How Walmart Can Sell Eggs at $0.88 Per Dozen While Still Making a Profit

When you visit Walmart, you might notice that they sell eggs at a surprisingly low price, such as $0.88 per dozen. This raises the question: How do they manage to do this and still make a profit? Let's dive into the factors that enable a discount powerhouse like Walmart to sell eggs at such a low price.

Economies of Scale

Walmart is one of the largest retailers in the world, and it leverages this sheer size to its advantage. They purchase eggs in massive quantities, which allows them to negotiate lower prices with suppliers. This massive buying power ensures that the cost per unit is reduced significantly, leaving a margin for profit. In essence, the more eggs Walmart buys, the lower the cost per dozen becomes.

Low Operating Costs

Walmart is known for its highly efficient operations, including a streamlined supply chain and logistics system. By minimizing their operational costs, Walmart can sell products at lower prices while still covering all their expenses. This efficiency is a key component of their business model, allowing them to offer competitive prices without compromising on profit margins.

Loss Leaders: Attracting Customers

One effective strategy Walmart employs is selling certain items at a loss to draw customers into the store. Eggs might be priced to lose money, but the expectation is that customers will purchase other, higher-margin items. This strategy is known as a "loss leader" and is widely used by retailers to boost overall sales and customer foot traffic.

Supplier Relationships: Securing Favorable Terms

Walmart's strong relationships with suppliers enable them to secure favorable terms and pricing agreements. By maintaining good rapport with suppliers, Walmart can negotiate better prices and better terms. Additionally, Walmart may have its own private label brands that offer higher margins, further contributing to their profit margins.

Market Positioning: Low Prices Attract Customers

Walmart's business model is based on providing low prices to attract a broad customer base. This strategy can lead to high volume sales, which can compensate for lower margins on individual items like eggs. By consistently offering competitive pricing, Walmart ensures that customers keep coming back, leading to substantial overall profits.

Conclusion

Walmart can sell eggs at such a low price due to its scale, efficiency, strategic pricing, and strong supplier relationships. Although some may be concerned about the impact on suppliers, Walmart's business model ensures that they can still maintain profitability overall. The combination of bulk buying, low operating costs, and loss leader strategies enables Walmart to offer the lowest prices while still turning a profit.