Everyday low prices or EDLP is a pricing strategy that promises low prices to consumers without having to wait for a discount event. Everyday low prices were popularized by WalMart’s first retail store in 1994 in the United States. This strategy proved to be one of the most effective ways to please consumers. Not only makes them loyal to the store, but this strategy can also increase consumption levels. Unfortunately, not all companies can do it. Then, why can WalMart apply it and become successful thanks to this strategy?
Let’s check out the Secret behind Walmart Strategy
Smaller Margin But High Sales Volume
This strategy was actually applied before WalMart was opened. Its founder, Sam Walton, tried to make the products he sold valued as cheaply as possible. This he did in 1950. Although the margin he got was not as big as the competitors competing with him, Walton continued this strategy.
The volume of sales that could be said to be high made Walton survive. With this sales volume, this man is able to make WalMart like now. With a high bargaining position , it can change the supply sector and their retail landscape to what it is today.
Minimize Operational Costs
In addition to keeping the price of the items he sells as low as possible, Walton also applies other strategies, namely minimizing operational costs. By keeping these costs very low, he succeeded in making WalMart even more successful. Minimizing these costs is not only in terms of the shop, but also in terms of itself.
Walton didn’t even buy a new car, he continued to use the old open-air car. He also always uses budget hotels when making business trips. Even though WalMart was successful, he continued to use this method. You could say the model used by Walton is not a matter of riding the wave(following popular opinions or trends/activities) carried out by many companies. More to little by little later became a hill. Not only can WalMart become big, but the customers’ loyalty is also passed down through generations. Ranging from grandparents to children.
Causing a Shift in Lifestyle and Mindset
Inevitably, WalMart’s presence not only made the company big, but also changed American society.With low prices, they not only can increase purchasing power but also increase the savings of each person. When consumers enter WalMart, they realize that by shopping at this place, they can also add to what they can buy. They also realized that they could still save even though they bought a lot. This is one of the main Walmart strategy.
How Can You Keep Cheap Like Now?
You might ask why even after the founder died, WalMart could still stand as it is now. This is caused by four things. First is very high sales volume. Second, because of the efficient management system. Third is the culture of minimizing operational costs that continue to be applied. Whereas the latter is due to its strength which can force suppliers to reduce their prices.
Maintained Sales Volume
The first reason WalMart was able to keep the price as low as possible was because of the very high sales volume. This is due to the large number of their consumers. Because everyone can find what they need at WalMart. Starting from niche things like video games to things that are very common like bottled water. That said, there was no one who was not the target market of WalMart, which is why everyone could enjoy shopping at that place.
In addition, this high volume is also caused by hereditary loyalty from her customers. Since childhood, potential customers are often invited to enter WalMart by adults. They finally got used to shopping there. Especially when they also find what they need in that place.
Leading Management System
Did you know that WalMart is the first company to store detailed data from a product electronically? This advanced data management system also makes it easier for them to manage the existing supply chain. Data on the product can be stored directly in their storage management system. So that the risk of lost or damaged data is very minimal. In fact, this method can also be done to arrange items stored in the warehouse.
According to Investopedia, the goal of this system is to see what is needed, how much is needed and when it is needed. With this systematically stored data, WalMart can find out what items the market is interested in and when they are needed the most.
The Culture of Minimizing Operational Costs that Roots
One other thing that makes WalMart able to maintain its price is because of its very low operational costs. Until now, WalMart officials often use the Walton method when on business trips. They often rent one room for several people at the same time when traveling together.
This minimal operational cost is also applied to building costs. Such as applying a system does not use too much air conditioner during the summer and minimizes the use of heaters in winter. This is done so that it continues to pay attention to the convenience of consumers who come to the retail store.
Make a SupplierSelling Items Cheaper
As a very large company, WalMart has a powerful weapon. This weapon can make him get the price of cheaper goods from the suppliers . This is due to the many companies (even very well-known companies) that rely on their annual revenue at WalMart. Generally, these companies get more than 20% of their revenue because of WalMart sales. Because of this, many companies can sell cheaper prices at WalMart. No wonder if this retail one can still maintain its price to date.
The bad side
Of course there is a downside to all the greatness of WalMart. Especially in the realm of the workers. It is known that because of its low operating costs, WalMart often softens its workers without additional costs. A cooling and heating system that cannot be maximized for staff (not consumers) is also one of the things that makes WalMart employees protest this.
Not only that, the health insurance provided by this company is not much. But this has all been revised since last January 2018, although in detail how the implementation of this change will run has not been reported. But WalMart is also one of the most vacuum cleaner places in America, so this can also be their bargaining position .
There are many things you can learn from savings and iron fist Walton, founder of WalMart. To be sure, the success he made to date is not due to his greatness, but also because WalMart’s culture is rooted in its leaders to date. As long as there is a successful work culture that continues to run, a company will continue to survive.
This concludes the Walmart strategy
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