Master the Game of Retail - E1: Unveiling the Winning Strategies of Walmart, Target, and Costco.

As the retail industry evolves and competition intensifies, it's essential for retailers to not just keep up but also strive for dominance and customer loyalty. Walmart, Target, and Costco are at the forefront of this game as industry titans, each with their own winning strategies. In this series, we will decode these strategies trying to understand the strengths and weaknesses of these leaders, so you too can become a leader in the retail industry.

Thanks to Kahn's Retail Success Matrix, we can easily analyze any of those retailers. Kahn’s matrix is a model developed by Professor Barbara Kahn from 美国宾夕法尼亚大学 - 沃顿商学院 , The model forms a canvas of four key factors that determine a retailer's success: Product brand, Low price (fall under product benefits) Experiential and frictionless (fall under Customer experience), the model suggests that retailers need to excel in at least two of these quadrants and be good enough in the other two elements in order to be successful and that the specific combination of factors that a retailer emphasizes will determine its positioning and competitiveness in the market. What I really like the most about Kahn’s matrix it is not sales or operations focused only but it is very customer-focused. The model is simple but very powerful and I personally see it as a useful framework for understanding and analyzing the strategies of any industry not only retail!

Let's delve...

Walmart

A. Overview of Walmart's retail strategy

Walmart is one of the largest retailers in the world, known for its EDLP (everyday low price) and wide selection of products. The company has a strong focus on operations excellence and technology, which has enabled it to maintain its position as a leader in the retail industry. if you make money on transactions then supply chain cost is a crucial element for your business.

B. Walmart's strengths and weaknesses

The company has a strength in its operations which is the cornerstone for the EDLP strategy, but because of the competition Walmart had to leverage what they are best at (excellent operations/Low price) to become also best at frictionless, both in-store and online.

In 2016, Walmart bought Jet.com for $3.3 billion, which helped them quickly establish a strong presence in e-commerce the company cited the Jet acquisition in 2016 as “critical to accelerating our omni strategy.”. By acquiring Jet.com, they gained access to new expertise, customers, and merchants. Leveraging these resources, Walmart developed a highly advanced e-commerce system, which seamlessly integrates with its physical stores. This omni-channel approach has enabled them to deliver a top-notch customer experience both online and offline.

Walmart is also good in convenience through their physical stores and sales associates, with 90% of US citizens living within 10 miles of a Walmart store. They have leveraged their stores for online orders (as fulfillment centers), with the buy online, pick up in-store option, which is more convenient for those who are constantly on the go. They have also launched a loyalty program (Walmart+) similar to Amazon Prime, offering delivery for a certain price and a range of benefits so they can gather more customer data in a sophisticated manner, which is helping them to deliver more value to their customers. Walmart is already known for its wide selection of products but also trying to be better at the product dimension through its Walmart Marketplace by bringing in third-party sellers to increase the product assortment. Walmart is branching out into other industries such as pharmacy, health, and insurance, aiming to be a one-stop-shop. Despite their success during and after the COVID-19 pandemic, they acknowledge that they are not a luxury retailer but a generalist retailer.

C. Outcome:

Walmart has leveraged its excellent position in low-price to also be the best in Frictionless but also working to be good enough at Product and Experiential quadrants.

Target

A. Overview of Target's retail strategy

Target is a discount retailer that offers a wide variety of products at affordable prices so they are also an everyday low-price merchant but unlike Walmart, the company focuses on creating a fun and inviting shopping experience for its customers, with very well-designed stores, partnerships with other brands like Ulta Beauty, Apple ..etc, and exclusive product lines like Missoni. also when it comes to visual marketing, I think they are the top.

In addition to its physical stores, Target is also investing very well in the omnichannel, extending the in-store experience and that appeared clearly during COVID-19. the company has built a strong online presence and operates an e-commerce platform and mobile app, both of which provide customers with easy access to Target's products and services. Target's online shopping experience is designed to be easy and convenient, with features such as curbside pickup and same-day delivery. Target's e-commerce also allows customers to check product availability online and in-store, this feature can save a lot of time for the customers.

B. Target's strengths and weaknesses

Target is the best in convenience and in-store experience, they are also the best in the product within their segment additionally, their investments in improving their omnichannel experience positioned them well as an essential retailer that could remain open during the pandemic. They have been expanding by building more stores, including smaller footprint stores in cities and on campuses. In addition, they have been enhancing their buy online, pick up in-store facilities, distribution centers, and sorters to offer a seamlessly integrated shopping experience.

C. Outcome

Target focuses on convenience, combined with a fun shopping experience, they are also the best in the product within their segment and good enough to compete in price and frictionless quadrants, all of that helped them maintain strong brand recognition, customer loyalty, and remain a top performer in their segment competing with the likes of Walmart and Amazon.

Costco

A. Overview of Costco's retail strategy

Now let's look at another titan, Costco Wholesale Corporation is a membership-only warehouse club that operates in over a dozen countries worldwide. Costco's retail strategy is centered around offering customers a unique shopping experience that is both efficient and cost-effective. One of Costco's main goals is to offer high-quality products at lower prices than traditional retail stores. To achieve this, Costco uses a no-frills approach to store design and keeps its overhead costs low. Costco also sells its own private label brand, Kirkland Signature, which allows the company to offer exclusive products at lower prices.

Costco's membership model is a key component of its business model. By requiring customers to pay an annual fee to gain access to the club's low prices and exclusive deals, Costco is able to generate a steady stream of revenue from its members. The membership fees also help to offset the low prices that the company charges for its products even if their operational costs are not as low as Walmart's.

B. Costco's strengths and weaknesses

One of Costco's main strengths is its ability to buy in bulk, so Costco is able to negotiate lower prices from suppliers and pass those savings on to its customers as a result, Costco is able to provide the lowest prices, but with a strategy that differs from Walmart's.

Additionally, Costco's membership model creates a sense of exclusivity that can lead to increased loyalty and repeat business. Costco also has a strong online presence, which allows customers to shop online and pick up in-store.

One of the company's main weaknesses is its limited product selection, Also, Costco's store design can be overwhelming for some customers, with its large warehouse-style layout and bulk packaging. it does not carry a broad assortment of products. Instead, they carefully curate their inventory, While a Walmart supercenter might carry around 140,000 items, a typical Costco store stocks around 4,000 items.

However, Costco has turned this into an advantage by implementing a "treasure hunt strategy." This means that 20% of the items in Costco's inventory may not be available the next time you visit the store. To prepare their customers, Costco trains them to buy an item on the spot if they find it interesting or appealing because it may not be available later. This unique strategy adds to the shopping experience at Costco and creates a sense of excitement for customers.

Another weak point for Costco is that they did not offer the best frictionless shopping during most of the COVID pandemic. They were not as efficient online as their competitors, and they did not provide the buy online, pick up in-store service for most of the pandemic. However, at the end of 2020 and the beginning of 2021, Costco began offering online services, such as buy online, pick up in-store, and curbside delivery. But to improve their position in the frictionless and to fulfill their online orders, Costco partnered with Instacart (Same-Day Delivery Powered by Instacart)

C. Outcome

Costco excels at offering low prices and providing a great experiential shopping environment. They are also striving to improve in the areas of providing frictionless shopping, as well as brand and product assortment.

The Key takeaway

It's not necessary to strive to be the best at everything. Attempting to do so can be resource-intensive and ultimately lead to failure. Instead, it's important to identify the areas where you want to excel and be the best while being content with being good enough in other areas. This is a critical lesson to remember, even those retail titans are not the best in every aspect of their business.

Excel in one quadrant, utilize that edge to excel in another one, and then aim to be good enough in the remaining two.

Which strategy do you think will work best for your business? Share your thoughts in the comments below!