Pricing: A Comprehensive Overview of Our Approach

“Some people may leap to the conclusion that if a company is selling a product for less than the competition, it must have paid less for the product. What they ignore is that if a retailer pays the vendor exactly the same as everyone else, but its internal costs are lower, and the retailer is willing to operate on lower margins, then the retailer can and will sell the product for less than the competition. That is what Wal-Mart does.”
 

Rob Walton, 2005, then Chairman, Walmart Inc.

A lot has changed since Rob’s quote more than 20 years ago, but the central question remains: How does Walmart consistently provide customers and members with lower prices, regardless of external headwinds?

The “how” is embedded in both our founding and our business model. Walmart was built around the concept of providing Everyday Low Prices (EDLP), and we achieve that by operating with a relentless focus on Everyday Low Costs (EDLC).

The “why” is simple: we are always striving to earn and maintain the trust of our customers. Delivering on our brand promise — helping people save money and live better — is how we earn their trust. We believe customers want the dependability of everyday low prices versus the rollercoaster of unpredictable price swings utilized by some retailers and grocers. Our goal is to consistently provide the lowest prices on a basket of goods, both online and in-store.

Sam Walton, our founder and Rob’s dad, often said, “Control your expenses better than your competition. This is where you can always find the competitive advantage.” While we don't control everything, there is a lot we can control and we focus there.

Driving unnecessary costs out of our business, allowing us to offer lower prices, starts with the way we work. Our associates are very aware of the need to be cost conscious, even with small things like office supplies or choice of rental cars during a work trip. Over time, the little things add up and allow us to reinvest savings where they matter most: in price and in people.

Our structure also helps control expenses. We empower associates closest to the customer to make decisions and identify improvements. When change is needed, we move quickly and avoid unnecessary bureaucracy that adds cost and often delays execution.

Supplier partnerships are another important component of EDLC. There’s an urban legend that our size drives lower supplier pricing. The truth is, our differentiation comes from trimming our internal costs, reducing our suppliers’ costs to serve so they can offer us the best available costs, and investing in ways that bring down prices for the customer, like reducing the costs of delivery.

We reduce costs by ordering full truck loads from suppliers versus partial loads as much as possible and utilizing logistics systems that optimize freight routes. Decades ago, we brought distribution in-house to improve reliability and reduce expenses. To this day, many of our suppliers do not actually deliver to us. Instead Walmart truck drivers — the best in the industry — back-haul from supplier facilities. We’ve even built internal proprietary systems to help our suppliers with their own forecasting and better management of their production and delivery schedules.

These investments in supply-chain modernization also help lower costs across the broader retail ecosystem. When suppliers improve production runs, packaging, forecasting, or freight efficiency to serve us better, those efficiencies do not stop at our doors — they can reduce costs industry-wide. Strong, efficient supply chains benefit retailers of all sizes by improving reliability, lowering waste, and expanding access to products. Competition works best when the entire system operates more efficiently, and we are proud to help drive that progress.

Our technology investments are another example of how we focus on internal process improvement rather than relying solely on external market pressures to bring down costs.  In 1969, Walmart installed its first computer network. We were an early adopter of inventory tracking systems and developing network connectivity between stores, distribution centers, and our home office in Bentonville, Arkansas, which is in a part of the country that is much more affordable than the high-priced markets where companies are often headquartered.

Fast forward to today and technology is infused into just about everything we do. Over the past two years, we have cut U.S. net delivery costs per order by 29% due in part to investments in automation technology. We utilize proprietary systems to predict demand patterns, ensuring that inventory placement is optimized and stock does not sit idle in warehouses. We also utilize proprietary software on associate devices to simplify the complex process of moving products from the backroom to the sales floor in over 4,500 U.S. stores. More recently, we have also started to use algorithms to pack “aisle ready pallets” that come off the trailer matching the stock on the aisle where it is headed. This means we only unload the pallet once instead of first in the backroom and then again in the aisle. Technologies like these are central to our cost discipline and have often been copied by other retailers, creating greater efficiencies for the entire retail industry.

When introducing new technology, we have a clear standard: it must be in the service of people — whether that is customers, associates or suppliers. While our customers are embracing Walmart.com and same day delivery, our associates love how technology eliminates monotonous tasks, allowing them to focus on higher-skilled and more rewarding responsibilities like customer service. 

One great example of this is Digital Shelf Labels (DSLs), which are replacing the paper tags that have been around since our first store opened in 1962. DSLs are helping us uphold our EDLP promise by freeing associates from the time-consuming manual task of changing shelf labels so they can focus on higher impact work. DSLs change how we show price, not how we determine price, and they bring efficiency to the overall process, keeping down costs so we can keep prices low. 

Technology also enables us to modernize long-standing practices. Sam Walton did not have the benefit of AI or online pricing, but he used available data and tools to make Walmart famous for Rollbacks and focused on local Price Matching. For decades we relied on the appearance of the weekly shopper insert in a local newspaper or for a customer to let us know if there was a lower price somewhere else in the neighborhood. Today, publicly available information online allows us to lower prices faster and more efficiently. 

While modern technology is improving pricing practices, it has also created new capabilities that we do not use — such as “Surveillance Pricing” and “Surge Pricing.”  These practices charge customers different prices on the same product based on their personal data such as age, gender, race, and income, or raising prices when customers are most likely to shop, like on their way home from work or on a Sunday afternoon. We believe these pricing strategies are inconsistent with EDLP and undermine customer trust. Our technology helps lower prices, not personalize them.

There’s another philosophy represented in Rob’s quote: External factors such as economic cycles, other companies’ strategies, policy shifts, or market pressures, are variables we cannot control. What we can control are our internal processes, operational discipline, and our long-term investments in logistics, technology, and people. Most importantly, we are willing to operate on lower margins than many of our competitors to best serve our customers by investing in prices, associates and communities.

When you combine these different elements of our EDLC business model, we can provide a form of shock absorption for our customers by helping to internalize and manage economic fluctuations through our scale and operational and financial discipline rather than passing volatility on to consumers. With approximately 90% of Americans living within 10 miles of a Walmart store or Sam’s Club location, our ability to keep prices low results in meaningful stability for millions of households and provides customers with a cushion for inflationary pressures.

Delivering Everyday Low Costs allows us to provide Everyday Low Prices. These combined efforts allow us to earn customer trust, which is not simply a strategy for Walmart — it is foundational to who we are.