Walmart Retail Marketing - Case Study Example

University

Introduction

This paper is aimed to critically analyze the concept of retail marketing, and Walmart will be the used as a case study and China will be the country of operation. Walmart is a huge multinational grocery retail chain and it runs large discounts superstores and warehouses. Retail marketing is very vital since it determines the success or failure of the particular retail outlet. The analysis will include assessment of elements that comprise retail mix such as merchandise range and assortment, retail communications, store layout, design and visual merchandising, customer service and facilitating services, formats and location, and the pricing strategies and tactic. All these components will be analyzed to determine the scenario of Walmart in China. Retail mix is an integral part of retail marketing, and if the right strategy isn’t applied the retail outlet is bound to fail, since retail mix provides a basis for sustainable competitive advantage. The fact that Walmart is a USA based company the there is a probable cause that the Company’s operation in China might be faced with numerous challenges. To assess these challenges in PEST factors, competitive context, and emerging retailing trends will be analyzed.

RETAIL MIX

The marketing mix policies have a specific importance in retail context. The retail marketing mix comprise of all the goods and services that a store is able to offer to its customers as well as the strategies that the retail managers put in place in order to adapt to that particular environment (Lazer and Keelly, 1961). Additionally, it is important to note that marketing mix energies should be coordinated and oriented towards market needs as well as opportunities. Ensuing is some of the marketing mix elements that Walmart utilizes in its operation in China.

Merchandise range and assortment

Assortment refers to the total of all measure that is designed to sway and delineate merchandise and services that are offered by a retailer and the mass of the items on sale (Theib, 2007; Müller-Hagedorn, 2005). Assortment, in particular it refers to the structure and more recently and this can be viewed from the customer and the retailer’s perspective. When the retailer has a distinctive assortment from its competitors and this acts as a form of competitive advantage. The format that the retailer uses in regards to assortment should make it very simple for the customers to differentiate from other retail outlets. For instance the assortment of Walmart should unique from the assortment style of other retailers in the country, and this makes the customers to identify themselves more with the retailer.

It is the responsibility of the retailer to decide which merchandise will be included in the assortment, as well as the length, width and the depth of the assortment. The possible effects of the containing articles contemporary services should also be analyzed. The number of the contemporary services should also be considered, as well as the manner in which these services should be actively considered and provided (Homburg et al., 2002). There are some brands that are positioned strategically, and they occupy special position and this achieves the desired level of success. In this regard, it should be noted that the components of differentiation that is between the retailers’ private label and the brands of the producer are often the selling price and the quality.

Retail communication

Communication is a very vital aspect of the in relation to retail, goods and services. The retailer has to come up with a retail communication policy. Retailers have their own brands and promotion of this brands and the specific location of this brands are very important. Communication in retail refers to all the instruments that the retailer uses for the purpose of its own ‘presentation” to a specific group (Bruhn, 2007). The main form that a retailer can use to communicate its policy include mass-media, prints, sales promotion, public relation, internet, exhibitions, and personal selling. The main point of consideration is the target group so as to perceive retailer characteristics as the values in a different manner. In a nutshell, it is important for the retailer to know socio-demographic features of its target market and this can be vital in adjusting its communication programs (Krafft and Mantrala 2009). For instance, the culture of the Chinese people is very different from the USA, hence the communication strategies that the Walmart uses in China is very different from those that are in the home country (USA).

Store layout, design and visual merchandising

The store layout, deign, and visual merchandising refers to the in-store management that that the retailer adapts, and it is usually a physical evidence from service marketing (Gilbert, 2003). The physical evidence in the retail comprise of the interior space of the store, gondolas, shelves layout, and product merchandising (Oehme, 2001). The retailer ought to have an interior design that is standardized in all of its stores, the interior should have an element that enhanced a shopping experience among the consumers. When consumers’ experience is enhanced through the interior design, and visual merchandising of a particular store, the retailer is likely to always come back due to the influence that he has. The main objective of in store management is to ensure that the customers that come to that retail store have a pleasant shopping atmosphere and experience, and consequently enhance customers’ satisfaction and this will increase customer turnover (Liebmann et al., 2008). Investing adequately in in-store management will ensure that there is customer loyalty, increase in time spend in the store, retailer’s image differentiation, and frequent customers visit.

Formats and locations

Location is derived from the physical evidences and from the integration external factors into service delivery. The store is a place where the retailer and the consumer develop a relationship, and the location is an element of the distribution policy and is represented with the geographic place and this is where the retailer uses to deliver the services to the customer. The location where the retailer sets up the store will determine the success of the business, the surrounding factors such as the infrastructure will be critical. Some retailers find it very vital to set up their stores in shopping centers or places that has a high levels of public concentration. The main fact that determine the location of a retail stores is their format (Liebmann et al., 2008). Some factors such as if dense population, proximity to residential areas and public institutions also influence the location of retail stores.

Pricing strategy and tactics

The pricing strategy is a very important aspect of the retail stores as well as the application of the general business strategy. The pricing strategy and tactics of the retailer will influence and increase quantitative sales, market share, turnover, the available distribution channels, and the effect of the consumers. The consumers are likely to be influenced by the pricing strategy of a particular retailer since especially if the retailer high quality goods with a lower pricing as compared to its competitors. There are some specific instruments that a retailer uses such as the discount, which is the main is the main pricing strategy used by Walmart, and other retailers might use low pricing strategy to attract and retain consumers. The manner in which the consumers and the competitor will perceive the pricing strategy will determine the intervention strategy of that will be used by the retailer. Some of the pricing strategy comprise of factors such as price differentiation, price aggregation, lowest price guarantee, and lowest price guarantee. Price has is a very influential factor, and there is no doubt that the consumers are more attracted to the best pricing strategy.

Customer loyalty

The manner in which customer loyalty is enhanced is the manner that the retailers delivers customers service and other facilitating factors. Loyalty in retail business is very critical and this is the reason why some retailers opt to instill some loyalty programs to influence the turnover of the customers. The loyalty of the consumer will also be facilitated by how the customer is well satisfied by the services offered by the retailer, the retailer is also expected to fulfill the customers’ expectation (Sternquist, 2007).

Marketing Mix Analysis

The retail mix of Walmart in China can be used to analyse the way in which these aspects provides a basis for sustainable competitive advantage.

Product

Wal-Mart has not been known to differentiate its products to improve its competitive advantage, but it has invested heavily in purchasing its suppliers directly from the suppliers for purposes of enhancing the quality of its products and ensuring loyalty with the customers (Gilbert, 2003). The company produces its own brands, otherwise known as house brands, under which the all the products are sold. For instance, Great Value is one of its house brand that has been very popular in the US and in China (George, 2007). These house brands account for over 40 percent of the total sales of the company. The popular Great Value house brand is favoured by many for selling groceries in the shields of: cookies and chips; grains and pastas and snacks; sauces, species and meat solutions; canned goods and soups; cereals, baking and breakfast. It is also prudent to note anther famous brand in the retail stores, Sam’s Choice, which is generic and offering food products and specific hard goods. These products make the selection of products in Wal-Mart unique and helps attract loyal customers as some of the products offered here cannot be found elsewhere (Berman et al., 2010).

Pricing

The retailer employs the low-price stagey to attract a competitive edge in the market (Gilbert, 2003). Despite the fact that the Chinese retail market is not characterized by consumers who prefer low prices as they are associated with cheaper quality, the company has made the effort of associating its low-price strategy with quality products to ensure that consumers perceive value for money (McGoldrick, 2002). Hence, the company employs the concept of cost leadership by ensuring that its competitive advantages comes from offering the lowest costs among all the retailers in the industry. Hence, it implements the price leadership strategy. In its pennies strategy, the company ensures that the average cost of products bought while integrating a shopping basket is $3, with the intention being $2.97. This strategy was devised on the rationale that consumers will change their shopping behaviour when they are offered pennies less compared to the rest of the competitors. This strategy has worked well for the company in the Chinese market.

Promotion

The main promotion that Wal-Mart employs in all its foreign markets is the ‘low-price strategy’. This strategy has been very successful in its home market in the United States, hence its replication in the rest of the markets. In China, this strategy took some time to catch up as the culture of the Chinese with regard to low cost products is not the same (Kotler et al., 2010). Over time, the retailer has been able to prove that this strategy works alongside providing quality products. Given the success of this strategy is promoting is products, the company has been reported to spend the least amount of money of mainstream advertising through the Television, billboards, or the print media. It is also prudent to note the success of its social media campaigns where the company has invests a lot of resources. Though this media, the company incorporates commercials, electronic newsletters, website publicity, newspaper ads, circulars and mass mailers. Hence, the company has been known to use the most efficient promotion strategies to achieve its goals.

Place

The distribution channels and the retail stores are designed in a way that appeals to the consumers and makes them feel welcome (Krafft and Mantrala, 2009). While the company operates both the traditional physical stores such as the express stores, supercentres, neighbourhood markets and the discount stores, it has also invested in online stores (George, 2007). The physical stores provides most of the company sales as they are designed in the layout that attracts the consumers especially due to the environment in which the consumers are served. It is easy to identify a Wal-Mat stores just by looking at its layout and design, hence giving the consumers a perception of uniqueness. The environment and the arrangement of the stores incorporates the local designs and culture so as to give the customers a sense of belonging. Hence, it is easy for the consumers to identify with Wal-Mart than with other competing retail stores.

Analysis of the External Environment

Despite the success of Wal-Mart in China, the company has faced many challenges associated with the culture shock, competition, operating strategies and its operating environment. These challenges affect the continued international growth of the company in China, a situation which has been faced in Germany and Korea, leading to a loss in the market share (Naughton et al., 2006).

PEST Factors

Political

The country has enjoyed a long period of political stability due to the absence of wars and severe conflicts that are experienced in other countries. However, the prevalence of regional insecurities in countries such as Japan, South and North Korea threatens the Chinese working environment.

Economic

The country is suitable for investment due to its rapid economic growth rate in terms of GDP and increasing new markets. However, it is characterized by high costs of economic inputs, operating materials and cost of labour.

Social and cultural factors

The Chinese culture is very different from that of the western countries and this may affect the strategies employed by foreign companies.

Technological Factors

The global economy is experiencing an upsurge in technological application. However, its application in China is still very slow and in small-scale.

Legal factors

The company has an enhanced legal development but the unique legal system may be unfavourable to international companies.

Environmental factors

The country does not have the relevant regulations to control environmental risks and dangers. This may lead to unethical practices by some of the companies due to intense competition.

Competitive context

Wal-Mart operates under conditions of intense competition in China due to the vast number of capable retail stores offering the same services. Some competitors such as Tesco has been reported to fiercely compete with Wal-Mart is almost all of its markets, and China is no exception. Sun-Art is another strong competitor that has a competitive edge in impressing the customers with its customer services and brands. The success of Sun-Art has been attributed to the fact that the retailer understands the Chinese culture and consumers better given that the retailer is known to copy competing brands so as to increase its competitive edge. The competition seems to affects Wal-Mart marketing strategy since most of them including Tesco and Sun-Art is known for product differentiation while Wal-Mart does not practice this form of strategy (Naughton et al., 2006).

Growth Strategy

The company’s growth objective is to increase its market share and attract many Chinese consumers for purposes of building a strong brand in the country. So far, the Wal-Mart’s growth in China has not been as rapid as in the home country (Sternquist, 2007). The company strives to increase its market share in the Chinese market by focusing on the past and striving to ensure that the future strategies take into consideration the present challenges. For instance, the company seeks to incorporate with the Chinese systems and culture, especially their spending strategies into their strategies instead of replicating the strategies adopted in the United States, this is because the company acknowledges that most of the challenges faced in the Chinese market are associated with the fact that the Chinese and the Americans have very different hopping habits, and therefore similar marketing strategies would not work (Kotler et al., 2010). Some of the recommended growth strategies include; familiarizing with the Chinese culture and habits; cooperating with the government and regulations; communicating with the Chinese authorities and collaborating with the middlemen in the industry.

Market selection and entry methods

Wal-mart’s selection of the Chinese market for its business expansion was not just for purposes of globalization, but also as a strategy for its future success in business. China’s economy is on a rapid growth with a population that attracts any investment from foreign investors due to the vast potential market (Schlevogt, 2000b). The company chose to enter the Chinese market by adopting the globalisation strategy and equity business modes, specifically the acquisition strategy (Sternquist, 2007). The acquisition of Trust-Mart allowed the company to get accustomed to the Chinese culture and its market so as to reduce the chances of opposition. The company also chose the offshore sourcing strategies as the company perceived China to be a reliable production and assembly source of its products.

Emerging retailing trends

Technology is advancing by the day and many retailers’ across the globe are using the internet as the primary promotion strategy. However, Wal-Mart faces the challenges of full application of information systems in its operation strategies since the IT environment in China is not as developed as in the United States and other countries such as the UK. Hence, it is difficult for Wal-Mart to achieve its desired level of application of technology due to the limited processing capabilities.

Conclusion

Wal-Mart’s decision to enter China and expand globally has seen the company dominate the international market. The business strategies employed by the company with regard to the choice of the entry mode, marketing strategies, range of its products, retail communication, formats and location, as well as the elements of the market mix demonstrate that these aspects are chosen effectively to enhance the competitive edge of the company. Wal-Mart’s motivation to expand its stores in China is based on the fact that the Chinese economy is on a rapid rise, hence the potential for future growth. However, it is worth noting the slow growth rate of Wal-Mart’s market share in China. This has been attributed to the application of the globalisation strategy, which does not resonate well with the Chinese culture. For fast and effective growth of its market share, the company should consider re-shaping its business strategies and adopting the differentiation strategy.