Part of Walmart’s charm is from its famously low prices. But, have you ever wondered how Walmart is able to be so cheap?
From staff hours to unique supply chains, we have found out Walmart’s secrets to keeping prices down. Keep on reading to find out the top 13 reasons why Walmart is so affordable!
13 Reasons Why Walmart Is So Cheap!
1. Walmart Buys In Bulk!
Firstly, Walmart is able to save lots of money whilst purchasing supplies due to the sheer size of their stores!
By buying huge quantities of goods in bulk, they are able to save on prices per individual item, which enables them to sell the product for cheaper.
2. Walmart Employs On A Majority of Part-Time Workers
Most Walmart employees have recently been cut down to part-time hours, lowering wage costs. Walmart introduced a new scheduling system back in 2016 that saw the declination of even part-time staff hours.
3. They Avoid Employee Unions
Walmart discourages the involvement of unions within its business structure, which enables Walmart to pay minimum wage, reducing overall staff costs.
Though Walmart’s minimum wage has increased throughout the years, an employee survey found that 55% of the part-time employees do not have enough food to meet their basic needs.
4. American Health Laws Mean Cheaper Food!
Health laws in the United States have fewer regulations than those found in Britain and Europe.
As such, lower quality foods are able to be sold for cheaper in America. Thus, Walmart is able to sell this food at increasingly affordable prices.
5. Walmart Is America’s Biggest Reseller
As Walmart is such a renowned global brand, people are guaranteed to shop at it due to customer loyalty and trust.
Consequently, Walmart can be argued to have a monopoly on the retail business, enabling them to sell for any price, no matter how cheap, as they are an established and trusted brand.
6. Companies Supply Personalised Goods To Walmart
Some companies make personalized models of their items in order to meet Walmart’s pricing regulations.
To get the costs down, these brands will usually use lower-quality materials to reflect the lower price, and ultimately Walmart are then able to sell these for even cheaper due to bulk buying!
7. Little Store Decoration
Walmart opts for minimal store decor, reducing design costs. When you take into account how many stores Walmart has, this lack of intricate decor saves a lot of money, allowing them to subsidize the prices of their items!
8. The Structure Of The Store
The store’s actual design structure is also cheap, allowing Walmart to save even more money! To cut down on fixed costs, Walmart uses cheap shelving and low-cost flooring. This means that any breakages can be easily replaced.
9. Walmart Doesn’t Have Many Adverts
Walmart has limited television adverts for such a large company.
Perhaps this is due to it being an already incredibly established brand, but whatever the reason, they are able to save money on its advertising budget – funneling more money back into slashing its prices!
10. The Materials In Furniture Are Lighter
By using lightweight materials in their furniture and packaging, Walmart can reduce retail prices and shipping costs for both themselves and their customers. Ikea uses a similar system, ensuring cheaper prices!
11. Walmart Has An Efficient Supply Chain System
Walmart has an extremely efficient supply chain, enabling them to cut down costs by selling and supplying rapidly.
Walmart uses a cross-docking system that cuts out the “middle man,” so products will usually arrive in store straight from the manufacturer, getting rid of warehouse costs!
12. They Provide A Lot Of Shelf Space To Third-Party Vendors
Walmart, in comparison to other stores, does not sell a lot of its own items. Instead, they lease a lot of shelf space out to other vendors who pay for their products to be in Walmart.
Consequently, Walmart makes money from this and most likely also gets a percentage of the overall sales of these items!
13. Walmart Looks At The Bigger Picture
Walmart is at a healthy position in its income, where the value of being known as a low-priced brand outweighs the need to garner a profit from every single item.
Therefore, Walmart is happy to sell some products below what they bought them for, as they are confident that customers will also pick up products that they will then make a profit from.
It’s all about balance: if a customer believes they are getting a great deal on one particular item, they are then more likely to purchase other products! Walmart is then able to compensate for these product losses.
If you want to learn more, also see our guides on Walmart statistics, Walmart’s competitive advantages, why Walmart is considered “trashy,” and why Walmart is called “Wally World.”
Conclusion
The main reason that Walmart is able to sell products for so cheap is due to their level of brand consolidation. Smaller businesses or start-up companies do not hold the same trust and validity within the public sphere, and therefore, cannot guarantee an income if they were to sell their products cheaply.
Unfortunately, cutting down on costs to compensate for product pricing can also affect the staff that work there, as well as the quality of the items and materials that you are purchasing. Though Walmart does have a simple and easy return or exchange system, it is important to remember that the price you pay often reflects the quality of the product.
