13 Retailing and Wholesaling

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We now look more deeply into the two major intermediary marketing channel functions: retailing and wholesaling. You already know something about retailing—retailers of all shapes and sizes serve you every day, both in stores and online. However, you probably know much less about the hoard of wholesalers working behind the scenes. In this chapter, we examine the characteristics of different kinds of retailers and wholesalers, the marketing decisions they make, and trends for the future.

When it comes to retailers, you have to start with Walmart. This megaretailer’s phenomenal success has resulted from an unrelenting focus on bringing value to its customers. Day in and day out, Walmart lives up to its promise: “Save money. Live better.” That focus on customer value has made Walmart the world’s largest retailer, the world’s largest company. Yet, despite its huge success, Walmart still faces plenty of fresh opportunities and some daunting challenges as well.

WALMART: The World’s Largest Retailer—the World’s Largest Company

Walmart is almost unimaginably big. It’s the world’s largest retailer—the world’s largest company. It rang up an incredible $482 billion in sales last year—more than double the sales of competitors Costco, Target, Macy’s, Sears, Kmart, JCPenney, and Kohl’s combined. If Walmart were a country, its sales would rate it 28th in the world in GDP, just behind Norway and ahead of Austria.

Walmart is the number-one seller in many consumer product categories, including groceries, clothing, toys, and pet care products. Walmart sells nearly twice as many groceries as Kroger, the leading grocery-only food retailer. Its apparel sales alone are 20 percent greater than the total revenues of Macy’s Inc., parent of both Macy’s and Bloomingdale’s department stores. And it captures an estimated twice the toy market share of competitors Target and Toys“R”Us.

On average, worldwide, Walmart serves more than 260 million customers per week through more than 11,500 stores in 28 countries and online in 11 countries. It’s also hard to fathom Walmart’s impact on the U.S. economy. It’s the nation’s largest employer—one out of every 231 men, women, and children in the United States is a Walmart associate.

What’s behind this spectacular success? First and foremost, Walmart is passionately dedicated to its long-time, low-price value proposition and what its low prices mean to customers: “Save money. Live better.” To accomplish this mission, Walmart offers a broad selection of goods at “unbeatable low prices,” day in and day out. No other retailer has come nearly so close to mastering the concepts of everyday low prices and one-stop shopping. Sam Walton himself summed up Walmart’s mission best when he said, “If we work together, we’ll lower the cost of living for everyone . . . we’ll give the world an opportunity to see what it’s like to save and have a better life.”

How does Walmart make money with such low prices? Walmart is a lean, mean distribution machine—it has the lowest cost structure in the industry. Low costs let the giant retailer charge lower prices while remaining profitable. Lower prices attract more shoppers, producing more sales, making the company more efficient, and enabling it to lower prices even more.

Walmart’s low costs result from superior operations management, sophisticated information technology, and good-old “tough buying.” Its huge, fully automated distribution centers supply stores efficiently. It employs an information technology system that the U.S. Department of Defense would envy, giving managers around the world instant access to sales and operating information. And Walmart is known for using its massive scale to wring low prices from suppliers. “Don’t expect a greeter and don’t expect friendly,” said one supplier’s sales executive after a visit to Walmart’s buying offices. “Once you are ushered into one of the spartan little buyers’ rooms, expect a steely eye across the table and be prepared to cut your price. They are very, very focused people, and they use their buying power more forcefully than anyone else in America.”

Despite its incredible success over the past five decades, mighty Walmart faces some weighty challenges ahead. Having grown so big, the maturing giant is having difficulty maintaining the rapid growth rates of its youth. Its same-store sales growth has stagnated over the past few years. Think about this: To grow just 6 percent next year, Walmart will have to add more than $29 billion in new sales. That’s a sales increase greater than the total sales of all but the top 100 or so companies on the Fortune 500, including companies such as McDonald’s, Macy’s, American Express, Xerox, Goodyear, Nike, or more than two Whole Foods. The bigger and more mature Walmart gets, the harder it is to maintain a high rate of growth, especially facing challenges from online juggernaut Amazon and hot discount formats such as dollar stores.

To regain growth, Walmart has pushed into new, faster-growing product and service lines, including organic foods, store brands, in-store health clinics, and consumer financial services. To combat trendier competitors such as Target, Walmart even gave itself a modest image face-lift. It spruced up its stores with a cleaner, brighter, more open look and less clutter to make them more shopper friendly. To broaden its appeal to middle and higher income consumers, it has added new, higher-quality products. Walmart stores now carry a selection of higher-end consumer electronics products, from Samsung ultra-thin televisions to Dell and Toshiba laptops to Apple iPhones and iPads. And the retailer is now upgrading its grocery offerings, both in its big-box stores and its smaller Neighborhood Market stores.

Photo shows a large Walmart sign "Walmart" "Save money. Live better." — At Walmart: “Save money. Live better.” Says Walmart’s CEO, “We’re obsessed with delivering value to customers.”

Bloomberg via Getty Images

Despite its massive presence, Walmart still has room to expand. In recent years, the giant retailer has grown rapidly into international markets, which now account for 28 percent of its total revenues. Walmart is also investing heavily in online, mobile, and social media commerce and building its omni-channel distribution capabilities. Although it remains a distant also-ran next to Amazon in e-commerce, Walmart is now the nation’s fourth-largest online merchant, and its online sales grew 12 percent last year (see the Chapter 10 opening story on Walmart versus Amazon). Walmart lists “winning in global e-commerce” as one of its top priorities for the future.

As Walmart continues to adapt and grow, however, one thing seems certain. The giant retailer may add new product lines and services. It might go digital and global. It might brush up its look and image. But Walmart has no intention of ever giving up its core low-price value proposition. After all, Walmart is and always will be a discounter. “I don’t think Walmart’s . . . ever going to be edgy,” says a Walmart marketer. “I don’t think that fits our brand. Our brand is about saving people money” so that they can live better.1

Objectives Outline

THE WALMART STORY SETS the stage for examining the fast-changing world of today’s resellers. This chapterlooks at retailing and wholesaling. In the first section, we look at the nature and importance of retailing, the major types of store and nonstore retailers, the decisions retailers make, and the future of retailing. In the second section, we discuss these same topics as they apply to wholesalers.

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Table of Contents for 13 Retailing and Wholesaling

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Table of Contents for
13 Retailing and Wholesaling