Walmart Supply-Demand Equilibrium

The subject of present assignment is to review and analyze one of the greatest retail giants, Walmart’s status in the field of online business activities. “E-commerce is one of the most competitive landscapes for retailers” (Personali Inc., n.d.). In our present days more and more companies are optimizing their possibilities’ through the internet, but only a few builds their whole business strategy on it.

Walmart has taken aggressive measures in the world of e-commerce to step into competition with the growing dominance of Amazon.

What does price elasticity of demand mean in connection with the service of e-commerce?

We have learned that the income of consumers is almost always substantially less than their wants (Gwartney-Stroup, 1979). So how we, consumers decide what choice to make? “Economizing behavior suggests that the rational consumer will spend his limited income on the things he expects will bring him the most satisfaction” (Stroup, 1980). Price is certainly a main element that influences our decision making. According to the principle of the Law of Demand there is a negative relationship between the price of a good and the amount of it, buyers are willing to purchase (UKEssays, 2018). Price elasticity of demand shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on quantity demanded. Price elasticity can show us how responsive customers are to certain products or services. “Marketers need to understand how elastic, sensitive to fluctuations in price, or inelastic, largely ambivalent about price changes, their products or services are when contemplating how to set or change a price” (Avery, 2015).

Why and how e-commerce business or service has been becoming so popular? - Please, see charts below of the constantly increasing percentages noted of e-commerce services against to offline shopping. -

First of all, it is reachable for everyone. It operates on an internet platform that is available for anyone therefore operating any kind of online service, you could get far more customers than owning just an actual shop. E-commerce business breaks down all the existing destination barriers as well. Also, there are lower costs assimilated with this type of business and can be in operation 24 hours a day.

In general, an online service – not highlighting any product – is highly elastic, since a decline of the price causes increased higher price elasticity demand, therefore increased supplied service. That is one of the many explanations why Walmart had chosen to step into the world of e-commerce. Their prices an unbeatable in their physical stores, so why not open up all the possibilities, and offer services that are our generations are obviously opened to. Managing online services mean a great amount of challenge. Why? Because the customers are aware of the wide variety of pricing options, and suppliers have to be flexible and willing to monitor to the consumer’s needs simultaneously with the competitor’s behavior. In Walmart’s case, it is important not to only study historical elasticity, but the key is to acquire understanding of the price elasticity curve of each product and/or service that is newly introduced to the market. Since lower price wins the sale, Walmart’s corporate management has to make sure that they understand their costumers and needs, create unique services and products and note their prices correctly from the start.

How non-price factors impact the demand of online service? Just as significant as price is service quality. For example, Walmart newly-introduced grocery pick-up service seems to attract more and more people, and the positive online reviews of their quality service facilitates its further development. Since there is the competition on the market of online services as grocery pick-up, companies that are choosing to provide it, has to be on top of it, and running it as smoothly as possible. Another non-price factor that can affect the demand of my chosen service is the shipping time. In this world we are living in, time is absolutely precious, so we want everything as fast as we can get them. Therefore, every business offering online services are encouraged to provide fast and reliable shipping options on a low cost. I would highlight the word reliable. These days companies cannot allow missed or unpunctual deliveries, because it can result in losing customer loyalty. Easy return policy can be another element to build into a well-functioning business. Trusting in your service and product by having a well-described return policy established, people are more likely motivated to purchase from you or utilize your service.

What non-price factors can affect the supply of online services and what changes can be predicted? One of the elements can be highlighted is inventory, and its management. E-commerce forces a new built/modified supply-chain strategy on the company. E-commerce and online shopping never sleeps therefore inventory needs to be constantly overviewed, require to be transparent to each member of the supply chain. Walmart operates not just a regular retail store but an online business where the connections of internal elements are highly complex: direct-to-consumer shipments, online orders, return to stores, ship-to-store, ship-from-store. All above means that Walmart has to own well-organized and well-functioning distribution and fulfillment centers in order to provide a high-quality service. In addition, the constantly-improving technology has an impact of the supply of our service we are providing as well. Either in a case of a product we are selling, or the service itself - we are providing – it has to be aligned with the rising standards of living. Evolution of the online market place system certainly influences the supply of my chosen service. It can be the main reason for Walmart to modify its business strategy and transform its e-commerce in the age of Amazon (Forte, 2017).

What is the industry and market equilibrium associated with Walmart’s online service? Market is “an abstract concept which encompasses the trading arrangements of buyers and sellers that underlie the forces of supply and demand” (Stroup, 1979). Equilibrium is “a state of balance between forces, such as supply and demand” (Stroup, 1979).

In the case of Walmart’s e-commerce service, determining whether supply drives demand or demand drives supply is quite difficult. The reason is there, hiding in almost every electronic device, we use. Look at the advertisements you are coming across on your social media account, or the promotion emails you receive, or the google pop-up messages you receive when you visit a place. All these are gathering information on you, us, consumers constantly, so they can have a better understanding of our needs, our demands therefore the supplied services and goods are in attempt to be in alignment with our demand. In the real market place equilibrium can only ever be reached in theory, so the prices of goods and services are constantly changing in relation to fluctuations in demand and supply. This fluctuation can be observed in the case of e-commerce as well. Demand and supply are existing parallel, one answering the other. This is where today’s technology has brought us. It helps us, consumers, but helps us, suppliers as well – to bridge between supply and demand, and to create equilibrium. At this moment if I have to decide, I would say that the demand might be still stronger than the supply. Why would (again) Walmart choose to open its doors, and look for new opportunities in the sector of e-commerce? Because the market for e-commerce is open, waiting for fulfillment.

What decisions related to supply and demand would be necessary for the development of Walmart online services? The key is in collaboration – to operate fewer links in their supply chain, where “suppliers and manufacturers within the supply chain synchronize their demand projections under a collaborative planning, forecasting and replenishment scheme, and every link in the chain connected through technology” (Tradegecko, n.d.). Walmart’s e-commerce success can be a result of a “long-run” strategy. As Sam Walton said about becoming a retail giant: “it was an outgrown of everything we’d been doing since 1945… it was about twenty years in the making” (Collins, 2001), the same applies turning its business strategy to e-commerce.

Talking about Walmart from the aspect of e-commerce, the following observation can be made: the company has set itself apart from stores practicing only online retails (Bhattacharyya, 2018). This means a great advantage for the company against online only retailers. Consumers – doing business online - able to enjoy the possibilities of store-pickup options as well as “to-home” deliveries.

All businesses – being online, physical or a mixture of these too (as in the case of Walmart) – need certain resources to function. Resources are the inputs used to produce outputs – like the above described e-commerce operation (Lumen Learning, n.d.). These resources can also be described as factors of production (Lumen Learning, n.d.). We have learned that there are four types of inputs entering production: natural resources or land; labor or human capital; capital as machinery, factories, equipment and entrepreneurship.

While retail – as Walmart does not directly utilize significant natural resources, its supply chain certainly does (Wal-Mart Inc, n.d.). Although natural