Operational cost cutting has always been a retailers’ favourite tool to boost their bottom line. It is even more crucial for Walmart as the giant’s key competitive edge is price. And Walmart has found that substantial cost savings can come from seemingly small actions.
Walmart's plan to transform
The world's largest retailer is transforming itself in the quest to fend off online competitors like Amazon and Alibaba. The company has made huge investments in acquisitions, tech initiatives, and employee training. It acquired Jet.com for US$3 billion last year and has just concluded a US$ 16-billion deal to purchase the Indian e-commerce platform Flipkart in August.
A new high-tech warehouse that can automatically retrieve items and load pallets, set to open in 2020 in California, is another major investment made by Walmart to revamp its supply chain.
Walmart’s massive scale also means small changes can yield great results. Switching from fluorescent light bulbs to LED lights in its parking lots helps cut its annual energy cost by US$ 200 million.
A change in the floor wax used in its stores helps cut costs by US$ 20 million because the new wax is cheaper and studier, which does not need to be buffed as often.
Another annual saving of US$ 20 million is achieved thanks to a simple change to its plastic bags. Even a decision to reduce the length of its receipts has saved over US$ 7 million.
Walmart achieving significant savings in small changes can be an eye-opening lesson for other retailers.