International growth dependant on EDLP acceptance

Saving people money so they can live better is Walmart’s mission globally, now the company just has to convince shoppers worldwide that shopping at stores that offer an every day low price value proposition is the key to their prosperity.

Leading the charge as the most articulate advocate of the EDLP business model is Walmart International president and CEO Doug McMillon. In presentations to investors, he spends a large amount of time offering a remedial education on the finer points of every day low prices and the expense control mentality that underpins and perpetuates the pricing philosophy.

“I am very confident that EDLP will work everywhere,” McMillon said.

It certainly worked in the United States for a long time before Walmart got sidetracked domestically and it has worked in such international markets as Canada and Mexico where Walmart has operated the longest. But Walmart doesn’t operate under the EDLP/EDLC approached everywhere and doing so eventually is the key to improving returns in the international division, was the overriding theme of McMillon’s presentation to financial analysts on Wednesday.

“We’ve got a great opportunity because customers today and tomorrow are going to be even more price sensitive,” McMillon said.

Heightened price sensitivity can cause shoppers to seek out deals and makes them receptive to promotional efforts by competitors, which is why it can take a long time to implement EDLP in countries where shoppers are accustomed to extensive promotional efforts. It took 18 months to convert to EDLP in Mexico in the late 90s, according to McMillon. Currently, countries where Walmart has yet to implement EDLP or the process is underway include China, South Africa, India, Argentina, Chile and Brazil.

As EDLP gains traction in more places it will drive improved same-store sales with is a dominant pillar of growth for the international group. Beyond that, McMillon noted that new store expansion, the development of ecommerce and multi-channel capabilities and store acquisitions would fuel growth.