Wal-Mart is no longer the undisputed king of the low cost strategy as online retailers like eBay and Amazon are some of the other contenders for the same title. The price strategy of Wal-Mart is no longer the sole competitive advantage that can bring customers to the stores in numbers.
Customers now also look at delivery challenges as factors affecting their decisions to go to the store. The lack of a strong online shopping experience is making Wal-Mart lose existing and new customers. The company has already reported declining revenues in some of its stores in the United States.
Much of the ownership of Wal-Mart is now in the hands of individual investors, who are keen on cashing out when they make a profit.
While this provides the company with a motive to reward its shareholders, it also acts as a long-term disadvantage because many of the individual shareholders do not show the required vision for the long term survival of the company. Consequently, they do not force the management to position itself well to grab emerging opportunities like online shopping and shipments or storage like its emerging competitors such as eBay and Amazon are doing.
Wal-Mart cannot attract top talent because it has a reputation for paying low wages to store employees. Its quest to have the lowest prices forces it to cut costs on every possible division, including human resources.
Low wages not only hinder talented people from applying for jobs at the company, but they also discourage existing staff from performing well. The workers eventually fail to do their best in promoting sales within the stores (Featherstone, 2011).
The neighborhood store format
Initially, the small neighborhood store format appeared to run contrary to the large store format that allowed the retail to enjoy economies of scale. However, the company had to opt for a smaller store format for it to fit into the neighborhoods without having excess inventory that becomes an extra cost.
Wal-Mart faces no problems in managing the small stores and can run them collectively within a large area as it already has a sophisticated inventory management system. The company’s move to small neighborhood stores comes from its goal of providing customers with the convenience they need.
Many who jump to online shopping quote the ability to get what they want immediately as one of the reasons for the move. Wal-Mart can offer the same convenience with a small store, especially when it also leverages on mobile and other technology features such as checkout using phones and interactive displays (Buss, 2013).
International expansion challenges for Wal-Mart
Wal-Mart will keep on facing regulatory challenges as it expands overseas. Problems like the ones faced in Germany, where the state did not allow it to price goods below their cost, will continue to emerge in many countries that want to protect their domestic companies from competition.
The company also faces cultural challenges. People in overseas countries may not hold the same views as North Americans. This is likely to hamper sales and motivation strategies.
Some countries have heterogeneous cultures and their customers will have different needs. The company cannot just ride on the deep discount advantage and expect to win all the customers. Their local retail companies are also not going to sit back and watch Wal-Mart take all their customers.
Instead, they may choose to use unethical means as they fight back. Such unethical means include smearing campaigns, which will be detrimental to the overseas growth of Wal-Mart if they are successful (Masters, 2004).
Buss, D. (2013). Walmart grows by growing smaller with stores, focusing on digital commerce. Brand Channel. Web.
Featherstone, L. (2011). Wal-Mart’s weaknesses: Is the behemoth in trouble? Alertnet. Web.
Masters, G. (2004). Wal-Mart’s global challenge. Web.