Retail Mix Marketing for Wal-Mart India

Executive Summary:

Retail Mix Marketing is a discipline that about the strategies and implementation of some

marketing variables including merchandising, pricing, location, promotion etc. For the growth in

international market like India, Wal-Mart’s needs to set a sustainable competitive advantage

based on the analysis of its retail marketing mix. This discussion is about finding out a core

competitive advantage analyzing its current retail mix and evaluating the sustainability of that

competitive strategy in the long run.

Table of Contents

Introduction: .................................................................................................................................... 4

Company Profile: ............................................................................................................................ 4

1. Analysis of Retail Mix for Wal-Mart India ............................................................................. 4

1.1 Merchandise Range and Assortment: .................................................................................... 5

1.2 Pricing Strategy: .................................................................................................................... 5

1.3 Locations and Formats .......................................................................................................... 6

1.4 Customer Services and Facilitating services: ........................................................................ 6

1.5 Store Layout & Design .......................................................................................................... 7

1.6 Promotion and Advertisement ............................................................................................... 7

2. How Retail marketing mix can provides Sustainable Competitive Advantage for Wal-Mart

India ................................................................................................................................................ 8

2.1 Resources & Capabilities: ..................................................................................................... 9

2.2 Cost Advantage and Differentiation .................................................................................... 10

2.3 Value Creation..................................................................................................................... 10

3. Challenges to continued international growth faced by Wal-Mart: ...................................... 11

3.1 Political Factors: .................................................................................................................. 11

3.2 Economic Factors: ............................................................................................................... 11

3..3 Social Factors: .................................................................................................................... 11

3.4 Technological Factors: ........................................................................................................ 12

Conclusion: ................................................................................................................................... 12

References: .................................................................................................................................... 13

Introduction:

Here, in this report of Retail Marketing, Wal-Mart India has been selected as the company of

contextual discussion and analysis. The story of efforts and opportunities of this US giant in core

retail marketing to become a key dominating player in Indian market has been discussed as a

whole here. Basically the current position of the company and effectiveness of its retail

marketing strategies were analyzed with the elements of retail marketing mix and sustainable

competitive advantages while the growth prospects were measured based on PEST factor,

growth strategies and emerging retail market trend.

Company Profile:

Wal-Mart Stores Inc is a US retail giant which works as a key multinational retailer that operates

discount department stores and warehouse stores. With about 11450 stores in 27 countries, the

company is almost dominating the retail industry around the world (Inc. magazine, 2015). Wal-

Mart entered the lucrative market of India on 27th

November, 2006 making a joint venture with

Bharti Enterprises. After the separation from Bharti in 2013, Wal-Mart is independently running

its missions & vision in Indian Market.

1. Analysis of Retail Mix for Wal-Mart India

Retail Mix deals with the variables of retail management which let the marketers influence the

buying behavior of consumers and set the mind of consumers about the retail image of the

company. Efficient management of Retail mix is a key issue for sustainability and domination in

tight competition (Berman, Barry, and Joel R Evans, 2007). It’s quite challenging for any

company (even Wal-Mart) to maintain a decent image of retail business in such a highly

regulated country like India. Variables like Merchandise, Price, Locations, Customers service,

Store layout and Promotion are the key elements of Retail Mix (Reynolds, Cuthbertson, and Bell,

2004). Optimal management of these variables will define the present and future prospects of

Wal-Mart India.

Here, the key elements of the retail mix have been analyzed in the context of Wal-Mart India.

1.1 Merchandise Range and Assortment:

Merchandise and assortment deal with the fixation and smooth operation of supply process and

assembling the products from the suppliers in most efficient way (Alexander, Nicholas, and

Doherty, 2009). Now, both the ‘breadth of merchandise’ (no. of merchandise category) and

‘Depth of Merchandise’ (no. of product types) indicates large horizon for Wal-Mart India. As

Wal-Mart deals with a broad category of merchandise, this denotes a positive signs such as

strong bargaining power as well the opportunity of diversified products etc. Well, broad category

of merchandise throws broad challenge of proper maintenance in every sense too for Wal-Mart

India. Wal-Mart deals with a large horizon product types in Indian Market which includes

fashion accessories, groceries and food, clothing and textiles etc. This secret of low cost

advantage includes some crucial challenges too such as high quality product ethics, uninterrupted

product supply on demand etc.

1.2 Pricing Strategy:

With the slogan ‘Low price everyday’, Wal-Mart is said to be always outstanding for its pricing

strategy (Fishman, Charles, 2006). Continuous concern and effort in maintaining the most

competitive price is said to be one of the key success factors for Wal-Mart. Besides, in a growing

country like India, price strategy is more preferable than Differentiation. Basic two strategies in

its pricing strategy include Discounts and Price Differentials.

As far as, Discount is concerned, Wal-Mart used to offer 10% discounts on every 4 key products

of each product category for Seventy Five days on an average. It’s been a huge responsive

strategy.

Wal-Mart sets price differentials based on price checking(Fishman, Charles, 2006). At first it

collects the price of the price close competitors for a certain period ( per week in general) and

then sets it price with a differential. Wal-Mart offers up to 4% price differentials while 10% in

some cases. Price of products such as food is set based on local demand or supply. Stores

managers are permitted to offer up to 5% price differentials for such kind of products.

Well, the point of concern is growing competitors. Leading competitors like Reliance, Bharti or

Pantaloon are gradually obtaining higher Economies of Scale. Higher economies of scale will let

any competitor offer low price goods. So time and competition demands more innovative and

effective pricing strategy for Wal-Mart for its strong sustainability.

1.3 Locations and Formats

‘Locations of consumers’ choice’ is a crucial competitive advantage. In some extent appropriate

location advantage becomes a reason of potential growth (McGoldrick 2002). Appropriate

location not only makes sure high volume of sales but also it strengthens brand value in

consumers’ mind by providing convenience. Wal-Mart owns 20 Modern wholesale Stores in 9

states across the India with 3954 associates (Wal-Mart India, 2015). Wal-Mart opened its first

Store in Amritsar in 2009. The other states it is operating stores are Andhra Pradesh, Punjab,

Maharashtra, Chhattisgarh, Rajasthan, Telengana, Jammu and Kashmir, Madhya Pradesh and

Uttar Pradesh. To analyze degree of advantage and potential growth from these locations, some

issues are to be kept in mind such as Trend direction based on demographic changes, further

growth opportunities and high investment plans. Following the positive economic trend of India,

people’s buying behavior is getting spontaneous. Such behavior is more common in developing

areas of India such as Uttar Pradesh, Maharashtra, Punjab, Rajasthan, Madhya Pradesh,

Chhattisgarh. Moreover, social and demographic changes are being frequently observed in these

areas. These indicate positive signs which may ultimately lead to success and future growth.

The major challenge in this field is the cultural alignment with the location. Wal-Mart could not

survive in Germany because of its failure to adapt with German culture. (Inc. 2015) India is

single country of several diversified cultures. So make sure the advantage in these locations,

adaptation in its cultures is a big factor.

1.4 Customer Services and Facilitating services:

Customer are the King. Their satisfaction will ultimately determine the success of the company.

Every effort will go in vain if customer services are not satisfactory enough. According to

Watson, regory, and ond (2003) there are 5 dimensions to measure the customer service

quality. These are 1) Tangibles, 2) Reliability, 3) Responsiveness, 4) Empathy, 5)Assurance.

Historic performance of Wal-Mart represents its concern to maintain applauding service quality.

Wal-Mart in India provides notable customer services beside low cost products. Even though the

company is not that much successful to satisfy all the five dimensions, its effort is applauding.

The reason behind this can be the tight regulation of Indian government for foreign retailer

players. Wal-Mart is only allowed to deal with retail sellers instead of individual customers. So

the company tries to provide good tangible products with low cost and utmost reliability to retail

sellers. Wal-Mart is reputed for responsiveness too. Its strong supply chain tries to make sure the

availability of the products to its targeted customers in time with right requirement and courtesy.

Wal-Mart is gradually developing goodwill of assurance in Indian retail market by maintaining

the constant service standards.

1.5 Store Layout & Design

It’s quite essential to create positive enthusiasm among the customers with an overall charming

presentation of the company (Bruce, Moore and Birtwistle, 2004). Well this presentation

includes all the presentable aspects about the company including its store layout, design,

premises, website, reports and everything about visual merchandising. Wal-Mart’s work to build

customer friendly Store layout is always applauding. Wal-Mart decorates its store in such a way

that the store remains clean and separated between sections based on different product category.

Sections and product categories are well managed so that these don’t create any hesitation among

customers in a big store. Even though Indian Wal-Mart stores are wholesale stores operated for

retailers, its layout is also as convenient as the layout of retail stores.

Beside attractive store layout, an attractive website, an encouraging online image, lucrative

premises well designed reports may also influence customers mind and contribute to strengthen

the brand value (Hackley, Christopher 2005). Wal-mart is doing very good to develop a highy

strong online image. Wal-Mart India can develop a more user friendly website with better user

interface.

1.6 Promotion and Advertisement

Retail Promotion is crucial term of retail mix to influence the customers’ mind with right

strategy(Hackley, Christopher, 2005). Its objective is to influence the perception, buying

behavior, brand loyalty, store loyalty and purchase decision of the customers. Wal-Mart deal

with its promotional activities in creative ways. As Wal-Mart is regulated in India to sell to the

retailers only, it promotes its products through Discounts, low price, gifts and Incentives. This

strategy has been widely successful and responsive among the retailers in India. It provides

several lucrative facilities to the retail customers in its all the 20 Wholesale stores of 9 states.

Beside Wal-Mart is working on making its supply chain much more easier and reachable to the

Indian retailers with attractive incentives.

As far as, Retail Advertisement is concerned, Wal-Mart’s ongoing total ad campaign is still in

the middle phase. This will be more clear if we analyze the scenario with DAGMAR (Dutka,

1995) model. According to this model people pass through Five stages before buying a product.

The steps include Unawareness, Awareness, Comprehension, Conviction, Action. Now as Wal-

Mart’s current advertisements are performed targeting the retailers only ( not the individuals

because of government regulation) in India, its overall advertising is still stuck in

Comprehension phase. Well that’s rather applauding because Wal-Mart is strictly focusing on its

target customer instead of irrelevant common people (because it’s not allowed to sell them

goods).

For promotion, Wal-Mart India is specifically focusing on the media which are effective enough

and cost-saving to reach its target customers (retailers). These media include Personal selling,

Print Ads, some Online promotion, TV ads in small range, Poster, Banners etc. So Wal-Mart’s

this ROE based promotion is rather more helpful.

2. How Retail marketing mix can provides Sustainable

Competitive Advantage for Wal-Mart India

To sustain in the market as a dominating player in the tight competition of Indian retail industry,

Wal-Mart must ensure its unique competitive advantage by its retail mix elements. Every

business is backed by the core purpose of profit and wealth maximization (Spillecke 2012). This

purpose of Wal-Mart will only be served if the company attains competitive advantage over its

competitors and dominates the market. Moreover, long term growth and smooth sustainability of

the business is also dependent on the unique and valuable competitive advantage.

So, the importance of competitive advantage in Indian retail is clear both for sustainability and

growth. But Wal-Mart may not competitive advantage in every available field It needs to

specialize in a particular field so that it can specialize all its effort on that particular field to make

sure the ultimate competitive advantage. Basically there are two notable competitive advantage

(Marburger, Daniel, 2012). These are:

1) Cost Advantage

2) Differentiation

Based on the porter’s model of competitive advantage, we will identify in detail how retail mix

of Wal-Mart India can provide sustainable competitive advantage.

2.1 Resources & Capabilities:

Unique and valuable Resources & capabilities which let a company dominate over its

competitors and better future prospects are the resources and capabilities of competitive

advantage(Berman, Barry, and Joel, 2007). If we look back at the retail marketing mix of Wal-

Mart-India, we will find out some key resources and capabilities of competitive advantage for

Wal-Mart India. Before detail discussion, key resources and capabilities of Wal-Mart India is

being listed below:

1) Strong supply chain

2) Brand value

3) Strong Bargaining power over suppliers

4) Economies of Scale

5) Reputation and Trademark

6) Expert Management

7) Proper location.

Let’s see how the retail mix of the Wal-Mart indicates these valuable resources and capabilities.

As Wal-Mart deals with broad ‘breadth of merchandise’ which is large number of suppliers, it

has a strong bargaining power over its suppliers. As suppliers are aware that Wal-Mart is a big

client and they will never intend to lose such a big client, so they will try to satisfy this client.

Price strategy of Wal-Mart indicates its economies of scale. Wal-Mart manufacture and purchase

in such a big volume that its per unit price gets too less. Wal-Mart is lucky enough to have the

advantage of location in all the crucial zones of India. Its international reputation, creative

promotion and advertisement has contributed to strengthen its brand value in Indian people’s

mind. Wal-Mart’s applauding customer services and strong management has been for the expert

personnel and team of Wal-Mart.

This is how Retail mix analysis for Wal-Mart indicates the key resources and capabilities. Now I

will represent how these resources and capabilities may contribute to provide either cost

advantage or Differentiation Advantage.

2.2 Cost Advantage and Differentiation:

To have Cost advantage, Wal-Mart needs to make sure that it is dominating the market in case of

price. Cost Advantage is the ability to offer the less price of same quality of product or superior

quality for the same price. Indian retail industry is highly cost dominated.

As Wal-Mart has achieved economies of scale, cost advantage is almost in its hand. Wal-Mart

purchases in such a large scale that its cost per unit becomes less than the price of maximum

competitors. Moreover its strong supply chain makes sure the continuous and smooth flow of

product supply on demand. This decreases some other costs such as transportation and marketing

cost. This is how these resources and capabilities are contributing to provide Cost Advantage for

Wal-Mart in Indian market. Higher Economies of Scale and Strong Supply Chain are crucial

weapon for cost advantage. (Alexander, Nicholas and Doherty, 2009)

The bottom-line of Differentiation is innovative and unique quality. The interesting part about

the Wal-Mart is that it’s been differentiated as a ‘low cost retailer’ ( Fishman, Charles, 2006).

Moreover, Wal-Mart’s cost advantage is its differentiation. Wal-Mart’s reputation, brand value,

location advantage are some highly potential resources which may contribute to sustainable

differentiation advantage.

2.3 Value Creation

Cost Advantage or Differentiation will make no sense if it doesn’t create any value and growth

opportunity for the company.( Berman, Barry, and Joe, 2007) Whatever is its strategy for

competitive advantage, Wal-Mart needs to make sure that the strategy is really contributing in

the market and is a valuable and non-imitable strategy. This is the way; Wal-Mart can develop a

sustainable competitive advantage in Indian retail industry.

3. Challenges to continued international growth faced by

Wal-Mart:

As far as international growth is concerned, its always highly challenging for any multinational

corporation. A company needs considers cultural adaptation, social trends, political regulations

etc. Challenges of Wal-Mart for growth in Indian market have been analyzed in the following

considering PEST factors (Political, Economic, Social & Technological) ((Reynolds,

Cuthbertson and Bell, 2004)

3.1 Political Factors:

It’s highly challenging to grow market in a highly regulated country like India. Indian

regulations don’t permit any foreign retail player like Wal-Mart to sell products directly to the

consumers . Wal-Mart is allowed to sell products to the retailers as a wholesale firm. So Wal-

Mart has a big challenge to deal with these strict political regulations and finding out the ultimate

solution. Wal-Mart’s capability to deal with this strictness will ultimately define the future status

of Wal-Mart in Indian market.

3.2 Economic Factors:

In economic point of view, Indian retail industry is highly lucrative. India has been identified as

one of the 30 most attractive retail markets. It’s retail market has been valued as $427 in 2010

and it is expected to worth $627 by 2015. (BBC news, 2010). Such a lucrative market is full of

challenges too when it comes to growth strategy. Adapting with the economic trend, grabbing

the sudden market opportunities, ability to absorb the economic shocks are the crucial economic

challenges for Wal-Mart in Indian market.

3.3 Social Factors:

Growth in international market is impossible without the adaptation with culture of the market

(Inc. , 2015) Wal-Mart needs to understand the social trend and demographic behavior of Indian

people and must sets its strategies considering this. Unlike US consumers, Indian people are not

accustomed to ‘buy and repay’. Rather Indian people are accustomed to ‘save and buy’ strategy.

So adaptation with social culture, buying behavior of people is the crucial challenges for Wal-

Mart here.

3.4 Technological Factors:

Wal-Mart is worldwide reputed as a sophisticated retailer in term of technology (Dragun, 2003).

Wal-Mart is said to the role model for bringing all latest technologies including Electronic

Interchange, Barcode & Inventory management, Point of sale etc. Major technological

challenges in India include developing expert human resource to operate these technologies and

using these as an advantage in the competition.

Conclusion:

The lucrative retail market of India is surrounded by challenges and difficulties. Foreign players

like Wal-Mart needs to be utmost strategic in such a market. Growth in any regulated market is

not that much easy. Strategic decisions , competitive advantage, cultural adaptation can make

the difference between success and failure in case of international growth. Focus on these core

issues may lead the Wal-Mart towards the success in Indian Market.

References:

Alexander, Nicholas, and Anne Marie Doherty(2009). International Retailing. Oxford:

Oxford University Press.

Berman, Barry, and Joel R Evans (2007). Retail Management. Upper Saddle River, NJ:

Pearson/Prentice Hall.

Berman, Barry, and Joel R Evans. Retail Management. Upper Saddle River, NJ:

Pearson/Prentice Hall, 2007. Print

Bruce, M., Moore, C. and Birtwistle, G. (2004). International retail marketing. Oxford:

Elsevier Butterworth-Heinemann.

Dragun, D. (2003). Value creation among the world's top 500 retailers. Oxford, UK:

Templeton College, Oxford

Fishman, Charles(2006). The Wal-Mart Effect. New York: Penguin Press,

Hackley, Christopher E (2005). Advertising And Promotion. London: SAGE

Publications.

Inc. (2015). Wal-Mart’s 6 rules for Expanding Business. Available from:

http://www.inc.com/bill-snyder/six-lessons-from-the-leader-of-walmart.html

Marburger, Daniel R (2012). How Strong Is Your Firm's Competitive Advantage? [New

York, N.Y.] (222 East 46th Street, New York, NY 10017)

McGoldrick, P. (2002). Retail marketing. London: McGraw-Hill.

Reynolds, J., Cuthbertson, C. and Bell, R. (2004). Retail strategy. Amsterdam: Elsevier

Butterworth-Heinemann.

Solomon Dutka (1995) Defining Advertising Goals for Measured Advertising. NTC

Business Books

Spillecke, D. (2012). Retail marketing and branding. Hoboken, N.J.: Wiley

Wal-Mart India (2015). Overview. Available in: http://www.wal-martindia.in/

Watson, regory , and ond ( 2003. Quality Into The 21St Century. Milwaukee,

Wis.: ASQ Quality Press.