Overview of the Retail Market:
It is known that the United States is the undisputed leader of the retail market. According to the 2015 Global Powers of Retailing report, 76 of the largest retailing companies in the world are based in the U.S and an estimated two-thirds of the U.S. GDP comes from retail consumption. While the retail industry has always been one of America’s greatest assets, the ever-looming threat of e-commerce giants like Amazon, the after-effects of the Great Recession of 2008, and the Retail Apocalypse of the 2010s came close to destroying the market. The United States retail market has only just started limping back to normalcy after its dismal performance this decade. Since 2010, over 12,000 physical stores have closed in the United States. The Great Recession of 2008-2009 took a great toll on the U.S retail market and caused an immense shift in consumer behavior. North Americans cut down spending on material goods and homes, casual fashion in the workplace was replacing the rigid dress codes of the 2000s, and the rise of e-commerce meant that one could make purchases without setting foot outside their homes. However, throughout all this uncertainty and chaos, one company managed to rise above its competitors and thrive: the largest global retailer Walmart.
Walmart has come a long way since its humble beginnings in the small hamlet of 1945 Bentonville. This once small general store rose to multinational status and even in the face of the Retail Apocalypse of the 2010s, it didn’t give up and adapted to the modern eCommerce scene when other major retailers downsized or even shut shop. As a new decade approaches, we ask ourselves, based on the performance of the company in the 2010s, how can we expect Walmart to perform in the 2020s and beyond? In this blog post, we look back at Walmart’s market share over the past 5 years and attempt to answer this question.
In order to understand the impact Walmart has on the retail market, we must first understand where Walmart is primarily getting its business. The Walmart stores that generated the most revenue are those in Southern and Midwestern states with Oklahoma at the top with sales of $6.45 billion as of 2014. Walmart, as of the fiscal year of 2018, saw a high in the sales of video game consoles, office supplies, toys, and home essentials as shown in the table below:
|Category||Name||Category Rank (Average)||Category Rank (Count)|
|Movies & TV Shows||Moana (Blu-ray + DVD + Digital HD)||1.0||31|
|Baby||Parent’s Choice Fragrance-Free Baby Wipes (Choose Your Count)||1.0||31|
|Gifts & Registry||Visa $200 Gift Card||1.0||31|
|Jewellery||Ozark Trail Promo Watch||1.0||31|
|Patio & Garden||Duracell 100L Spotlight||1.0||31|
|Auto & Tires||Torin Jack Stands (Weight capacity: 2 Tons)||1.0||31|
|Books||Disney Bedtime Favorites||1.0||31|
|Pets||Purina Beneful Originals With Real Beef Adult Dry Dog Food – 3.5 lb. Bag||1.0||31|
|Walmart for Business||EXPO Low Odor Dry Erase Markers, Chisel Tip, Assorted Colors, 4 Pack||1.0||31|
|Clothing||Men’s Cargo Fleece Sweatpant||1.1||31|
|Sports & Outdoors||Ozark Trail Oversized Cozy Camp Chair, Blue||1.4||31|
|Home Improvement||Milton S-506 Dual Head Chuck Inflator Gauge||1.8||31|
|Home||Slumber 1 by Zinus 8\” Spring Mattress-In-a-Box||1.9||31|
|Photo Center||5×7 Photo Card Stock 110 lb.||1.9||31|
|Video Games||Nintendo Switch Pro Controller, Black, HACAFSSKA, 00045496590161||1.9||31|
|Household Essentials||Great Value LED Auto Nitelite, 4 Pack||1.9||31|
|Toys||Hot Wheels 9-pack (styles may vary)||1.9||31|
|Party & Occasions||Gemmy Airblown Christmas Inflatables 5′ Disney Minnie with Candy Cane||1.9||31|
|Office||Dixon Woodcase Pencil, #2 HB, Yellow, 20-Count||1.9||31|
And who exactly shops at Walmart? Numerator Retail conducted a study to find out which demographics capture the attention of Walmart the most, and the results were as follows:
As we can see from the above table, the middle-aged and the very young i.e, those under 24 and above 45 are most likely to shop at Walmart. However, the smallest age demographics – those between 24 and 45, and those over 65 fall short only by a small margin. Walmart shoppers also typically have lower educational attainment (the largest percentage being non-college graduates) and have a combined household income of less than $80,000 per year. When profiled by ethnicity, African-Americans are the most likely to shop at Walmart, followed by Caucasians and Hispanics who are only less likely to shop there by a small margin. Asians, at an index of 53 make up the smallest portion of Walmart’s shoppers. More families with children tend to shop at Walmart than singletons and Friday and Sunday are Walmart’s busiest days – understandable considering that the primary reasons for shopping there are for stocking up on weekly use provisions and buying in bulk. Walmart shoppers also tend to be more likely to visit fast food stores and other similar retailers like Russo’s and KJ’s Market.
The message is clear – Walmart as a company exists to provide lower-income families with the goods they need at affordable prices. However, unlike many other companies with the same vision and mission in mind that have closed their doors, Walmart chose to adapt to our fast-paced modern world rather than cling to traditional business practices.
Walmart’s Business Model
Although it’s been late to the party, Walmart has changed dramatically over the last five years. Doug McMillon, who was promoted to CEO in 2014, vowed to modernize Walmart and thrust it into the e-commerce scene. McMillon inherited the company when it was on the verge of crisis. Needless to say, Walmart, as a conventional brick-and-mortar retailer, was going to need to adapt to this new environment or risk closing its doors as its contemporaries were doing. Sales were falling at Walmart U.S. and its subsidiary Sam’s Club stores, and McMillon had to act quickly.
McMillion realized that the land grab strategy that had made retailers so successful for decades was no longer going to work. In 2016, Walmart shut down 63 Sam’s Club locations and 269 other stores around the world, including all of its Walmart Express stores. Instead, the retailer shifted focused on improving the stores it already has. As a step towards this, it opened 1,000 grocery pickup stations to increase sales while saving on delivery costs. Walmart also experimented with features like Pickup Towers, self-service kiosks, curbside pickups for customers to retrieve online orders, also enabled faster returns. To bolster its international e-commerce presence, Walmart also partnered with companies such as JD.com in China and Rakuten in Japan.
Walmart was also hitherto notorious for paying its employees low wages and being anti-union. In February of 2015, it said it would raise wages to at least $9/hour come April that year and then $10/hour in February 2016, as long as employees completed a training program. It was argued that the move would help the company clean up stores, eliminate out-of-stocks, and improve customer service. However, the results were not positive immediately as the decision added $2.7 billion to the company’s expenses. But in 2018, the desired results were finally achieved. Store performance and customer satisfaction improved and market shares increased along with it.
Of course, McMillon could also not ignore the pull of the e-commerce market, so he decided that the acquisition of several important assets had to be made. In August of 2016, it acquired Jet.com for $3.3 billion. After acquiring Jet.com, Walmart also acquired several native online brands like Modcloth, Bonobos, and Moosejaw. Just as was evident previously, this decision did not achieve immediate positive results. Walmart’s e-commerce growth steadily slowed over the next two years, and by April 2016 global e-commerce sales growth had fallen to just 7%. To remedy this, Walmart enlisted in the help of Marc Lore, who took over U.S e-commerce operations and added certain features like online grocery pickup and free two-day shipping on orders more than $35. After these features were introduced, Walmart’s e-commerce sales increased by 50% in the 2018 financial year.
Walmart Statistics and Financial Performance from 2016-2020
And how has Walmart performed in the fiscal year of 2019? In 2019, the company generated global net sales of approximately 514.4 billion U.S. dollars. These figures have grown considerably over the last few years; increasing about 2.9 percent in 2019 compared to the prior fiscal year.
Walmart’s gross profit margin has remained steady at around 25 percent over the last several years. As of fiscal 2019, the company operated more than 11,000 stores throughout the world and this figure is only going to increase as the company continues to expand into emerging markets.
E-commerce sales meanwhile grew by 40%. According to a report by Morgan Stanley, Walmart has also gained shares not just in Grocery, but also in Apparel, and Home furnishings. It also predicted that Walmart will be able to achieve comparable-store sales gains of 2.5% in the next decade. It also states that Walmart now has about 15% of total retail sales in Grocery, Home furnishings, Electronics, Apparel, Sporting goods, General merchandise and Office supplies, and has been adding an average of about $10.6 billion in incremental sales per year. In Grocery, Walmart dominates with a 23% share in the current fiscal year.
It is evident that in spite of several hiccups, Walmart has managed to adapt to the new consumer and stay strong in the 2010s – but what does the future hold in store for Walmart?
Walmart’s Market Share 2020 – A forecast
Well, the future is expected to be bright, but mostly unchanging. As we can see from the above graph, Walmart is expected to experience stagnation in terms of growth in the new decade. As of December 3rd, the current price of Walmart’s stock is 119.095$ and this indicates that the asset price has been in an uptrend for the past year. The future price of the stock is predicted at $197.201 after a year according to Wall Street Journal’s prediction system. A strong grocery business helped Walmart’s online sales grow 41% in the third quarter of this year. Walmart shares were recently up about 1%, having climbed more than 30% this year. During trading Thursday morning, the stock hit a 52-week high of $125.38. According to Refinitiv Data, this is what Walmart reported for 2020’s fiscal year:
- Earnings per share: $1.16, adjusted, vs. $1.09 expected
- Revenue: $127.99 billion vs. $128.65 billion expected
- U.S. same-store sales: up 3.2% vs. growth of 3.1% expected
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