Published: October 30, 2015
On Oct. 2, Walmart decided to lay off 450 employees at its headquarters in Bentonville, Arkansas. The layoff affected those in management positions at the headquarters of both Walmart and Sam’s Club;.The latter is the membership-only retail warehouse that is owned by Walmart. These layoffs come just a little over a month after Walmart announced it was shrinking its earnings estimate for the year due to a decrease in profits.
“While difficult, I believe these changes will help us become a more nimble organization that serves customers better. Our customers are changing, retail is changing and we must change. We need to become a more agile company that can easily adapt to shifting customer demand,” said CEO Doug McMillion.
Those affected by the cuts will receive pay and benefits for 60 days followed by a two-week severance package for each year worked at the company. The cuts made last Friday are some of the highest numbers the retail chain has seen at its headquarters since laying off 300 employees in 2010 and 800 back in 2009.
Junior finance major Katelyn Jacques said this will not work out well for Walmart.
“I think it is quite a large number of people to lay off at one time, and I don’t believe this method of cutting costs will be effective in the long run,” said Jaques.
However, it is not only Walmart that must face such a strategy in today’s competitive environment. Other large corporations like Whole Foods, Sprint and Target are engaging in cost-cutting strategies in order to keep profits up and compete in the retail atmosphere.
This year, Walmart has focused on creating a better public image by offering employees higher wages and more training, which has a negative effect on its profits. Walmart says the cuts are an attempt to compete with retailers such as the online giant Amazon.
Robert Giambatista, Ph.D., of the Kania School of Management notes, “Laying off 450 out of 18,000 headquarters staff (2.5 percent) will not change Walmart’s culture or make them more ‘nimble’ As the CEO stated, the cuts are not nearly consequential enough to really change the firm in any fundamental way. Instead, it’s a pure cost-cutting measure, though it won’t have any appreciable difference on the bottom line,” said Giambatista. Walmart’s business model, in contrast to Amazon’s, is a typical brick and mortar store as opposed to being just online.
Walmart also focuses on cost differentiation as opposed to customer service. And as Giambatista indicates, more than cuts at headquarters will be required to produce such drastic change.
Walmart has also been trying to expand into e-commerce, attempting to take market share from major online threat Amazon. Earlier this summer, Walmart created a program similar to that of Amazon’s, in which the customer pays $50 per year for free shipping with the products arriving in three days or less. This is clearly a direct competitor of Amazon Prime, the $99 per year service offered through Amazon.com in which customers pay the annual fee for free two day shipping along with access to instant video and music streaming through the site. With regard to Walmart’s effort to adapt to the changing wants of customers, junior occupational therapy student Ilene Umansky advises, “Changing its business model or implementing new sales strategies would be ideal for the situation that Walmart is facing and would hopefully prevent future layoffs.”
And by forging its way into the online retailing market, that is exactly what Walmart is trying to do. Furthermore, Walmart detailed a plan last week that involved growing its effort to offer in store grocery pickup for online orders, increasing the service to 13 markets. Now not only non-perishable products, but also fresh food can be obtained more easily than taking the time to shop for the items in store.
Walmart will see if its cost cutting efforts and expanding online presence will be enough to outlast the intense competition of online competitors and appeal to Amazon’s large customer base. The company needs to find a balance between the convenience of picking items up in the store while offering the deals and convenience of online ordering that can compare to Amazon, which is known for its efficiency and customer service. As young people tend to engage in more online shopping, it will be interesting to see if Walmart’s strategy can attract younger age groups to keep and grow its market share in the retail environment.
Contact the writer: email@example.com