How To Beat WalMart

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How To Beat Wal-Mart
by Matthew Maier

• Travis DeBacker
• Roth Puth
• Hung Nguyen

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Agenda

• War business?
• After the external environment.
• 4 strategies to beat Wal-Mart.

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Military Strategies
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Business Strategies

• Cost Leadership
• Costs are below those of competitor
• Product Differentiation
• Perceived value of products services

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Cost Leadership

• Sources
• Size and Economies of Scale
• Experience and learning-curve economies
• Low-cost access to productive inputs
• Technological advantages
• Policy choices

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Product Differentiation

• Sources
• Focus directly on attributes
• Product features, complexity, location
• Relationship with customer
• Product customization, brand building
• Linkage between firms
• Product mix, supply chain, service and support

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Rule 1

• Hitem where they aint

If you know the enemy and know yourself, your
victory will not stand in doubt. Regard your
soldiers as your children, and they will follow
you into the deepest valleys look upon them as
your own beloved sons, and they will stand by you
even unto death.
-Sun Tzu

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Costco

• Target Customer small business owner
• Wealthy Frugal.
• Demand quality to reflect their status.
• Employees
• Highest paid in the industry
• Motivated well treated
• Strategy brand names at bargain prices.

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Results

• Sales per store
• Costco 115 Million
• Sams Club 67 Million
• Employee Strategy
• Costco Turnover 6
• Walmart Turnover 44 (1.5 billion expense)
• Revenue contribution per employee
• Costco 16,550
• Wal-Mart 12,800

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Rule 2

• OutDiscount the Discounter

What is of supreme importance in war is to attack
the enemys strategy.

-Sun Tzu
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Dollar Tree

• Who did what to Wal-mart?
• Dollar Tree Simple pricing and a less painful
  shopping experience for their customers.

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Dollar Tree Facts

• Nations largest single-price vendor.
  Everythings 1
• 1986 The first Dollar Tree store opened in
  Dalton, GA.
• 2735 locations and counting
• 3.2 billion of annual revenue. Net sales surged
  nearly 191 since 1998
• In 2004, company earned 186 million dollars

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Strategy

• Outdiscount the discounter. 1
• Suppliers work with Dollar Tree to fit both their
  needs. (ex. Instead of 20-ounce soap bottles, PG
  produces 18-ounce soap bottles)
• Simple convenience

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Outcome

• Dollar Tree operating margin, 2005 9.7
  Wal-Mart 5.9
• Customers get the basic necessities in a shorter
  period of time.

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Rule 3

• Re-create what Wal-mart has swept away

To capture the enemys army is better than to
destroy it..
-Sun Tzu
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SAVE-A-LOT
Who did what to Wal-mart? - SAVE-A-LOT A
grocery chain store who brought back the bygone
Main Street feel and focus on underserved
neighborhoods.
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SAVE-A-LOT Facts

• Has 1,250 outlets in 39 states
• Sale estimated to be 4.2 billion dollars in 2004
• Growing about 7 annually.
• Save-a-lot has a 3.5 profit margin compare to
  Wal-marts 2.6

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Strategy

• Theme keep everything small. (Ex. 20-25
  employees and selection limited.)
• Save-a-lot 1,250 grocery items. Wal-mart 40,000
  grocery items
• One kind of each product, also relies heavily on
  private-label brands (account 75 of inventory).

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Strategy

• Focus on neighborhoods where income are fixed or
  below 35,000.
• Inventory comes from 16 distribution centers all
  packed into one truck.
• To avoid Trademark cost, brand names are taken
  from employees.

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Outcome

• The nations 5th largest grocer

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Rule 4

• Win the service game

The potential of troops skillfully commanded in
battle may be compared to that of round boulders
which roll down from mountain heights.
-Sun
Tzu
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• Dicks sporting goods- has created a sales team
  with true expertise that coddles customers.
• Dicks revenue growth is 34 Wal-Mart sporting
  section is 16.
• Customers today want information-dicks hires
  certified trainers and has 200 PGA pros.
• Customers can try out golf clubs in a driving
  cages with simulated course, sneaker shoppers can
  test shoes on a 60-yard rubber track, bike owners
  can have their cycles repaired, and tennis
  players can get their rackets restrung.

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Rule 4 Cont.

• Although the cost to run a dicks might be high,
  dicks returns are greater.
• Dicks has been growing 16-23 yearly and stock
  prices from 8-34 the past two years.
• Dicks has a wider selection and is cost
  efficient.
• Dicks inventory turnover is 3.7 while the
  industry is 2.7.
• Dicks has a replenishment system that calibrates
  and gets exact orders theyre needed.
• Never think your powerful competitors are
  invincible.
• Find opportunities and make sure Wal-Mart misses
  them

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Lessons From The Fallen

• Kmart- had high inventory cost and never
  materialized.
• Toys R Us- Wal-Mart expanding its toy selection
  and slashed prices in the mid-1900s. Toys R Us
  was slow to recognize and found
• Winn-Dixie- Sam Walton worked for Winn-Dixie for
  six years and two years after he opened his
  supercenters with cut-rate groceries.
• Winn-Dixie customers didnt buy into an upscale
  grocer and soon started to shop at Wal-mart.

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