How Walmart Works? Understand Walmart Business Model

One of the popular names in E-commerce, Walmart has come a long way to offer its service around each corner of the world. Everyone has heard the name of Walmart at least once, but not everyone is aware of its expansion journey. If you are one of the researchers seeking the facts of Walmart, then you are at the right place. The Walmart business model comprises a straightforward approach that inspires entrepreneurs to enter the large E-commerce sector.

The great American startup first appeared in the early 60s. Arriving in the present era, it is one of the most successful and popular retail corporations worldwide. So let’s check in brief about how Walmart works along with elemental details of how it makes money.

Overview Of Walmart

Walmart is a global retail establishment that operates a chain of supercentres, wholesale stores, and grocery shops in the United States and other countries. As we discussed before, Walmart is an ancient bird founded in 1962.

The founders, Sam Walton & Bud Walton, opened up their first Wal-Mart discount store in Rogers in the 1960s with an aim to provide groceries, clothing, jewelry, home furnishing, medicines, electronics, household appliances, etc., at lower costs. Among all of these, Walmart grocery stands as one of the most popular grocery stores in Latin America.

The core concept of the business relies on providing users with all sorts of items at discounted prices. Walmart has streamlined its supply chain to provide users with all the required items while maintaining lower operations costs so that both parties can enjoy benefits. The supply chain plays a vital role in conducting business procedures.

The firm consists of an extensive network of suppliers and distribution zones located in different zones of the planet. This supply chain establishment allows the company to control the flow of goods from suppliers to consumers while sustaining discounted prices and a broad spectrum of product assortment. The enterprise is publically traded on the New York Stock Exchange (NYSE) under the symbol WMT. It raised $5 billions in funding from the latest funding round of post-IPO debt.

Key Checknotes of the Company

• In 1970, the company established a home office and its first distribution hub in Bentonville, Arkansas.
• Walmart occupied 1198 stores with 200,000 associates and completed the sale of $15.9 billion by 1980.
• By 1990, the company achieved the title of largest retailer in the U.S. in revenue.
• Walmart reported environmental measures in 2005 to improve its environmental record, which was in poor condition previously.
• In 2014, some company employees went on strike in prominent localities of the U.S., demanding higher earnings.
• The association affirmed to change its corporate name from Wal-Mart Stores to Walmart Inc. as of 2017.
• As of January 2021. The company affirmed the launching of a fintech startup to provide financial products for users and workers.
• In August 2022, Walmart asserted a partnership with Paramount to offer Paramount+ content to its subscribers with a proposal to compete with Amazon.
• Coming to February 2023, Walmart declared that they had made 605.8 billion US$ in net sales worldwide in the previous financial year.

Apart from the growth scenario, Walmart also faced criticism for myriad reasons, be it low wages, poor health care, improper working conditions, anti-competitive practices, and much more. However, every story has two sides. Not to forget, it overcame such situations and currently rules second place in the world’s largest employer of the private sector (PS – Amazon holds the first position).

How Walmart Works?

Walmart (also known as Wal-Mart) employs a vast network of retail stores, including supercentres, discount stores, Sam’s Club, and small stores. These stores offer various products, including groceries, clothing, home-related goods, etc. Next, the enterprise has a great online presence, facilitating users to shop for various sorts of goods through its website and mobile applications. Here, users can select a home delivery service or even choose curbside pick-up in selected zones.

So here, the Walmart business model employs its supply chain design where a person can shop from multinational locations, and the supplier fulfills the demands of specific products. Hence, the supply chain strategy is all about maintaining the distribution of goods while minimizing expenses. Moreover, it works to provide quick and fortunate delivery services, and because of the handy services, Walmart made it possible to beat Amazon in the delivery market.

Next, it avails everyday low prices to buyers. By following the low-price leadership, the company made it possible to reach out to millions of users worldwide. One of the ways they keep prices low is by purchasing in bulk and passing those savings on to shoppers.

The pricing strategy and convenient services are the main reasons for its sales growth. The online sales of Walmart grew by 24% in the U.S. and grew by 26% on the international channel as of the second quarter of July 2023.

Apart from this, the company heavily invests in technological advancements like data analytics and radio-frequency identification for tracking inventory. It even has a sophisticated logistics and inventory management system that allows it to quickly restock and maintain the stocks.

In general, Walmart’s success is heavily built on its adaptability to occupy and manage inventory while offering low prices to users at both physical and online stores. Their operations executions and focus on user satisfaction truly contributed to making it a retail giant.

Walmart Business Model Explained

Key Activities of Business

• The key activity of business relies on collecting data & resources of goods suppliers to maintain inventory.
• Next, handling online orders from app and web channels remains the key activity.
• To proffer everyday low prices, the company works to negotiate with the vendors to get the products at discounted prices, which passes down to users’ savings.
• As Walmart operates in multiple locations and nations, it is essential to oversee the chain of suppliers.
• After acquiring the chain of suppliers, distributing goods with proper inventory planning remains an important activity.
• Warehouse management is required at its best to store and distribute goods from vendors to users.
• Later on, managing technological channels – web and mobile apps- is equally necessary to handle online orders.
• One of the key activities stands for its branding & promotion to increase the business reach.

Consumer Segment

For Users

• Users can benefit from a huge market availability to shop for their everyday products at lower prices.
• The brand avails international availability, facilitating users to shop from worldwide locations.
• The business also proffers free delivery, same-day delivery, or self-pickup services so they can receive orders as per their preference.

For Suppliers

• Suppliers who have joined the company can benefit from reaching a wide range of users globally.
• By utilizing the online platform, suppliers can cuff off the operating costs.
• As more and more users shop from the suppliers, they can enjoy sales growth, eventually leading to increased earnings.

How Does Walmart Make Money?

A big e-commerce giant like Walmart has myriad revenue streams. Let’s explore in brief how Walmart makes money from multiple resources.

True to the fact that the main revenue stream of the company relies on retail sales. The company has over 10593 stores around the globe. So the retail sales contribute a huge ratio in profit. Furthermore, the online platform also contributes to the highest profit ratio. When people shop for goods from the app and web channels, Walmart makes money from these online sales.

Walmart International also counts on revenue resources. The organization operates in many countries, and these international sales generate great earnings. Apart from retail sales, the company gets profit by availing of a membership program named “Walmart+.” Here, shoppers have to pay subscription fees for the program to get benefits like discounts, free shipping, or other complementary perks.

Sam’s Club is also one of the earning sources popular for its bulk sales in various categories. Next, advertising remains a prime factor in revenue streams. Walmart promotes brands and retailers on its platform, and these brands pay Walmart for promotion and advertisement. The advertisement services help brands to get better reach and more shoppers.

The company also generates revenue from additional resources like financial services, which contain money transfers, credit cards, bill pay, and earns fees and interest from these services. So Walmart has multiple ways to make money, and those huge earning streams make it the largest and most successful brand in the world.

Future Expansion

In the upcoming years, Walmart may offer further products to its users so buyers can get the one-stop-shop app experience. Their future plans also describe that it may expand into new markets of domestic and international sectors to facilitate their service to more and more users around the globe. With the rapid demand for Artificial intelligence, the firm will employ the latest technologies to improve business efficiency and user experience.

How Much Does It Cost To Build An App Like Walmart?

As we discussed, the Walmart business model offers a straightforward business approach. Hence, entrepreneurs can follow its business model to start their online business. For that, it’s required to understand how much it will cost to build an app. The cost of building an app like Walmart depends on variable factors, such as app design, app complexity, features, functionalities, development team, etc.

However, the expected cost ranges anywhere from $8k to $15k or even can be higher depending on the advanced features you would like to integrate. If you wish to save from higher expenses, then you can purchase a pre-built platform that comprises essential functionalities to take off your online business.

In Summary

At the end of the article, it’s fair enough to say that Walmart has overcome multiple hurdles and maintained its continuity toward growth. The Walmart business model revolves around delivering low prices to a wide range of patrons through efficient supply chain management, massive scale, and a diverse product offering. The company continually adapts to changes in the retail landscape, embracing e-commerce and international expansion while focusing on cost leadership.

Are you a passionate entrepreneur seeking a robust system like Walmart? We have got your back! Opt for our pre-built Walmart clone app that allows you to launch your business on an instant basis. Our solution comprises all the essential functionalities to manage business operations adequately. Along with that, a customizing facility is there that allows you to make changes in specific app functionalities to create the best match solution suiting your business demands.