Walmart is the largest retailer in the world, with over 11,500 stores in 27 countries. Despite its massive size and success, Walmart faces a number of challenges and issues that could threaten its continued growth and profitability. In this article, we will examine some of Walmart’s biggest issues and problems.
Competition from Amazon
One of Walmart’s biggest threats is competition from Amazon. Amazon is growing rapidly, with online sales increasing by over 30% in recent years. Amazon’s acquisition of Whole Foods also gave it a major presence in physical grocery and retail. Walmart is trying to compete by investing heavily in its online business, but Amazon still has key advantages in areas like technology, fulfillment, and its Prime membership program. Staying competitive with Amazon will require major investments and focus from Walmart.
Threats from dollar stores
The rise of dollar stores like Dollar General and Dollar Tree also poses a challenge for Walmart. Dollar stores have expanded rapidly by targeting low-income shoppers that were traditionally Walmart’s customer base. Their small-format, convenient locations and ultra-low prices on essentials threaten Walmart’s market share. While Walmart still dwarfs them in total sales, dollar stores erode Walmart’s dominance in areas like consumables and household products. Fending off this challenge will require Walmart to double down on EDLP (Every Day Low Prices) and improve its small-format stores.
Problems with fulfillment and delivery
Competing with Amazon also exposes problems with Walmart’s fulfillment and delivery capabilities. Walmart has over 4,700 U.S. stores which provide proximity to customers, but many of them are not optimized for e-commerce fulfillment. Walmart is working to transform its stores into fulfillment centers, but remodeling and reconfiguring its massive chain for omnichannel retail is difficult and expensive. Developing fast, flexible fulfillment to support online ordering, delivery, and pickup remains a major strategic hurdle.
Issues with technology and e-commerce
Walmart has also struggled to match competitors in technology and e-commerce. Amazon is lightyears ahead in areas like website design, personalization, and cloud services. Dollar stores and grocery rivals are also rolling out new tech-enabled retail concepts. Walmart has been active in acquiring tech startups and building an innovation lab, but changing a traditional company into a tech powerhouse is extremely challenging. Legacy systems, resistance to change, and risk aversion could hinder Walmart from making needed tech leaps.
Problems with international growth
While Walmart is massive in the U.S., it has struggled to replicate that success internationally. For example, Walmart failed in markets like Germany and South Korea despite major investments. International growth is key for Walmart’s continued expansion, but it faces sturdy local incumbents and differences in consumer behavior across markets. Adapting its model to new regions while maintaining its everyday low price strategy presents another significant challenge.
Reputational issues
Walmart’s reputation as a responsible company has also taken hits, which can turn away customers, employees, and investors. Critics often attack Walmart for things like low wages, health benefits, use of overseas suppliers, and its effects on small communities and businesses. While Walmart has worked to improve its practices and image, negative perceptions persist. Addressing these reputational issues while staying true to its core model will be a delicate task.
Reliance on physical retail
Despite its growing e-commerce business, Walmart still relies heavily on physical stores for the majority of its revenue. foot traffic to stores and shopping malls is declining nationwide, especially for general merchandise retailers. Walmart will need to carefully manage its massive real estate portfolio, control rent and asset costs, and transform stores into hubs with diverse revenue streams. Leveraging its physical scale while mitigating risks will require foresight and vision.
Labor challenges
Walmart employs over 1.5 million associates in the U.S. alone, making hiring, training, and retaining workers a monumental task. The company has faced criticism for low wages and difficult working conditions, making it hard to attract and keep talent. Additionally, Walmart faces challenges in areas like employee engagement, morale, diversity, and workplace culture. Improving its employment brand and policies will be vital as competition for workers heats up.
Reliance on China
Walmart sources billions in merchandise from China to keep prices low. But reliance on China comes with supply chain risks, as seen with recent tariffs. If relations between the U.S. and China worsen, it could drive up Walmart’s costs or even disrupt access to crucial products. Overdependence on any one country also gives suppliers greater leverage to raise prices. Walmart will need to work to diversify its sourcing origins as a hedge.
Lackluster grocery performance
Groceries make up 56% of Walmart’s U.S. sales, but growth has been sluggish. Despite efforts like online grocery pickup, consumers have more choices than ever from discount grocers, warehouse clubs, organic chains, and convenience stores. Walmart needs a stronger value proposition and unique offerings to differentiate itself in the crowded food retail space. Becoming more innovative with its fresh food, prepared meals, and store experiences could help drive grocery gains.
Opposition to its expansion plans
As Walmart seeks to open new stores or enter new markets, it frequently faces fierce local opposition. Critics argue that Walmart lowers wages, destroys small businesses, and hurts communities. Grassroots “site fights” have blocked or delayed Walmart projects, hampering growth. Overcoming negative attitudes about “big box” retail to move into urban markets presents zoning, lobbying, and PR challenges for the company.
Conclusion
Walmart dominates the retail landscape, but it faces considerable headwinds and threats. From e-commerce competition to reputational issues, Walmart has a lot of problems to solve in order to maintain its industry leadership. Its size and scale provide strengths to draw on, but do not guarantee future success. Walmart’s management must carefully navigate challenges and invest wisely while retaining everyday low prices. In a dynamic industry, Walmart cannot afford to ignore any of these big issues if it wants to thrive in the long run.