how much of their stock has been sold And how much stock is still lying inside the stores so that he is able to refinish the stock being timely Moreover, this software's and tools help Walmart with need and trend analysis And this is how it works for suppose recession is there, times are tough So, under such conditions, Walmart increases the number of consumable items inside its stores by 50%.
Because at the time of recession increase the consumption of the consumable items. And reduce the consumption of non-consumable items Whereas, if the time is running very fast So, under such conditions, Walmart will increase the number of non-perishable items that are not consumables inside its stores. and will reduce the quantity of consumables So that even if there is inside each of the conditions whether there is a recession even if the good times are going on Walmart is always profitable.
30th April 2020, Walmart announces its express delivery And After This One Announcement Amazon's World Changes Forever 7 Years Ago, In 2013, Walmart Tests Its Grocery Delivery Service and guess what! The results were amazing Amazon acquires Whole Foods for $13 billion in 2017 To enter the grocery delivery space But guess what? Walmart is crushing Amazon in grocery delivery And this is how they do it Inside Walmart Express Deliveries to Customers Super Low Prices In 2 Hours I know what you ae thinking Amazon also gives this one-of-a-kind service to its customers. But you know what This is a 5 such key difference Which Makes Walmart Much More Powerful Than Amazon No.1, Inventory Amazon extends its 2-hour delivery through Whole Foods of retail stores The biggest limitation is because of their limited inventory because of Whole Foods, Amazon can only deliver groceries within 2 hours On the other hand, because Walmart has a huge inventory inside its store and everything is available there. So, from Walmart you can order almost everything within 2 hours Which Amazon is not able to give to its customers Second difference is Quality Control Amazon has more than 70% sales through sellers That is, sellers use Amazon's marketplace to sell their goods. But its biggest downturn is that Amazon never runs any quality checks on the goods coming from sellers.
Whereas, All of the inventory that goes into Walmart stores passes through Walmart's checks. So that customers can get a quality product So, if customers are using express delivery from Walmart then only quality products will always reach them. Which is not the case in Amazon always Third difference is Membership Amazon's Prime 2 Hour delivery is only for customers who have Prime membership Whereas, Walmart Express Delivery is free for each customer if that customer makes a purchase above $30 So technically, To do Amazon Prime's 2 hours delivery You will need to buy a Prime membership along with that you have to give money for products But with Walmart this is not the case Fourth and most important difference, and that is Fast Reverse Logistics If you order something from Amazon that is not a grocery item then it will take you 2 to 3 days to get that item returned And in such a case, all that reverse logistics cost has to be bear by the seller who sold the item through Amazon. Whereas with Walmart, If you have placed a return order for anything then the Walmart store is only 10 miles away from you.
So, this whole process is also very fast and Walmart has to bear very little cost in it. And moreover, If the customers want and they want the return very quickly then they themselves can go to the Walmart store and get that return done. Because it's just 10 miles away Now fifth and most important difference, and that is Sustainability You see no matter how big Amazon is but the harsh reality is Amazon is not profitable Amazon's Maximum Profit Their aws Comes from the segments of Amazon Web Services Their retail segment and their E-commerce segment are not that profitable Whereas on the other hand, Walmart is highly profitable So, the coming time if Walmart will have to compete with Amazon So, Walmart Can Bring Its Pricing Below Amazon Why? Because they have much cash that they can easily sustain But Amazon will have a tough time to compete with Walmart in the retailing business And all of this brings us to the powerful lessons that we can learn from this case study and implement within our business. First lesson, You don't have to do something extraordinary to build a successful business If You Look Very Closely Then Walmart Doesn't Do Anything Too Extraordinary They just follow simple rules of retailing Which was implemented by Sam Walton on such a scale that today he has created the world's largest company. So even you can look for simple rules in your business to make it big Second lesson, Customers are always loyal to the value and not to the business Time has changed when it comes to non-luxury product Customers are never attached by your brands but with the value you give Whose biggest example is Swiggy and Zomato In today's date, no matter how much money Swiggy and Zomato have spent to build their brands Each customer checks by opening both the apps orders the food from where it is cheaper.
So, make sure you are consistently delivering value to your customers. Because no matter how big a brand you build it doesn't matter as much in today's date as your given value does. Value finished, business end Ind money's app is a safe app which is being used by more than 6 million Indians today. Inside the description and comment box You will get the link of Ind Money So, download Ind Money's app today and fund your US stock account and get Amazon shares absolutely free.
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