Wal-Mart’s primary competition in US includes department stores of the likes of Target and Kmart. Costco offers competition to Sam Club format of Wal-Mart. In niche small markets, dollar stores are offering strong competition to Wal-Mart.
Kroger competes with Neighbor market and supercenters of Wal-Mart especially on the grocery product line. Target competes with Discount stores and supercenter shopping formats of Wal-Mart with Target commanding a small premium on prices as it follows fashion trend. Market segment of Target is the high-income customers leading to higher margin realization. ($ 50,000 of target vs. EDLP strategy of Wal-Mart by leveraging purchasing scale has pushed down prices compared to other retailers.
Average prices in Kmart and Target is at least 10-15% higher than Wal-Mart and focuses its competition on product variety and quality.
Revenue growth of Costco during 2008-2012 (22.64%) is almost doubled that of Wal-Mart (11.86%) during the same period. Target had a moderate growth of 11%.
The % of sales of large scale suppliers like P&G, Lever, PepsiCo, and Kraft with Wal-Mart is higher than the competitors ensuring maximum product availability, demand fluctuations and supply chain variability linked with promotions(Graff, T. O. (1998).)
EDLP strategy however resulted in a low price reputation driving volumes which also resulted in lesser need for frequent advertisement. EDLP strategy also results in lowering of inventory and logical costs. It will also ensure that the promotional cost/ trade spending cost will be drastically reduced. EDLP pricing strategy provides incentive for customers to travel long distances to shopping outlets, hurting retailers in near proximity(Casadesus-Masanell, R., & Ricart, J. E. (2008).)
Comparison between Wal-Mart’s innovative supply chain management vs. Competitors
Wal-Mart has tripled its annual revenue in the last 10 years by expanding stores in small towns and minimizing cost in their supply chain network. The same trend is displayed in its operating income also(Walmart Analysis. (2008).)
Operating profit/ Sales: Wal-Mart has shown high growth in operating profit/ sales ratio majorly owning to its innovative supply chain cutting down operating expenses.
Distribution cost/Sales: Wal-Mart maintains lowest distribution cost/ sales of 1.7% while their distribution cost of their competitors namely Kmart and Sears was 3.5% and 5% of the cost of sales.
Inventory turnover (Net sales/ Inventory): Wal-Mart had reasonably high inventory turnover ratio of 11.5 which is significantly higher than their competitors namely Target Co, Amazon.com and Sears which had inventory turnover of 8.7, 6.2, and 4.7 respectively. However Kroger was the industry leader in inventory turnover attributed to their focus on highly perishable food items.
Gross Margin (Total Revenue-COGS/ Total Revenue): Wal-Mart has attained 24.74% gross margin compared with...