History and background of Walmart, sales and profit growth, corporate mission, and key financial data from...

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General Management

History and background of Walmart, sales and profit growth,corporate mission, and key financial data from the retailer’sannual report and balance sheet.

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History and background of Walmart WalMart Stores Inc is not only the largest retailer in the world it now also ranks as the largest corporation in the world The retail giant dwarfs its nearest competition generating three times the revenues of the worlds number two retailer Frances Carrefour SA Domestically WalMart has more than 12 million workers making it the nations largest nongovernmental employer US operations include 1478 WalMart discount stores located in all 50 states 1471 WalMart Supercenters which are combined discount outlets and grocery stores and which make WalMart the countrys top food retailer 538 Sams Clubs the number two US warehouse membership club chain trailing Costco Wholesale Corporation and 64 WalMart Neighborhood Markets smaller food and drug outlets also offering a selection of general merchandise International operations which commenced in 1991 include WalMart discount stores in Canada and Puerto Rico WalMart Supercenters in Argentina Brazil China Germany Mexico Puerto Rico South Korea and the United Kingdom and Sams Clubs in Brazil China Mexico and Puerto Rico In Mexico WalMart also operates Bodegas discount stores Suburbias specialty department stores Superamas supermarkets and Vips restaurants In addition the company runs Todo Dias supermarkets in Brazil Neighborhood Markets supermarkets in China ASDA combined grocery and apparel stores in the United Kingdom and Amigo supermarkets in Puerto Rico WalMart also holds a 36 percent stake in The Seiyu Ltd a leading Japanese retailer In all more than onequarter of WalMarts stores are located outside the United States and international operations generate about 185 percent of total revenues The heirs of founder Samuel Walton continue to own about a 38 percent interest in the company Development of a Good Concept in the 1960s Founder Waltonwho at his death in 1992 was among the richest people in the United Statesgraduated from the University of Missouri in 1940 with a degree in economics and became a management trainee with JC Penney Company After two years he went into the army Upon returning to civilian life three years later he used his savings and a loan to open a Ben Franklin variety store in Newport Arkansas In 1950 he lost his lease moved to Bentonville Arkansas and opened another store By the late 1950s Sam and his brother JL Bud Walton owned nine Ben Franklin franchises In the early 1960s Sam Walton took what he had learned from studying massmerchandising techniques around the country and began to make his mark in the retail market He decided that small town populations would welcome and make profitable large discount shopping stores He approached the Ben Franklin franchise owners with his proposal to slash prices significantly and operate at a high volume but they were not willing to let him reduce merchandise as low as he insisted it had to go The Walton brothers then decided to go into that market themselves and opened their first WalMart Discount City in Rogers Arkansas in 1962 The brothers typically opened their departmentsized stores in towns with populations of 5000 to 25000 and the stores tended to draw from a large radius We discovered people would drive to a good concept Walton later recalled in a 1989 article in Financial World WalMarts good concept involved huge stores offering customers a wide variety of namebrand goods at deep discounts that were part of an everyday low prices strategy Walton was able to keep prices low and still turn a profit through sales volume as well as an uncommon marketing strategy WalMarts advertising costs generally amounted to onethird that of other discount chains most competitors were putting on sales and running from 50 to 100 advertising circulars per year but WalMart kept its prices low and ran only 12 promotions a year By the end of the 1960s the brothers had opened 18 WalMart stores while still owning 15 Ben Franklin franchises throughout Arkansas Missouri Kansas and Oklahoma These ventures became incorporated as WalMart Stores Inc in October 1969 The 1970s held many milestones for the company Early in the decade Walton implemented his warehouse distribution strategy The company built its own warehouses so it could buy in volume and store the merchandise then proceeded to build stores throughout 200squaremile areas around the distribution points This practice cut WalMarts costs and gave it more control over operations merchandise could be restocked as quickly as it sold and advertising was specific to smaller regions and cost less to distribute WalMart went public in 1970 initially trading over the counter in 1972 the company was listed on the New York Stock Exchange By 1976 the Waltons had phased out their Ben Franklin stores so that the company could put all of its expansion efforts into the WalMart stores In 1977 the company made its first significant acquisition when it bought 16 MohrValue stores in Missouri and Illinois Also in 1977 based on data from the previous five years Forbes ranked the nations discount and variety stores and WalMart ranked first in return on equity return on capital sales growth and earnings growth In 1978 WalMart began operating its own pharmacy auto service center and jewelry divisions and acquired Hutchenson Shoe Company a shoedepartment lease operation By 1979 there were 276 WalMart stores in 11 states Sales had gone from 44 million in 1970 to 125 billion in 1979 WalMart became the fastest company to reach the 1 billion mark Establishment of Sams Clubs in 1983 WalMart sales growth continued into the 1980s In 1983 the company opened its first three Sams Wholesale Clubs and began its expansion into bigger city markets Business at the 100000squarefoot cashandcarry discount membership warehouses proved to be good the company had 148 such clubs by 1991 by which time the name had been shortened to Sams Clubs The company continued to grow rapidly In 1987 WalMart acquired 18 Supersaver Wholesale Clubs which became Sams Clubs The most significant event of that year however was the opening of a new WalMarts merchandising concepttaken from one originated by a French entrepreneurthat Walton called Hypermart USA Hypermart USA stores combined a grocery store a general merchandise market and such service outlets as restaurants banks shoe shine kiosks and videotape rental units in a space that covered more area than six football fields Prices were reduced as much as 40 percent below full retail level and sales volume averaged 1 million per week compared with 200000 for a conventionalsized discount store Making customers feel at home in such a largescale shopping facility required inventiveness The Dallas store had phone hot lines installed in the aisles for customers needing directions Hypermart floors were made of a rubbery surface for ease in walking and the stores offered electric shopping carts for the disabled To entertain children there was a ball pit or playroom filled with plastic ballsan idea taken from Swedish furniture retailer Ikea Evolution of Hypermart into the WalMart Supercenter in 1988 There were also wrinkles to work out Costs for air conditioning and heating the gigantic spaces were higher than expected Traffic congestion and limited parking proved a drawback Customers also complained that the grocery section was not as wellstocked or maintained as it needed to be to compete against nearby grocery stores WalMart began addressing these problems by for example redesigning the grocery section of the Arlington Texas store In 1988 WalMart also opened five smaller supercentersaveraging around 150000 square feetfeaturing a large selection of merchandise and offering betterstocked grocery sections without the outside services such as restaurants or video stores These stores dubbed WalMart Supercenters proved much more successful than the Hypermart format which was eventually abandoned Hundreds of Supercenters were subsequently opened during the 1990s WalMart received some criticism during this period for its buying practices One analyst according to an article in the January 30 1989 edition of Fortune described the treatment sales representatives received at WalMart Once you are ushered into one of the spartan little buyers rooms expect a steely eye across the table and be prepared to cut your price WalMart was known not only for dictating the tone with its vendors but often for only dealing directly with the vendor bypassing sales representatives In 1987 100000 independent manufacturers representatives initiated a public information campaign to fight WalMarts effort to remove them from the selling process claiming that their elimination jeopardized a manufacturers right to choose how it sells its products During this time however WalMarts revenues kept going up and the company moved into new territory WalMart enjoyed a 12year streak of 35 percent annual profit growth through 1987 In 1988 the company operated in 24 statesconcentrated in the Midwest and South1182 stores 90 wholesale clubs and two hypermarts David D Glass who was named president and CEO in 1988 but who had been with the company since 1976 was a key player in WalMarts expansion In a move motivated by good business sense and public relations efforts WalMart sent an open letter to US manufacturers in March 1985 inviting them to take part in a BuyAmerican program The company offered to work with them in producing products that could compete against imports Our American suppliers must commit to improving their facilities and machinery remain financially conservative and work to fill our requirements and most importantly strive to improve employee productivity Walton told Nations Business in April 1988 Product conversionsarranging to buy competitively priced USmade goods in place of importswere regularly highlighted at weekly managers meetings William R Fields executive vicepresident of merchandise and sales estimated that WalMart cut imports by approximately 5 percent between 1985 and 1989 Nonetheless analysts estimated that WalMart still purchased between 25 and 30 percent of its goods from overseas about twice the percentage of competitor Kmart Corporation Criticism for Small Town Impact in the 1990s WalMart also came under criticism for its impact on small retail businesses Independent store owners often went out of business when WalMart came to town unable to compete with the superstores economies of scale In fact Iowa State University economist Kenneth Stone conducted a study on this phenomenon and told the New York Times Magazine April 2 1989 If you go into towns in Illinois where WalMart has been for 8 or 10 years the downtowns are just ghost towns He found that businesses suffering most were drug hardware fiveanddime sporting goods clothing and fabric stores while major appliance and furniture businesses picked up as did restaurants and gasoline stations because of increased traffic Nevertheless WalMart developed a record of See Answer

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