EconomyFinancialWalmart VS inflation: the giant's strategy to remain the...

Walmart VS inflation: the giant's strategy to remain the supermarket leader

Walmart wants to remain the leader of supermarkets in Mexico, with a strategy for its Walmart Supercenter and Walmart Express formats. The retail chain has the challenge of coping not only with the rise in prices of some products and price competition, but also with the caution of Mexicans when it comes to filling their shopping carts.

But Mariano Fiscella, VP of Walmart Supercenter and Walmart Express, is not intimidated by high inflation levels. In his native Argentina, this indicator constantly fluctuates and this year has even reached levels above 70%. “I have been in Mexico for eight years, in this last stage, and I had gotten used to much lower levels of inflation, but I am Argentine, a land accustomed to inflation,” he says.

The Mexican economy closed August with annual inflation of 8.7%, the highest level since December 2000. This is an increase of 0.7% compared to the previous month and 4.9% since January, according to Inegi data. This has had a direct impact on the Consumer Confidence Index, which measures how confident people feel about the stability of their income and their willingness to consume, is down four months.

In the midst of this scenario, the low-price market is increasingly competitive, and although Walmart’s sales have not lost dynamism, the US retailer faces other chains such as Chedraui, which are gaining market share in Mexico.

The Mexican retailer, led by José Antonio Chedraui Eguía, was in the second quarter of the year, however, Walmart, and all its formats, are far from losing ground in Mexico.

In the period, Walmart’s same-store sales -those that have been in operation for more than a year- grew 10.8%, below Chedraui’s 16.2%. La Comer grew 9%, and Soriana 6.4%. The growth of the chains affiliated with the National Association of Self-Service and Department Stores (ANTAD) was 10.5%.

“It is difficult to talk about a market loss for Walmart, because, in reality, in times like the current one, with pressure from inflation and loss of purchasing power, consumers make some purchase decisions guided by price opportunities, without this representing a trend or a definitive change in their consumption habits,” says Carlos Hermosillo, an independent stock market analyst.

A low price strategy

The strength of Walmart de México y Centroamérica is its supply chain. Fiscella explains that it has a network of more than 85,000 suppliers, -90% are small and medium-sized companies-, with which they maintain constant negotiations to establish synergies in order to maintain the prices of products in stores and prevent customers from changing option for a price comparison, habitual action in a context of high prices.

“What our team does is work hand in hand with our suppliers in a collaborative way, to include a greater variety of items with a careful price and careful quality”, declares the manager regarding the agreements with suppliers. “We seek that be a win-win for both sides.”

Walmart negotiates its logistics chain globally, which has become a lever to keep costs under control. However, with the increased cost of logistics in the last two years -shipping freight has increased by up to 400%-, the company has had to sacrifice the variety of product presentations to maintain stock in stores of the formats it manages. .

“Although we still have a presence of the articles, we had to give up having a wide variety of presentations for each one of them. But, even so, the client perceives that we have a product and not the lack of it”, points out the manager. “International supply chain issues have affected the entire planet, however, we have managed to ensure very healthy supply levels, we have practically not had any major effects in the eyes of the client,” he adds.

One of the applied strategies is to allow suppliers to use the logistics chain to send products to distribution centers and from there to stores, to mitigate the impact on fuel costs. Before, shipments were direct to stores, which raised the cost of transportation.

In stores, the company offers multi-savings, which allow shoppers to purchase more products at a lower cost, and price reductions. Since March, Walmart has maintained the campaign The basics of your basket , which includes 50 products of the basic basket, such as rice, oil and personal care items, such as shampoo and soap, which have not increased in price.

The products that make up this program are determined by historical data that allows us to detect which are the products that buyers carry in their carts most frequently.

“Walmart’s advantage is its size, and consequently, the negotiating power that this gives it with its suppliers, which allows it to share the discounts that eventually apply to us, and even achieve sales and special conditions unique to its channel,” Hermosillo says.

The growth of own brands

Own brands are another fundamental part of Walmart’s strategy, as they allow it to capture consumers who seek to optimize their spending. However, in this segment, competition has also intensified, given the appearance of brands under the rubric of other chains, convenience stores and

Mariano Fiscella shares that with this category they have a greater price management space. Meanwhile, they have a double-digit share of the company’s sales, and they expect it to double by 2026.

“The growth of private labels has significantly outpaced the growth of national brands. The customer is much more open to trying own brands that offer good quality at a lower price. In our stores you can find options for all price ranges, better than the average commercial brands,” says Fiscella.

Looking ahead to the end of the year, the company expects a dynamism in sales that is generated by the seasonal nature of the national holidays and the Christmas holidays. This year, in addition, there will be the World Cup.

“In general, we are optimistic and many buyers tell us that they do not want to miss out on the opportunity to buy, so they are saving and we have proposals prepared for these events and those clients who are waiting for this opportunity,” concludes Fiscella.

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