Walmart could have potential competitors from grocers that could potentially try to enter the other side of the retail industry as well. When it comes to its potential competitors, Walmart, has the advantage of distribution, an established brand name, and cost advantage over its potential competitors.
As of now one of Walmart’s biggest competitors would be Target, as they are both similar in numerous ways having similar products and prices. These two companies are part of the discount retail industry and keeping costs low is what they are known for. In the strategic industry analysis, Wal-mart and Target, it is stated that “Walmart is positioned as a price leader because they sell a variety of products, to a variety of different people at the lowest possible prices,” (Golberg, Mareck, Hardy, Hoeft, & Noetzel, 2005). This statement shows how Walmart doesn’t particularly focus on a specific target market, but chooses to reach broad types of consumers by attracting them with low prices. This strategy has helped Walmart globalize since its focus is to offer low prices to all consumers. Also, per Wal-mart and Target, “Target can capitalize on quality products and affordable prices,” this is how Target differentiates from Walmart (Golberg, Mareck, Hardy, Hoeft, & Noetzel, 2005).
At Target, there is not just an emphasizes on low prices, but additionally on high-quality products. Target has various partnerships with designers which helps to keep their merchandise exclusive and up-to-date with the trends. This further supports to highlight the high quality of their products, which comes in various price points that target various target markets. Target, clearly has had its own success and established its brand, but its growth has remained domestic. Walmart is the leading company on low prices and has been able to reach global success.When it comes to Walmart’s customer base, it is a very broad target market. Walmart doesn’t target specific groups, but it does have a predominant type of consumer. As of most recent, Business Insider, has described the “average Walmart shopper as a white, 51-year-old female with an annual household income of $56,482,” (Peterson, 2016).
Peterson, also provides graphs showing Baby Boomers and the annual household income ranging from $25k to $49.9k, which are the largest portions of Walmart’s customers (Peterson, 2016). Given that data, Walmart does seem to attract mostly customers with lower annual incomes.
Having such base, contributes to Walmart’s competitiveness and encourages the company to further assert their brand, which is having the lowest prices.In Walmart’s website, they state “our suppliers help us meet the needs of hundreds of millions of customers each week with responsibly produced products and services,” (Walmart.com, 2018). In order to meet this goal and for both companies to be profitable it is crucial for suppliers to understand the needs and wants of Walmarts customers. Little Debbie is one of Walmarts suppliers, what makes them different and more desirable to Walmart is their DSD sales. The “Distributors deliver fresh and merchandise products” (littledebbiecstore.
com, 2018), their services include the delivery on a daily basis and the restocking of shelves. Having these types of relationships with suppliers helps Walmart become more profitable. Not only are they not left with overstock, it also helps keep cost down which allows them to keep their prices low. Even with so many benefits suppliers still have a low bargaining power. Since Walmart is a global company it would not be ideal for suppliers to lose Walmart as a distributor because they have large exposure. Another reason for low bargaining power is the high competition between suppliers.
It allows Walmart to choose suppliers that could contribute to keeping their costs low.In terms of substitutes and complements, these factors have little impact on Walmart. Because of the industry that Walmart is in there aren’t many alternatives to common everyday products. Customers, however, do have the choice to go to other stores, but rarely do since Walmart offers convenience and low pricing.
There is the choice of online shopping, which could offer even lower prices, but Walmart also has a big and growing place in e-commerce. As for complements, Sam’s Wholesale Club could be considered an example of a complementor to Walmart. Although, Sam’s Club is owned by Walmart it does add value to the company by selling the same products in a wholesale form at even lower prices for the customers.Threats of new entry are low due to high entry barriers. One of the main disadvantages is the high cost of starting a new business. In order to compete with walmart the new retailers would have to carry a large scale of products and obtain a large investment.
Even if the retailers are able to overcome these barrier they would still be competing with an established brand. Walmart still has a competitive advantage due to their relationships with suppliers , which enables them to obtain products at a lower price. There is a possibility for new entry, but it would be difficult to overcome the entry barriers.