In 1945, Sam Walton opened his first variety store and in 1962, he opened his first Wal-Mart Discount City in Rogers, Arkansas. Now, Wal-Mart is expected to exceed “$200 billion a year in sales by 2002 (with current figures of) more than 100 million shoppers a week(and as of 1999) it became the first (private-sector) company in the world to have more than one million employees. ” Why? One reason is that Wal-Mart has continued “to lead the way in adopting cutting-edge technology to track how people shop, and to buy and deliver goods more efficiently and cheaply than any other rival.
Many examples exist throughout Wal-Mart’s history including its use of networks, satellite communication, UPC/barcode adoption and more. Much of the technology that was utilized helped Sam Walton more efficiently track what he originally noted on yellow legal pads. From the very beginning, he wanted to know what the customers purchased, what inventory was selling and what stock was not selling.
Wal-Mart now “tracks on an almost instantaneous basis the ordering, shipment, and delivery of literally every item it sells, and that it requires its suppliers to hook into the system, enabling it to track most goods every step of the way from the time they’re made and packaged in the factories to when they’re carried out store doors by shoppers. ” “Wal-Mart operates the world’s most powerful corporate computing system, with a capacity (as of late 1999) of more than 100 terabytes of data (A terabyte is 1,000 gigabytes, or roughly the equivalent of 250 million pages of text. Only the U. S. government maintains a bigger database. ”
Sam Walton was eventually considered “the most influential retailer of the century, and with good reason, for nearly every great retailer of the coming years would follow his business examples. ” Industrial Revolution: When the Industrial Revolution took place in the United States, factories were now able to out produce consumer demand. For the first time, these new goods needed new ways to be sold, new ways to get to the public. “In New York, Philadelphia, and Chicago, the first department stores opened their doors.
Railroads and telegraph wires snaked across the country, giving storekeepers a new way to order goods and get them on the shelves faster than ever before. A whole new industry sprang up to persuade people through advertisements with enticing pictures and clever slogans, to buy things they’d never known they needed, to turn America, in the phrase department store pioneer John Wanamaker, into the Land of Desire. ”
At the same time, large corporations became another “dominant form of business”, such as with U. S. Steel, Swift, R. J. Reynolds, and Procter & Gamble. Department stores such as Woolworth, Penney, Sears, A&P, and Kroger became known in the retail environment. Early Discount Approach: “The first small discount stores” started in the 1930s, developed in the years after WWII and really began to take off in the 1960s as “giant discount chains”. A Brief history of Sam Walton the founder of Wal-Mart Sam Walton wanted to build a company that both cared for people and would make some money. With his timely thinking he and his partners built a company that has not slowed down.
While staying one step ahead of the ever-changing technology and methods of today’s fast paced business environment, Wal-Mart executives still rely on many of the traditional goals and philosophies that Sam embroiled on his company. The company has faced and is still facing a significant amount of controversy; however these have not contributed to any kind of downfall within the company. The future of Wal-Mart looks extremely profitable especially if they continue to increase its profits and rely on the beliefs that got them to the point they are at. In 1962, Sam Walton opened the first Wal-Mart store in Rogers, Arkansas.
Wal-Mart was at one time included in Fortune’s list of the “10 most admired corporations. ” The Wal-Mart Philosophy-Wal-Mart is successful not only because it makes sound strategic management decisions, but also for its innovative implementation of those strategic decisions. Many trace discount entrepreneur birth to1962, the first year of operation for Kmart, Target and Wal-Mart. But by that time, Sam Walton’s tiny chain of variety stores in Arkansas and Kansas was already facing competition from regional discount chains. Sam traveled the country to study this radical, new retailing concept and was convinced it was the wave of the future.
He and his wife, Helen, put up 95 percent of the money for the first Wal-Mart store in Rogers, Arkansas, borrowing heavily on Sam’s vision that the American consumer was shifting to a different type of general store. Wal-Mart is a national discount retailer offering a wide variety of general merchandise to customers. Wal-Mart stores offer pleasant and convenient shopping in 36 departments including family apparel, health and beauty aids, household needs, electronics, toys, fabrics and crafts, lawn and garden, jewelry and shoes.
In addition, some Wal-Mart stores offer a Pharmacy Department, Tire & Lube Express, garden center, snack bar or restaurant, Vision Center, and One-Hour Photo Processing for convenience (http://www. walmart. com). Wal-Mart stores operate on an “Every Day Low Price” philosophy and are able to maintain their low price structure through conscientious expense control. While other major competitors typically run 50 to 100 advertised circulars per year, Wal-Mart produces only 12-13 major circulars per year (http://www. walmart. com). The cost savings associated with fewer circulars are passed on to the customer through lower shelf prices every day.
Wal-Mart associates strive to provide exceptional customer service, a characteristic that is unique to the chain. Everything possible is done to make shopping at Wal-Mart a friendly experience (2000 Annual Report). Today, Sam’s gamble is a global company with more than 1. 3 million associates worldwide and nearly 5,000 stores and wholesale clubs across 10 countries. The “most admired retailer” according to FORTUNE magazine has just completed one of the best years in its history: Wal- Mart generated more than $256 billion in global revenue, establishing a new record and adding more than $26 billion in sales.
The company earned almost $9. 1 billion in net income and grew earnings per share by more than 15 percent. But it all started with an understanding of what consumers want from a retailer. “The secret of successful retailing is to give your customers what they want,” Sam wrote in his autobiography. “And really, if you think about it from the point of view of the customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.
You love it when you visit a store that somehow exceeds your expectations, and you hate it when a store inconveniences you, or gives you a hard time, or pretends you’re invisible. ” While other discounters such as Kmart quickly expanded across the country in the 1960s, Sam was able to raise the funds to build only 15 Wal-Mart stores. Wal-Mart got the boost it needed in 1970 when its stock was offered for the first time on the New York Stock Exchange. The public offering created the capital infusion that grew the company to 276 stores by the end of the decade. By focusing on customer expectations, Wal-Mart was growing rapidly in 11 states.
In the 1980s, Wal-Mart became one of the most successful retailers in America. Sales grew to $26 billion by 1989, compared to $1 billion in 1980. Employment increased tenfold. At the end of the decade there were nearly 1,400 stores. Wal-Mart Stores, Inc. branched out into warehouse clubs with the first SAM’S Club in 1983. The first Supercenter, featuring a complete grocery department along with the 36 departments of general merchandise, opened in 1988. Wal-Mart had become a textbook example of managing rapid growth without losing sight of a company’s basic values.
In Wal-Mart’s case, the basic value was, and is, customer service. Ironically, technology plays an important role in helping Wal-Mart stay customer focused. Wal- Mart invented the practice of sharing sales data via computer with major suppliers, such as Proctor & Gamble. Every time a box of Tide is rung up at the cash register, Wal-Mart’s data warehouse takes note and knows when it is time to alert P&G to replenish a particular store. As a result, Wal-Mart stores rarely run out of stock of popular items. Wal-Mart Stores, Inc. is principally engaged in the operation of mass merchandising stores.
At January 31, 2002, the Company operated 1,647 discount stores, 1,066 supercenters, 500 SAM’S clubs and 31 neighborhood markets in the United States. Internationally, at January 31, 2002, the Company operated units in Argentina (11), Brazil (22), Canada (196), Germany (95), South Korea (nine) Mexico (551), Puerto Rico (17) and the United Kingdom (250), and, under joint venture agreements, in China (19). The Company operates through three segments, the Wal-Mart Stores segment, the SAM’S Club segment and the International segment.
Source: MarketGuide Wal-Mart’s influence on the U. S. economy has reached levels not seen by a single company since the 19th-century rise of Standard Oil, economists and historians say. Even if you don’t shop at Wal-Mart, the retail powerhouse increasingly is dictating your product choices – and what you pay – as its relentless price-cutting helps keep inflation low. Wal-Mart is the top seller of groceries, jewelry and photo processing. It is moving into banking, used-car sales, travel and Internet access. It averages 100 million customers a week. Anyone whose stocks rose in the late 1990s owes Wal-Mart, the world’s biggest company.
It alone accounted for as much as 25 percent of the U. S. productivity gains from 1995-99, says consultant McKinsey & Co. Such gains drove corporate profits, thus stock prices. Wages in retailing, one of the biggest sources of new jobs in the ’90s and current decade, are also affected by Wal-Mart. “I joke we’re all going to be working for Wal-Mart someday,” says economist Mark Zandi of consultant Economy. com. Although Wal-Mart is hitting speed bumps because of growing labor challenges, employment lawsuits and higher costs, few doubt it will stop besting competitors as it expands.
While other retailers such as Home Depot, tech giants such as Microsoft and manufacturers such as General Electric played big parts in the 1990s productivity gains, Wal-Mart, with its massive buying power and technology advantage, played the biggest role, economists say. As it grows, its influence, largely unknown to consumers, will continue to seep into more parts of the United States and the global economies. “Everyone knows Wal-Mart,” says Jim Hoopes, a business history professor at Babson College, “but nobody has a real sense of how big and how powerful it is. ” Few companies have moved so far so fast.
Founded 40 years ago in rural Arkansas by Sam Walton, Wal-Mart has swelled to 4,300 stores in nine countries and annual revenue near $250 billion. Its computer network, a critical part of its success, rivals the Pentagon’s. It is now the biggest customer for many of the world’s leading consumer-products companies, including Kraft, Gillette and Procter & Gamble. At P&G, Wal-Mart accounts for 17 percent of annual revenue, up from 10 percent just five years ago. That makes those companies more dependent on Wal-Mart’s success, more vulnerable should it stumble and more likely to respond to Wal-Mart’s requests for lower prices and product changes.
The chain’s buying power is so immense that 450 suppliers have opened offices – many in the 1990s – near Wal-Mart headquarters in tiny Bentonville, Ark. As many as 800 more such offices are expected in the next five years. Sales representatives want to be near Wal-Mart buyers to beat the competition, says Rich Davis, a local economic development official. Wal-Mart is increasingly affecting: Product choices. P&G is dumping weak brands, such as Crisco and Jif peanut butter, sold to J. M. Smucker last year. It wants to focus on heavy hitters, such as Tide detergent, most desired by Wal-Mart and other big retailers, P&G says.
That strategy helped P&G boost fiscal second-quarter net income 14 percent year-over-year to $1. 5 billion, it said. Other companies have tweaked products so that they pass muster with Wal-Mart. Video-game maker Planet Moon Studios two years ago wanted an industry group to give its “Giants” game a teen rating. Why? So it would be carried by Wal-Mart and others. Planet Moon changed the color of blood in the video to green from red, toned down the language and put a bikini on a topless character, says CEO Bob Stevenson. Without those changes, he says, “The risk to sales was too high.
Wal-Mart is also challenging its suppliers by developing more of its own products, called “private labels. ” It stepped up that effort in the mid-1990s as it expanded into vitamins, batteries and bathroom tissue. Its Great Value grocery line has 1,475 items, up from 194 two years ago. Wal-Mart says it is committed to keeping shelves full of well-known brands such as Kellogg’s cereal and Tide. But, in general, private-label profits run as high as 30 percent, vs. 15 percent on brand-name items, says Burt Flickinger, managing director of consultant Reach Marketing.
Private-label products also promise Wal-Mart more profit as the chain expands abroad, because U. S. brands don’t have the same clout there. In Europe and the United Kingdom, where Wal-Mart is battling for Britain’s Safeway grocery chain, private-label goods are 50 percent of its sales vs. 25 percent in the United States. Product prices. Big food companies including Kraft, which gets 10 percent of its revenue from Wal-Mart, have not been able to raise prices as quickly as they once did because of Wal-Mart’s demands, says Jonathan Feeney, a consumer products analyst at investment firm SunTrust Robinson Humphrey.
Kraft declined to comment. History has shown that suppliers suffer if they run afoul of Wal-Mart. Rubbermaid raised the prices it charged Wal-Mart in the mid-1990s because of an 80 percent jump in the cost of a key ingredient in its plastic containers. The retailer responded by giving more shelf space to lower-priced competitors, helping drive Rubbermaid into a 1999 merger with rival Newell, says John Mariotti, a former Rubbermaid executive. “Rubbermaid earned Wal-Mart’s wrath by not giving it the best deal,” he says. Employment.
Wal-Mart’s impact on wages was first felt in rural towns in the South and Midwest where Wal-Mart got its start. Often, it became the biggest employer overnight, setting wage rates for all retailers, experts say. Now, its impact on retail employment has spread nationwide, contributing to slower wage growth throughout the sector, economist Zandi says. Pay for retail workers rose 43 percent from 1990 to 2001, vs. 50 percent for non-retail workers, according to Bureau of Economic Analysis data. No one knows exactly how big a part Wal-Mart played, Zandi says.
But its influence is “undeniable” because it created more jobs in the 1990s than any other company, he says. More retail jobs are on the way. Wal-Mart plans to add 800,000 workers in the next five years. U. S. retailers are expected to add 3. 1 million jobs by 2010, the government says. Manufacturers, which pay more, will add fewer than 600,000 jobs in the same period. Labor unions that represent factory workers are alarmed. They say Wal-Mart, in demanding ever-lower prices from suppliers, has helped drive thousands of U. S. nufacturing jobs abroad, where labor costs are lower.
Now they worry about Wal-Mart’s push into the unionized supermarket industry. Wal-Mart has no unions. That means its employees earn less than those at competing supermarkets, says the United Food and Commercial Workers. Wal-Mart’s hourly pay averages $7 to $8 an hour, vs. $11 at Kroger, Safeway and other competitors with unions, says UFCW spokesman Greg Denier. Not true, says Wal-Mart spokesman Tom Williams. While he would not disclose wages, which vary by market, he says Wal-Mart pay is close to or equal to union wages.
Productivity. Wal-Mart’s key role in the 1995-99 economic boom came partly because of its legendary use of technology to analyze costs and speed delivery of goods from its 30,000 suppliers to dozens of sprawling warehouses, say retail and financial analysts. Wal-Mart says it has the nation’s biggest private satellite communications network, one that links stores to Bentonville by voice, data and video. Suppliers tap directly into Wal-Mart’s computers to track sales of everything from soup to nuts, which improves inventory controls and cuts costs.
Other retailers, including Kmart, tried matching Wal-Mart’s tech prowess but failed. Kmart filed for bankruptcy-court protection last year and is cutting 67,000 jobs and closing nearly 30 percent of its stores. Wal-Mart also teaches manufacturers to be more cost-effective so product prices can stay down. For example, Wal-Mart might suggest that a supplier cut its labor costs by shipping toasters in their cartons, rather than packing them in bigger boxes and shrink-wrapping them onto shipping pallets, says James Champy, chairman of Perot Systems’ consulting unit, which advises Wal-Mart suppliers.
Such close communication between a retailer and supplier is unusual. But it’s being adopted by more companies, including Dell Computer, as U. S. businesses seek more productivity to better compete globally. “It’s where the future of business has to be,” Champy says. That future may also include fewer companies. To achieve economies of scale, more consumer products companies are merging. Wal-Mart’s demand for low-cost products partly influenced Kellogg’s purchase of Keebler in 2001, and the merger of Kraft and Nabisco in 2000, analyst Feeney says.
