Walmart’s Price Strategy – HA!

Walmart declares it will maintain affordable prices despite facing massive tariff impacts, positioning itself to gain market share while competitors struggle with rising costs.

At a Glance 

  • Walmart CEO Doug McMillon states the company is positioned to “play offense” with pricing strategies despite tariff challenges
  • Two-thirds of Walmart’s products are made in the USA and not subject to tariffs
  • Walmart+ membership program, with an estimated 25 million members, serves as a “secret weapon” during economic uncertainty
  • The retailer has historically increased market share during economic downturns
  • Electronics, clothes, and toys are expected to face the most significant price increases from tariffs

Walmart Sees Opportunity Where Others See Crisis

As President Trump’s tariffs create waves across the retail industry, Walmart is taking a bold stance by positioning itself to potentially benefit from the economic disruption. The retail giant has acknowledged it will be significantly impacted by the tariffs but aims to maintain lower prices than competitors to attract more customers during uncertain times. This strategy aligns with the company’s historical performance during economic downturns, where it has consistently gained market share. 

CEO Doug McMillon has indicated that Walmart is in a position to “play offense” and may strategically invest in pricing strategies in response to tariffs. This aggressive approach comes at a time when many retailers are warning of inevitable price increases. At a recent investor day, Walmart took the unusual step of declining to predict future profits due to tariff uncertainties, a rare move for a company of its size that signals both the gravity of the situation and potential strategic flexibility. 

American-Made Advantage and Strategic Supplier Relationships

Walmart holds a significant advantage in the current trade environment that many consumers may not realize. According to CFO John David Rainey, approximately two-thirds of Walmart’s products are made in the United States, meaning they aren’t subject to the new tariffs. This domestic sourcing strategy provides substantial insulation from the direct impacts of the tariffs, which include a 104% duty on Chinese imports and a 46% levy on goods from Vietnam. 

“While tariffs were expected, the scale and scope of them has come as a shock,” said Neil Saunders.

For products that are imported, Walmart’s massive scale gives it exceptional leverage when negotiating with suppliers. The company’s priorities include keeping prices low, managing inventory effectively, and controlling expenses amidst market volatility. 

Experts predict that certain categories will be hit harder than others, with electronics, clothing, and toys expected to become more expensive due to their heavy reliance on imports. Nonetheless, Walmart’s ability to absorb some costs and pressure suppliers for concessions positions it better than smaller competitors.

Walmart+ Membership as a Strategic Asset

Amid tariff challenges and recession fears, Walmart has been quietly building a powerful tool to maintain growth: its Walmart+ membership program. With an estimated 25 million members as of January – more than double the previous estimate from fall 2022 – the subscription service is proving to be a significant revenue driver. Members shop twice as much and spend nearly three times as much as non-subscribers, with Walmart+ members accounting for nearly 50% of spending on the company’s website and app in the most recent fiscal year.

“With the consumer driving 70 percent of the U.S. economy, Walmart’s weak guidance gave rise to some nervousness [about] potential consumer spending going forward,” said Robert Pavlik. 

The membership program offers perks like free shipping, same-day grocery deliveries, gas discounts, and a Paramount+ subscription. Recognizing economic challenges facing many Americans, Walmart has also introduced Walmart+ Assist, offering discounted membership to customers qualifying for government assistance. This initiative both expands the program’s reach and reinforces Walmart’s commitment to affordability across all customer segments. The company sees the program as a “frequency driver” that has demonstrated increased spending per subscriber and consistent growth in sign-ups.

Positioned for Growth Despite Economic Headwinds

Despite the uncertainty created by tariffs, Walmart’s forecast includes expected net sales growth of 3% to 4% and adjusted operating income increases of 3.5% to 5.5%. The company has experienced 11 consecutive quarters of double-digit online sales growth in the U.S., demonstrating its effective digital transformation. As the largest U.S. grocer, Walmart is particularly well-positioned during economic downturns when consumers become more price-sensitive and consolidate shopping trips to save on transportation costs. 

The company’s emphasis on its ability to deliver low-priced goods has driven record e-commerce traffic in 2024, further strengthening its competitive position. While the immediate impact of tariffs will cause short-term disruption and cost increases, Walmart’s combination of scale, domestic sourcing, membership program, and strategic pricing appears to be creating an opportunity for market share growth during a period that many other retailers view with trepidation. For America’s largest retailer, the tariff challenge may ultimately prove to be an opportunity to further cement its industry leadership.

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