Walmart is a multinational retail company that is famous for providing affordable products. It is a company of USD 405.613 billion. Walmart’s revenue is around 559.2 Billion which depicts that the company’s pricing strategy has been able to keep the consumers loyal to the brand.
The Product Price Ranges
Walmart was established in 1962. Since then, people have been adoring the brand because of its pricing. Walmart has been providing affordable products for the last 6 decades which made the company the 2nd largest retailing brand in the world. Walmart solely focuses on its affordable pricing which more or less attracts the mass. Its top sold products are food items (bananas to be specific), household items, garments, footwear, etc. The brand has been continuously providing a quality product at a much lower price.
Pricing Strategy of Walmart
Walmart has been thriving in the retail industry since 1962. When it comes to pricing strategy, their goal is providing quality goods at a much cheaper price. They call it the EDLP pricing strategy. EDLP means Everyday Low Price. Walmart follows this strategy in its revenue model.
The purpose of this strategy is to captivate a larger number of audiences in order to gain higher profits. As their price is quite low, their sales volume is much higher than the competitors. This ensures that their profitability is much higher, even though their profit margin is comparatively thin and their selling price is quite low. Walmart also follows the cost leadership strategy which has given them a competitive advantage over the last six decades.
Alongside that, Walmart also follows the market-oriented pricing strategy when it comes to their household goods, their own products and media content. Moreover, Walmart tries to maintain a flat-rate subscription strategy in its business model. For instance, they provide unlimited delivery from time to time. Walmart also change their marketing mix from time to time. They adjust their pricing strategy according to the state of the market. In brief, if we say, Walmart follows 3 basic pricing strategies. These are:
- EDLP (Everyday Low Price)
- Market-oriented pricing
- Fixed-rate subscription pricing
Everyday Low Price (EDLP)
EDLP means Everyday Low Price. Under this pricing strategy, a brand offers quality products at a consistently lower price without any discount or holiday offers. Different studies have shown that consumers prefer having a consistently low price over a rapid price swing. Hence, EDLP is so effective. It simplifies the decision-making process. Consumers don’t have to wait for sales. They can buy products all year long.
It reduces consumer search costs. Customers don’t have to spend hours searching for the best deal available on the market. They always know that; Walmart provides value for money. Because of that, Walmart has gained so much appreciation and success. Walmart was able to establish 8500 stores around the world. Their customer pool is approximately 200 million.
Related Article: Pricing Strategies of PepsiCo
Market-Oriented Pricing
Market-oriented pricing is basically following the competitor’s strategy closely and taking strategies based on that. Alongside that, the prices of the products are decided as per the market condition which means that if the demand is high and competitors are charging a higher price, then the brand will also go for a higher price. The companies also see the cost of making and the future demand of the consumers. Depending on that, the final price is decided. A market-oriented pricing strategy allows a brand to understand consumers’ perspectives before even launching the product. For example, Target is offering a product at $15. If consumers are buying that frequently, this will mean that the price is acceptable and if Walmart provides the same product at $15 or at a less price, consumers will buy the product. In some cases, they might get cost leadership depending on the situation.
Fixed-Rate Subscription Pricing
Fixed-rate subscription pricing is also known as the flat-rate pricing strategy under which consumers are given a fixed price for all the products under the same feature. Usually, products that have a set number of features are given at flat-rate pricing. This strategy usually doesn’t work for companies but when it comes to Walmart, they have been successfully using this strategy for years. Mostly for business to business, this strategy is not that appreciated. But Walmart has been following this strategy for a long time. Their success depicts that the strategy is working well for them.
Walmart’s Global Pricing Strategy
Walmart had a revenue of over 486 billion US dollars in 2016. Even during the pandemic, their revenue grew and became 559.2 billion USD. Walmart contributes a significant portion of the US economy. Globally they follow the EDLP strategy. Their Everyday Low Pricing strategy has helped them gain so much popularity. Their consistent affordable pricing has helped them achieve consumer loyalty over the past few decades.
Pricing Strategies Applied by the Competitors
Walmart’s biggest competitors are Amazon, Target, Costco, etc. Amazon follows a competitive pricing strategy. They observe the business model of all the competitors, analyze them thoroughly and build their own strategy accordingly. On the other hand, Target constantly tries to offer the cheapest price possible. They always try to gain a cost advantage. Costco also goes for cost leadership. Just like Target they also try to provide products at a cheaper price than the competitors.
Recommendations
Walmart has been thriving in the retailing industry since 1962. There are not many recommendations for them but as they are the second-largest retailing company, they still have some room for improvement. Currently, Amazon is the largest retailing company in the world. Their innovative pricing strategy has made them the market leader. Amazon provides a wide range of products starting from affordable to premium quality. This allows the consumers to choose according to their preferences. Besides, Amazon also observes the different pricing strategies applied by consumers. After analyzing those strategies, the company takes adapts a suitable strategy for its products. Walmart can also follow this technique to gain a competitive advantage and become the new market leader.
Related Reading:
- Pricing Strategy of Nestle (7 Strategies)
- Pricing Strategies of Tesla Inc
- Pricing Strategy of Airbnb (9 Strategies)
- Pricing Strategy of Dove
Nishat Tarannum Mridula is a contributing writer at The Strategy Watch. She has been contributing for last two years.
Nishat is currently studying at the University of Dhaka. Even though her major is in Banking, she enjoys writing on diverse topics, starting from appliances to blogposts. She is in the middle of completing her BBA from University of Dhaka. Alongside that, she writes different types of business articles for The Strategy Watch.