How do companies like Wal-Mart keep their prices low?
http://www.cio.com/research/scm/edit/012202_scm.html Wal-Mart is a pioneer of supply chain management, which is explained below (from the above site). Supply chain management is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service, manufactures that product or service and delivers it to customers. Let’s look at consumer packaged goods as an example of collaboration. If there are two companies that have made supply chain a household word, they are Wal-Mart and Procter & Gamble. Before these two companies started collaborating back in the ’80s, retailers shared very little information with manufacturers. But then the two giants built a software system that hooked P&G up to Wal-Mart’s distribution centers. When P&G’s products run low at the distribution centers, the system sends an automatic alert to P&G to ship more products. In some cases, the system goes all the way to the individual Wal-Mart sto
Besides supply chain management and buying in bulk, Wal-mart keeps their prices low because they choose to. The business strategy behind Wal-mart is geared toward the long-term as opposed to the short-term. Rather than charge customers high prices and having them go somewhere else, Wal-mart chooses to charge as little as possible and therefore stave off competition. Wal-mart only has a 3.5% profit margin. That means for every dollar they sell, they only make 3.5 cents. But the key is selling a massive amount of goods.
