Advice Blog

This Is How Walmart Became The Superpower

Source: CNN iReport

Source: CNN iReport

Do you how Walmart became the superpower despite jumping into the discounted retailer industry much later than its competitors? 

1. Beat up the vendors
2. Small town monopolist
3. Better management
4. Things are cheaper in the South
5. The potent advantages of regional dominance

Which one do you think it's the true reason? Bruce Greenwald (Competition Demystified) explains why it's #5. 

Walmart had almost 3 times the level of local sales of its competitors, its advertising cost per dollar of sales would have been 1/3 that of the competitors. Also, the superior efficiencies achieved in these 3 functions - inbound logistics, advertising, and executive supervision - taken together gave Walmart an operating margin advantage of 4-5% of net sales. This is how Walmart was able to outrun and outcompete all other discounted retailers and became the superpower.