Retail Assignment: Walmart Rahul DSa Roll No.

544 What strategy will one undertake to compete with Walmart in private labels? Wal-Mart's strengths with its size and access to capital, Wal-Mart can sustain even a low-performing store for the long term when moving into a region, a luxury not afforded many small, family-based businesses. Distribution and supply chain efficiencies enable the retailer to offer exceptionally low prices that are difficult for rivals to match. Its wide product assortment--especially in superstores where both groceries and general merchandise are offered--generates store traffic and supports a one-stop shopping experience for the consumer. And, its cost-control-oriented corporate culture, which includes a reliance on low-cost, part-time labor, keeps costs down. About 40% of products sold in Walmart are private label store brands, or products offered by Walmart and produced through contracts with manufacturers. Walmart began offering private label brands in 1991 with the launch of Sam's Choice, a brand of drinks produced by Cott Beverages exclusively for Walmart. Sam's Choice quickly became popular, and by 1993 was the third most popular beverage brand in the United States. Other Walmart brands include Great Value and Equate in the US and Canada, and Smart Price in Britain. Wal-Mart's business model has its shortcomings, however. Of the five primary dimensions to retailing--quality, service, convenience, selection, and price--and WalMart wins only on price and selection. Because of its reliance on distribution and supply chain efficiencies, Wal-Mart retailers are challenged to alter product assortments and tailor offerings to the specific needs of a region. In addition, Wal-Mart's approach assumes that price is the primary factor consumers evaluate when choosing a retailer. While Wal-Mart is able to offer high-demand products at low prices, its sheer size makes it difficult for associates to deliver exceptional customer service on a consistent basis, a key component in the consumer shopping experience. Strategy 1 The retailer should compete on the basis of costs, but not target the mass market. This can be done with regards to private labels as well. One can easily target Walmarts George clothing brand or even their White Stag line. Also low cost target market for furniture as well as their grocery line can be beneficial. Stores can be modest in size and stock common food and related products, furniture that is easy to transport so as to maximize inventory turnover. No transport will be provided for the furniture and an Ikea type model where the furniture is assembled or taken by the customer can be used. Customers bag their own groceries and must either bring their own bags or purchase them for a nominal charge. The store should not accept credit cards, eliminating the fee typically charged by banks to process the transaction. Functional operations are all focused on minimizing costs, and efforts are targeted to consumers with low-tomoderate incomes. It is difficult for one to match Walmart on but one can emphasize a limited number of products and achieve a substantial volume.

Strategy 2 Low costs--and low prices--cannot serve as an effective basis for that competition. Specialization can also be an excellent approach to combat Walmarts low costs in private labels. Due to the smaller margins, Walmart carries only high-demand products. Another Private label can carve out a niche. The key here is that Walmart usually offers private labels wherein Walmart as a corporate brand name is not associated with the product most of the time and the private label name is pretty famous. However where Walmart mostly concentrates on lost cost private labels. Hence these will a perception that it might not be the best quality hence one cane use a strategy that clearly defines the portfolio into three segments. The Good segment is often the base version or functional products wherein the features are matched but the pricing is significantly competitive. The Better segment operates on either better or additional features at similar prices or even lower prices. The Best segment is the top end of the portfolio and has a dual role. This segment apart from enhancing the category offering helps to build the overall store imagery as also ensure that the private label portfolio is perceived to be comprehensive and not only cheap products. Next is the approach to the branding of these products. At a macro level there are two options. One is to use an unrelated brand name for the products and the other is to leverage the stores name as a prefix followed by a branding. Strategy 3 Certain aspects that one can score over Walmart are: a. Packaging--Make sure the packaging is reflective of the quality and performance. The point-of-sale, packaging can make a significant difference in purchase intent. b. Position--Position the product near the one that you want to compete directly against. This strategy ensures that the customers know that there is an alternative to their branded selection. In many cases, cost-conscious consumers will select a brand for the ultimate value it provides. c. Personnel--Make store personnel a strong advocate. Word-of-mouth still remains one of the best forms of advertising, despite the money that's invested in advertising and sales promotion. How will Walmart compete with regards to private label brands in India? Its a tough prospect with regards to Walmart trying to compete with already major dominant players in the private label market. Take for example in Apparels Trent's Westside is a predominantly private label fashion apparel format. In FMCG Private labels eliminate a large number of intermediaries in between vendors and consumers.

They procure directly from vendors and sell to the ultimate consumers. As a result, the retailers stand to earn a better margin for goods sold. Pantaloon's FMCG private brands contribute 8%-35% to sales in their respective segments. The company has launched "Ektaa" that offers community specific foods across India. More of the Aditya Birla Group has private brands like "Feasters (food category"; Jaan (tea); Kitchen's Promise (pickles). Pantaloon has a range of offerings in electronics under its private brands "Koryo" and "Sensei". Around 20% of the segment comes from these brands which are retailed through "eZones". Wlamrt with a joint venture with Bharti has introduced 8 private labels already. Hence people are already familiar with the brands that Walmart supply. Hence just a transfer of these labels means that Walmart would definitely not lose any market share. The reason why Walmart will succeed in India is that it has already established its logistics and supply chain and once the FDI is opened in the sector, Walmart just has to open up the front end since it has already established a great network in the back end. The reason why many people will supply private labels to Walmart is that 1. Walmart is able to give real time sales data. The data reaches the supplier and the warehouse through the software. 2. The benefit Walmart offers its vendors that supply the private labels is big volumes and access to markets they would otherwise not be able to reach. 3. Walmart ensures that the vendors paid on the dot so that their cash flows are not affected. This is a big lure for many vendors who had dealt with retailers demanding long credit cycles, and even then dont pay in time. 3. If a vendor does exceptionally well, he can supply to even global Walmart stores. Certain downsides are 1. The margins that vendors make are low and hence many vendors might not supply to Walmart. 2. Walmart brands are not very well known as compared to others brands in the market. 3. Walmart follows not a corporate sub brand strategy and hence individual brands that Walmart brings out would need to be positioned properly. 4. Walmart has to understand that the cultures of the people changes per state and hence the product mix has to be done accordingly. 5. Indians are very finicky about price quality relationship. Hence low-price in private labels as compared to the national brands it would stock might also suffer. 6. Walmart might have to introduce a good-better-best strategy in private labels in India in order to clearly have points of diferentiation.