Walmart stores are famed for their large size and extensive range, but the corporation is best known for its low costs. Walmart is unabashedly proud of its low-cost merchandise and has also been working towards better compensating its employees. They have made huge strides over the past few years by improving average earnings, training opportunities, and internal advancement prospects. Let’s know ‘Why is Walmart so cheap?’
Even after offering better compensation to its employees, the company manages to keep its prices super low. Keep on reading to know how Walmart manages this.
Reasons Why The Company’s Products Are Cheap
- Competition
If Walmart didn’t maintain its pricing low enough to compete with e-commerce behemoths like Amazon, it would quickly lose market share and eventually collapse as online sales soared. Walmart’s items are around 34% less expensive than Amazon’s.
Surprisingly, just as the rise of internet sales forces Walmart to keep prices low to remain competitive, Walmart is sometimes the only big shop in town. Walmart can count on millions of customers using its physical stores as their go-to spot for groceries, clothing, household goods, and more. Because of their large and dependable customer base, they can keep their pricing low. Customer loyalty creates Walmart’s monopoly in the retail business.
- Low operational costs
The low operational cost has been the company’s priority since its founding. The business keeps expenses down by employing a largely automated supply-chain management structure, requiring executives to travel on a budget, etc. It has a cross-docking method that eliminates the “middle man,” allowing products to come in-store directly from the manufacturer, saving money on warehouse charges!
- Having negotiating power
Walmart has enormous negotiating leverage with its suppliers as it is the world’s largest retailer. Many manufacturers rely on Walmart sales to stay afloat, and even larger, more established brands can’t afford to be excluded from Walmart’s aisles or websites.
Walmart can negotiate lower wholesale pricing than almost any other retailer on the planet, and it passes those savings on to its customers.
- The sheer number of sales
Walmart sells more of almost everything than almost every other retailer, and it sells many things at lower prices. With this in mind, Walmart may be able to generate more money even if the margins are narrower.
This happens because Walmart buys in bulk. Because of the sheer number of its locations, Walmart can save a lot of money on supplies! They can save money on individual items by purchasing large amounts of products in bulk, allowing them to offer the product for less.
- Vigorous anti-shoplifting measures
The company estimated in 2015 that it loses up to $3 billion a year to theft. If the retailer didn’t vigorously prevent stealing, that number would be substantially higher. The corporation reportedly keeps a list of all verified shoplifters and advocates for prosecution in many theft cases.
For a time, the corporation operated a contentious Corrective Education program, in which shoplifters might have their charges dismissed if they paid for a course designed to re-educate and reform criminals.
- Health-Care rules in the US allow for cheaper food!
Health rules in the United States are less stringent than those in the United Kingdom and Europe. As a result, lower-quality foods can be sold for less in America. As a result, it can sell this food at ever-lower prices.
- Walmart considers the big picture.
Walmart’s income is at a healthy level, with the benefit of being regarded as a low-cost brand outweighing the requirement to make a profit on every single item. As a result, Walmart is pleased to offer some things for less than what they paid for them since they are convinced that customers will also buy products from which Walmart will profit.
It’s all about the balance: if a consumer thinks they’re getting a good deal on one item, they’ll be more likely to buy other items! Walmart is then able to make up for the lost products.
Other Ways Walmart Manages To Have Low Prices
- Walmart keeps its shop decor simple to save money on design.
- The design of the store is very inexpensive; Walmart employs low-cost shelves and flooring to cut down on fixed expenditures. Thus, making them easier to replace.
- Walmart lowers retail prices and shipping costs for both themselves and its consumers by adopting lightweight materials in their furniture and packaging.
- Walmart inhibits union participation in its corporate structure, allowing it to pay minimum wage and cut overall labor expenditures.
- It works directly with the manufacturers of the products it offers, as well as the farmers who provide food for its supermarket sections.
- For such a massive corporation, Walmart only has a few television commercials. This saves them even more money.
Conclusion
There are several reasons why the company has been able to survive in the market despite its low rates. Customer loyalty, cheap operating costs, bulk purchasing, and looking at the big picture are just a few of the many reasons.
However, Walmart’s ability to sell things for such low prices is owing to its high level of brand consolidation. Smaller enterprises and start-ups do not have this same level of public confidence and legitimacy and so cannot guarantee a profit if they sell their products for a low price.
