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Wal-Mart Stores, Inc

Wal-Mart Stores, Inc.

702 Southwest 8th Street
Bentonville, Arkansas 72716-8611
U.S.A.
Telephone: (501) 273-4000
Fax: (501) 273-6850
Web site: http://www.walmartstores.com

Public Company
Incorporated: 1969
Employees: 1,500,000
Sales: $256.68 billion (2004)
Stock Exchanges: New York Pacific
Ticker Symbol: WMT
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores; 452910 Warehouse Clubs and Superstores; 452990 All Other General Merchandise Stores; 454110 Electronic Shopping and Mail-Order Houses

Wal-Mart 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 world's number two retailer, France's Carrefour SA. Domestically, Wal-Mart has more than 1.2 million workers, making it the nation's largest nongovernmental employer. U.S. operations include 1,478 Wal-Mart discount stores (located in all 50 states); 1,471 Wal-Mart Supercenters, which are combined discount outlets and grocery stores (and which make Wal-Mart the country's top food retailer); 538 Sam's Clubs, the number two U.S. warehouse membership club chain (trailing Costco Wholesale Corporation); and 64 Wal-Mart Neighborhood Markets, smaller food and drug outlets also offering a selection of general merchandise. International operations, which commenced in 1991, include Wal-Mart discount stores in Canada and Puerto Rico; Wal-Mart Supercenters in Argentina, Brazil, China, Germany, Mexico, Puerto Rico, South Korea, and the United Kingdom; and Sam's Clubs in Brazil, China, Mexico, and Puerto Rico. In Mexico, Wal-Mart 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. Wal-Mart also holds a 36 percent stake in The Seiyu, Ltd., a leading Japanese retailer. In all, more than one-quarter of Wal-Mart's stores are located outside the United States, and international operations generate about 18.5 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 J.C. 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 J.L. (Bud) Walton owned nine Ben Franklin franchises.

In the early 1960s Sam Walton took what he had learned from studying mass-merchandising 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 Wal-Mart Discount City in Rogers, Arkansas, in 1962. The brothers typically opened their department-sized stores in towns with populations of 5,000 to 25,000, 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.

Wal-Mart's "good concept" involved huge stores offering customers a wide variety of name-brand 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. Wal-Mart's advertising costs generally amounted to one-third that of other discount chains; most competitors were putting on sales and running from 50 to 100 advertising circulars per year, but Wal-Mart kept its prices low and ran only 12 promotions a year.

By the end of the 1960s the brothers had opened 18 Wal-Mart stores, while still owning 15 Ben Franklin franchises throughout Arkansas, Missouri, Kansas, and Oklahoma. These ventures became incorporated as Wal-Mart 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 200-square-mile areas around the distribution points. This practice cut Wal-Mart's 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.

Wal-Mart 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 Wal-Mart stores. In 1977 the company made its first significant acquisition when it bought 16 Mohr-Value stores in Missouri and Illinois. Also in 1977, based on data from the previous five years, Forbes ranked the nation's discount and variety stores, and Wal-Mart ranked first in return on equity, return on capital, sales growth, and earnings growth.

In 1978 Wal-Mart began operating its own pharmacy, auto service center, and jewelry divisions, and acquired Hutchenson Shoe Company, a shoe-department lease operation. By 1979 there were 276 Wal-Mart stores in 11 states. Sales had gone from $44 million in 1970 to $1.25 billion in 1979. Wal-Mart became the fastest company to reach the $1 billion mark.

Establishment of Sam's Clubs in 1983

Wal-Mart sales growth continued into the 1980s. In 1983 the company opened its first three Sam's Wholesale Clubs and began its expansion into bigger city markets. Business at the 100,000-square-foot cash-and-carry discount membership warehouses proved to be good; the company had 148 such clubs by 1991, by which time the name had been shortened to Sam's Clubs.

The company continued to grow rapidly. In 1987 Wal-Mart acquired 18 Supersaver Wholesale Clubs, which became Sam's Clubs. The most significant event of that year, however, was the opening of a new Wal-Mart's 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 $200,000 for a conventional-sized discount store.

Making customers feel at home in such a large-scale 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 Wal-Mart 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 well-stocked or maintained as it needed to be to compete against nearby grocery stores. Wal-Mart began addressing these problems by, for example, redesigning the grocery section of the Arlington, Texas, store. In 1988 Wal-Mart also opened five smaller "supercenters"averaging around 150,000 square feetfeaturing a large selection of merchandise and offering better-stocked grocery sections, without the outside services such as restaurants or video stores. These stores, dubbed Wal-Mart Supercenters, proved much more successful than the Hypermart format, which was eventually abandoned. Hundreds of Supercenters were subsequently opened during the 1990s.

Wal-Mart 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 Wal-Mart: "Once you are ushered into one of the spartan little buyer's rooms, expect a steely eye across the table and be prepared to cut your price." Wal-Mart 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, 100,000 independent manufacturers representatives initiated a public information campaign to fight Wal-Mart's effort to remove them from the selling process, claiming that their elimination jeopardized a manufacturer's right to choose how it sells its products.

Company Perspectives:

Sam Walton built Wal-Mart on the revolutionary philosophies of excellence in the workplace, customer service and always having the lowest prices. We have always stayed true to the Three Basic Beliefs Mr. Sam established in 1962: 1. Respect for the Individual. 2. Service to Our Customers. 3. Strive for Excellence

During this time, however, Wal-Mart's revenues kept going up, and the company moved into new territory. Wal-Mart enjoyed a 12-year streak of 35 percent annual profit growth through 1987. In 1988 the company operated in 24 statesconcentrated in the Midwest and South1,182 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 Wal-Mart's expansion.

In a move motivated by good business sense and public relations efforts, Wal-Mart sent an open letter to U.S. manufacturers in March 1985 inviting them to take part in a "Buy-American" 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 Nation's Business in April 1988. Product conversionsarranging to buy competitively priced U.S.-made goods in place of importswere regularly highlighted at weekly managers' meetings. William R. Fields, executive vice-president of merchandise and sales, estimated that Wal-Mart cut imports by approximately 5 percent between 1985 and 1989. Nonetheless, analysts estimated that Wal-Mart 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

Wal-Mart also came under criticism for its impact on small retail businesses. Independent store owners often went out of business when Wal-Mart came to town, unable to compete with the superstore's 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 Wal-Mart has been for 8 or 10 years, the downtowns are just ghost towns." He found that businesses suffering most were drug, hardware, five-and-dime, 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, Wal-Mart developed a record of community service. The company began awarding $1,000 scholarships to high school students in each community Wal-Mart served. At the same time, the company's refusal to stock dozens of widely circulated adult and teen magazines, including Rolling Stone, had some critics claiming that Wal-Mart was willfully narrowing the choices of the buying public by bowing to pressure from conservative special interest groups.

In 1990the year in which Wal-Mart became the number one retailer in the United States, passing both Sears, Roebuck and Co. and Kmartstores were added in California, Nevada, North Dakota, Pennsylvania, South Dakota, and Utah. The company also opened 25 Sam's Clubs, of which four were 130,000-square-foot prototypes incorporating space for produce, meats, and baked goods. In mid-1990, the company acquired Western Merchandise, Inc., of Amarillo, Texas, a supplier of music, books, and video products to many of the Wal-Mart stores. Late in 1990 Wal-Mart acquired the McLane Company, Inc., a distributor of grocery and retail products based in Temple, Texas, for about $275 million. Early in 1991, in a $162 million transaction, The Wholesale Club, Inc. of Indianapolis merged with Sam's Clubs, adding 28 stores that were to be integrated with Sam's by year-end. In addition, Wal-Mart agreed to sell its nine convenience store-gas station outlets to Conoco Inc.

Wal-Mart's expansion continued, and by 1992 the company opened about 150 new Wal-Mart stores and 60 Sam's Clubs, bringing the total to 1,720 Wal-Mart stores and 208 Sam's Clubs. Some of these stores represented a change in policy for the company, opening near big cities with large populations. Another policy change was instituted by the company when it announced that it would no longer deal with independent sales representatives.

Key Dates:

1962:
Samuel Walton and his brother J.L. (Bud) Walton open their first Wal-Mart Discount City in Rogers, Arkansas.
1969:
The brothers are operating 18 Wal-Mart stores in Arkansas, Missouri, Kansas, and Oklahoma; they incorporate these ventures as Wal-Mart Stores, Inc.
1970:
Wal-Mart stock begins trading over the counter.
1972:
The company's stock is listed on the New York Stock Exchange.
1979:
Revenues surpass $1 billion; the company is the fastest to reach this milestone.
1983:
The first Sam's Wholesale Clubs are opened; they are later renamed Sam's Clubs.
1988:
The company opens its first Wal-Mart Supercenters, combined discount outlets and grocery stores.
1990:
Wal-Mart becomes the largest retailer in the United States.
1991:
Foreign expansion begins with the creation of a joint venture with Cifra, S.A. de C.V., Mexico's largest retailer.
1994:
The company enters the Canadian market through the purchase from Woolworth Corporation of 122 Woolco stores.
1997:
Revenues surpass $100 billion; Mexican joint ventures are merged into Cifra, and then Wal-Mart acquires a controlling stake in Cifra; the company enters Europe through acquisition of the 21-unit Wertkauf hypermarket chain in Germany.
1998:
The first Wal-Mart Neighborhood Markets are opened in the United States; 74 Interspar hypermarkets are acquired in Germany.
1999:
ASDA Group plc, third largest U.K. supermarket operator, is acquired for about $10.8 billion.
2000:
After Wal-Mart increases its stake in Cifra to about 63 percent, Cifra is renamed Wal-Mart de México S.A. de C.V.
2002:
Wal-Mart takes a 35 percent interest in The Seiyu, Ltd., a leading Japanese retailer.
2003:
Fiscal 2003 revenues of $244.52 billion make Wal-Mart the world's largest corporation.

In 1991 Wal-Mart introduced its new store brand, Sam's American Choice, whose first products were beverages including colas and fruit juices. The beverages were made by Canada's largest private-label bottler, Cott Corp., but the colas were supplied from U.S. plants. Future plans called for the introduction of many different types of products that would match the quality of national brands, but at lower prices.

Beginning of Foreign Expansion in 1991

Also in 1991 Wal-Mart ventured outside the United States for the first time when it entered into a joint venture with Cifra, S.A. de C.V., Mexico's largest retailer. The venture developed a price-club store called Club Aurrera that required an annual membership of about $25. Shoppers could choose from about 3,500 products ranging from fur coats to frozen vegetables. Within the year, the joint venture operated three Club Aurreras, four Bodegas discount stores, and one Aurrera combination store.

Expansion in the United States also continued, and from 1992 to 1993, 161 Wal-Mart stores were opened, while only one was closed. Another 48 Sam's Clubs and 51 Bud's Warehouse Outlets also were opened. Expansions or relocations took place at 170 Wal-Mart stores and 40 Sam's Clubs. By 1993 the 2,138 stores included 34 Wal-Mart Supercenters and 256 Sam's Clubs.

Founder Sam Walton died on April 5, 1992, of bone cancer. A fairly smooth management transition at Wal-Mart ensued, because Walton had already hand-picked his successor, David Glass, who had served as CEO since 1988. S. Robson Walton, eldest son of the founder, was named chairman of the board.

In January 1993 Wal-Mart's reputation was shaken when a report on NBC-TV's Dateline news program reported on child laborers in Bangladesh producing merchandise for Wal-Mart stores. The program showed children working for five cents an hour in a country that lacked child labor laws. The program further alleged that items made outside the United States were being sold under "Made in USA" signs as part of the company's Buy American campaign instituted in 1985. Glass appeared on the program saying that he did not know of any "child exploitation" by the company, but did apologize about some of the signs incorrectly promoting foreign-made products as domestic items.

In April 1993 Wal-Mart introduced another private label, called Great Value. The brand was initially used for a line of 350 packaged food items for sale in its Supercenters. The proceeds from the company's other private label, Sam's American Choice, were to be channeled into the Competitive Edge Scholarship Fund, which the company launched in 1993 in partnership with some vendors and colleges. In the same year, Wal-Mart spent $830.5 million to purchase 91 Pace Membership Warehouse clubs from Kmart, which had decided to shut down the Pace chain. Wal-Mart subsequently converted the new units into Sam's Clubs. The Sam's Club chain was thereby solidifiedparticularly in California, where it gained 21 storessoon after the emergence of a rival, PriceCostco Inc. The product of the October 1993 merger of Price Co. and Costco Wholesale Corp., PriceCostcolater renamed Costco Cos. and then Costco Wholesale Corporationwould within a few years overtake the Sam's Club chain as the nation's top warehouse membership club. Overall, Wal-Mart posted profits of $2.33 billion on revenues of $67.34 billion in 1993. The company workforce now exceeded half a million people.

Mid-1990s Growth Slowdown

In the mid-1990s Wal-Mart continued to grow in the United States, but at a slower pace than previous years. Whereas the company had always posted double-digit, comparable-store sales increases, starting in fiscal 1994 these sales increases had fallen to levels closer to the retail industry average4 to 7 percent. Furthermore, overall net sales typically had risen 25 percent or more per year in the 1980s and early 1990s. For fiscal years 1996, 1997, and 1998, however, net sales increased 13 percent, 12 percent, and 12 percent, respectively. The company was beginning to reach the limits of expansion in its domestic market. This was reflected in the scaling back of the Wal-Mart discount store chain, which reached a peak of 1,995 units in 1996 before being reduced to 1,921 units by 1998. The company staked its domestic future on the Wal-Mart Supercenter chain, which was expanded from 34 units in 1993 to 441 units in 1998. Most of the new Supercenters377 in totalwere converted Wal-Mart discount stores, as the company sought the additional per-store revenue that could be gleaned from selling groceries. Meanwhile, the Sam's Club chain was struggling and was not as profitable as the company overall. As it attempted to turn this unit around, Wal-Mart curtailed its expansion in the United States; there were only 17 more Sam's Clubs in 1998 than there were in 1995.

Another vehicle for company growth was aggressive international expansion. Following its earlier move into Mexico, Wal-Mart entered into the other NAFTA market in 1994 when it purchased 122 Woolco stores in Canada from Woolworth Corporation in a $335 million deal. Over the next few years Wal-Mart entered Argentina, Brazil, and China through joint ventures. By 1997 Wal-Mart had set up several joint ventures with its Mexican partner, Cifra. That year, these joint ventures were merged together and then merged into Cifra. Wal-Mart then took a controlling, 51 percent stake in Cifra for $1.2 billion. The company thereby held a majority stake in the largest retailer in Mexico, whose 402 stores included 27 Wal-Mart Supercenters, 28 Sam's Clubs, and 347 units consisting of several chains, including Bodegas discount stores, Superamas grocery stores, and Vips restaurants.

In December 1997 Wal-Mart entered Europe for the first time when it acquired the 21-unit Wertkauf hypermarket chain in Germany for an estimated $880 million. The Wertkauf format was similar to that of the Wal-Mart Supercenter. The profitable Wertkauf chain had annual sales of about $1.4 billion and was the eighth largest hypermarket operator in Germany. Also in December 1997 Wal-Mart bought out its minority partner in its Brazilian joint venture, which by that time ran five Wal-Mart Supercenters and three Sam's Clubs. By early 1998 the company also operated nine Wal-Mart Supercenters and five Sam's Clubs in Puerto Rico. Later that year Wal-Mart announced plans to triple its retail base in China by the end of 1999, aiming for a total of nine stores at that time. Moreover, in July 1998 the company announced that it had purchased a majority stake in four stores and six additional development sites in Korea, extending its expansion in Asia. Around this same time, however, a Wal-Mart expansion into the troubled nation of Indonesia under a franchise agreement failed.

During fiscal 1997 Wal-Mart's international operations were profitable for the first time. By 1998 international sales had reached $7.5 billion, an impressive figure given that the company had begun its foreign expansion only in 1991; still this figure represented just 6.4 percent of overall sales. Although growth in sales at home were slowing down, Wal-Mart managed to exceed the $100 billion mark in overall revenues for the first time during fiscal 1997 and that year also gained further prestige through its selection as one of the 30 companies on the Dow Jones Industrial Average, a replacement for the troubled Woolworth. The firm also became the largest nongovernmental employer in the United States, with 680,000 domestic workers.

As another possible outlet for shoring up its top position in retailing in the United States and for increasing sales amid its nearing the saturation point for its Supercenters, Wal-Mart in late 1998 began testing a new format, the Wal-Mart Neighborhood Market. In an attempt to compete directly with traditional supermarkets and with convenience stores, this new concept consisted of a 40,000-square-foot store offering produce, deli foods, fresh meats, other grocery items, and a limited selection of general merchandise. The new store also featured a drive-through pharmacy. The company hoped that the Neighborhood Market would allow it to penetrate markets unable to support the huge 100,000-square-foot Supercenters, such as very small towns and certain sections within metropolitan areas.

Reaching New Heights in the Early 2000s

By 1999 Wal-Mart was the world's largest retailer (and the largest nongovernmental employer in the world, with 1.14 million employees) and was also the leading retailer in both Mexico and Canada. But it was Europe that was at the forefront of the corporation's international expansion in the late 1990s. In December 1998 Wal-Mart bolstered its German operations through the purchase of 74 Interspar hypermarkets from SPAR Handels AG. Then in July 1999 the company entered the U.K. market for the first time by acquiring ASDA Group plc for about $10.8 billion. Ranking as the third largest supermarket operator in the United Kingdom, ASDA operated 229 stores at the time of its acquisition and generated about $13.2 billion in annual revenues. Its stores were run in a fashion similar to that of Wal-Mart Supercenters: they were large-format units offering food, apparel, and general merchandise at everyday low prices, with an emphasis on private-label brands and an avoidance of promotions. The stores acquired in the United Kingdom continued to operate under the ASDA name, whereas the German units were eventually rebadged as Wal-Mart Supercenters.

In January 2000 H. Lee Scott, Jr., a 20-year company veteran, was promoted from chief operating officer to president and CEO. Scott succeeded Glass, who remained on the board of directors as chairman of the executive committee. The new leader had played an important role in reversing the declining results at Wal-Mart's domestic operations. One key to the turnaround was the adoption of a more aggressive approach to controlling bloated inventories at the stores and warehouses. Making better use of technology led both to significant decreases in inventory levels and to improved performance in keeping store shelves better stocked. Also during 2000 Wal-Mart spent $587 million to purchase another 6 percent of Cifra, which was subsequently renamed Wal-Mart de México S.A. de C.V. Wal-Mart held a stake of approximately 62 percent in this subsidiary.

During 2001 Wal-Mart became the largest food retailer in the United States as its grocery sales reached $56 billion. This milestone was reached in large measure through the aggressive rollout of the Wal-Mart Supercenter format. By early 2002 there were about 1,050 Supercenters in the United States, while the number of Wal-Mart discount stores had declined to fewer than 1,650. In fiscal 2002 alone, 178 Supercenters were opened, whereas there was a net reduction in discount units of 89 (121 had been converted to Supercenters, one was closed, and 33 were opened). At the same time, the Wal-Mart Neighborhood Markets format had grown to include 31 stores, providing a further base for the ever rising grocery revenue.

Despite some setbacks in its attempt to penetrate the very difficult German retail market, Wal-Mart kept up its steady international expansion. In 2001 the first Wal-Mart Supercenter in Puerto Rico opened for business. Then in December 2002 the firm paid approximately $242 million for Supermercados Amigo, Inc., the leading supermarket chain in Puerto Rico, with 37 outlets. Next on the expansion roster was Japan. In May 2002 Wal-Mart acquired a 6.1 percent interest in The Seiyu, Ltd. for about $51 million. Seiyu operated about 400 stores in Japan of various formats but mainly of the food-and-clothing variety. It ranked as Japan's fifth largest supermarket chain. In December 2002 Wal-Mart spent another $459 million to expand its stake in Seiyu to 35 percent, and it also had the right to increase it to nearly 67 percent by 2007. By 2003 Wal-Mart had more than 330,000 workers outside the United States, and its international operations produced $40.7 billion in sales that year, representing a 15 percent increase over the preceding year as well as about 17 percent of total revenues. International operating profits for 2003 jumped nearly 56 percent, hitting $2.03 billion. In May 2003 Wal-Mart, seeking to focus solely on retailing, sold its McLane wholesale distribution subsidiary to Berkshire Hathaway Inc. for $1.5 billion.

Overall fiscal 2003 revenues of $244.52 billion made Wal-Mart Stores, Inc. the world's largest corporation. Its achievement of becoming the first nonmanufacturing company to top the Fortune 500 was fitting as the company increasingly had become a symbol of both the positive and negative aspects of the U.S. economy of the early 2000s. In an October 6, 2003 article titled "Is Wal-Mart Too Powerful?," Business Week suggested a number of ways in which to view the power of Wal-Mart, such as: its drive to keep costs and prices down being at least partly responsible for the low rate of inflation in the late 20th and early 21st centuries; its cost-cutting focus also being a contributing factor in the shifting of factories outside the United States; and its 2002 imports from China of $12 billion representing 10 percent of total U.S. imports from that country. Furthermore, Wal-Mart had always taken a hard line on labor costs, particularly by resisting efforts to unionize its workforce. Two consequences of this were the company's extraordinarily high turnover rate of 44 percent per year for its hourly workers and the fact that in 2001 the average Wal-Mart sales clerk made less than the federal poverty level. As another way of looking at the power of Wal-Mart, Fortune in a March 3, 2003 issue estimated that the company's share of the U.S. gross national product (GNP) in 2002 was 2.3 percent. This approached the levels reached by General Motors Corporation (3 percent in 1955) and U.S. Steel Corp. (2.8 percent in 1917) when these firms were at their respective peaks. Fortune estimated that Wal-Mart's share of the nation's economy would become the biggest ever by around 2006, assuming the continuation of its then current growth rate.

As it continued to be dogged by detractors opposed to its business practices, Wal-Mart launched a PR offensive in 2003 to counter the relentless criticism it faced. But the retail giant had to contend with much more than just the attacks of journalists and social critics; it was facing a barrage of potentially damaging lawsuits. These included a host of class-action lawsuits involving employee claims that they were asked to work off the clock and to not take scheduled breaks. A sex discrimination lawsuit that potentially could involve 1.5 million current and former female employees alleged that Wal-Mart engaged in a pattern of discrimination against women in pay and promotion. In addition, in the fall of 2003 a federal investigation was launched into the company's use of a cleaning contractor that employed illegal immigrants.

Notwithstanding these legal battles, Wal-Mart Stores, Inc. was placing no brakes on its drive to become ever larger. During 2004 the company planned to open at least 220 new Supercenters, while its discount store chain would be reduced by a net of about 90 units. This would mean that for the first time there would be more Supercenters than Wal-Mart discount stores in the United States. The Neighborhood Market chain was scheduled to grow by between 25 and 30 units, and Sam's Club would add about 15 stores. The international store count would likewise increase, by about 100 units. It seemed clear that Wal-Mart intended to aggressively defend its position as the largest retailer of all time.

Principal Subsidiaries

Wal-Mart Stores East, LP; Wal-Mart Property Company; Wal-Mart Real Estate Business Trust; ASDA Group plc (U.K.).

Principal Divisions

Wal-Mart Discount Stores; Wal-Mart Supercenters; Wal-Mart Neighborhood Markets; Sam's Club.

Principal Competitors

Target Corporation; Kmart Corporation; Costco Wholesale Corporation; The Kroger Co.; Albertson's, Inc.; Walgreen Co.; CVS Corporation; Carrefour SA; Royal Ahold N.V.; Toys 'R' Us, Inc.

Further Reading

Bianco, Anthony, and Wendy Zellner, "Is Wal-Mart Too Powerful?," Business Week, October 6, 2003, pp. 10004+.

Bowermaster, Jon, "When Wal-Mart Comes to Town," New York Times Magazine, April 2, 1989.

Capell, Kerry, et al., "Wal-Mart's Not-So-Secret British Weapon," Business Week, January 24, 2000, p. 132.

Daniels, Cora, "Women vs. Wal-Mart," Fortune, July 21, 2003, pp. 7880, 82.

Donlon, J.P., "A Glass Act," Chief Executive, July/August 1995, pp. 40+.

Fitzgerald, Kate, "Suppliers Rallying Against Negative 'Dateline' Report," Advertising Age, January 4, 1993, pp. 3, 38.

Friedland, Jonathan, and Louise Lee, "The Wal-Mart Way Sometimes Gets Lost in Translation Overseas," Wall Street Journal, October 8, 1997, pp. A1, A12.

Kahn, Jeremy, "Wal-Mart Goes Shopping in Europe," Fortune, June 7, 1999, pp. 10506+.

Kelly, Kevin, "Wal-Mart Gets Lost in the Vegetable Aisle," Business Week, May 28, 1990.

Koepp, Stephen, "Make That Sale, Mr. Sam," Time, May 18, 1987.

Laing, Jonathan R., "Super-Saviors," Barron's, May 6, 1996, pp. 1719.

Lee, Louise, "Discounter Wal-Mart Is Catering to Affluent to Maintain Growth," Wall Street Journal, February 7, 1996, pp. A1, A8.

, "Facing Superstore Saturation, Wal-Mart Thinks Small," Wall Street Journal, March 25, 1998, pp. B1, B8.

Loomis, Carol J., "Sam Would Be Proud," Fortune, April 17, 2000, pp. 13036+.

Malkin, Elisabeth, "Warehouse Stores Move into Mexico," Advertising Age, January 18, 1993, p. 13.

Nelson, Emily, "Why Wal-Mart Sings, 'Yes, We Have Bananas!,"' Wall Street Journal, October 6, 1998, pp. B1, B4.

Ortega, Bob, In Sam We Trust: The Untold Story of Sam Walton and How Wal-Mart Is Devouring America, New York: Times Business, 1998.

Ortega, Bob, and Christina Duff, "Kmart Will Sell 91 Warehouse Clubs to Wal-Mart, Shut Rest of Pace Chain," Wall Street Journal, November 3, 1993, p. A4.

Quinn, Bill, How Wal-Mart Is Destroying America (and the World) and What You Can Do About It, rev. ed., Berkeley, Calif.: Ten Speed Press, 2000.

Saporito, Bill, "And the Winner Is Still . . . Wal-Mart," Fortune, May 2, 1994, pp. 62+.

, "David Glass Won't Crack Under Fire," Fortune, February 8, 1993, pp. 75+.

, "Is Wal-Mart Unstoppable?," Fortune, May 6, 1991, pp. 5059.

Schwartz, Nelson D., "Why Wall Street's Buying Wal-Mart Again," Fortune, February 16, 1998, pp. 92+.

Sellers, Patricia, "Can Wal-Mart Get Back the Magic?," Fortune, April 29, 1996, pp. 130+.

Slater, Robert, The Wal-Mart Decade: How a New Generation of Leaders Turned Sam Walton's Legacy into the World's #1 Company, New York: Portfolio, 2003.

Sparks, Debra, "Life After Sam," Financial World, December 6, 1994, pp. 52, 54.

Trimble, Vance H., Sam Walton: The Inside Story of America's Richest Man, New York: Penguin, 1990.

Useem, Jerry, "One Nation Under Wal-Mart," Fortune, March 3, 2003, pp. 6468+.

Vance, Sandra S., and Roy V. Scott, Wal-Mart: A History of Sam Walton's Retail Phenomenon, New York: Twayne, 1994.

"Wal-Mart: Will It Take Over the World?," Fortune, January 30, 1989.

Walton, Sam, with John Huey, Sam Walton, Made in America: My Story, New York: Doubleday, 1992.

"Walton's Mountain," Nation's Business, April 1988.

Whitsett, Jack, "Ten Years After Walton's Death, Wal-Mart Reflects His Vision," Arkansas Business, April 15, 2002, pp. 1+.

Zellner, Wendy, "A Grand Reopening for Wal-Mart," Business Week, February 9, 1998, pp. 86, 88.

, "The Sam's Generation," Business Week, November 25, 1991, pp. 3638.

Zellner, Wendy, et al., "How Well Does Wal-Mart Travel?," Business Week, September 3, 2001, pp. 82, 84.

, "Wal-Mart Spoken Here," Business Week, June 23, 1997, pp. 13841, 14344.

Carole Healy

updates: Dorothy Kroll, David E. Salamie

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Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc.

702 Southwest 8th Street
Bentonville, Arkansas 72716-8611
U.S.A.
(501) 273-4000
Fax: (501) 273-6850
Web site: http://www.wal-mart.com

Public Company
Incorporated:
1969
Employees: 825,000
Sales: $117.96 billion (1998)
Stock Exchanges: New York Pacific
Ticker Symbol: WMT
SICs: 5331 Variety Stores; 5311 Department Stores; 5411 Grocery Stores

Wal-Mart Stores, Inc. is the largest retailer in the world, the fourth largest company overall in the United States, and the nations largest nongovernmental employer. The retail giants domestic operations include 1,921 Wal-Mart discount stores (located in all 50 states); 441 Wal-Mart Supercenters, which are combined discount outlets and grocery stores (and which make Wal-Mart one of the countrys top food retailers); and 443 Sams Clubs, the number two U.S. warehouse membership club chain (trailing Costco). International operations, which were commenced only in 1991, include Wal-Mart format stores in Canada and Puerto Rico; Wal-Mart Supercenters in Argentina, Brazil, Mexico, and China; and Sams Clubs in Argentina, Brazil, Mexico, Puerto Rico, and China. In Mexico, Wal-Mart also operates Aurreras combination stores, Bodegas discount stores, Suburbias specialty department stores, Superamas supermarkets, and Vips restaurants. The company has also established operations in Germany and Korea. In all, one-fifth of Wal-Marts stores are located outside the United States.

Development of a Good Concept in the 1960s

Founder Samuel 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 J.C. 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 J.L. (Bud) Walton owned nine Ben Franklin franchises.

In the early 1960s Sam Walton took what he had learned from studying mass-merchandising 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 Wal-Mart Discount City in Rogers, Arkansas, in 1962. The brothers typically opened their department-sized stores in towns with populations of 5,000 to 25,000, 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.

Wal-Marts good concept involved huge stores offering customers a wide variety of name-brand 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. Wal-Marts advertising costs generally amounted to one-third that of other discount chains; most competitors were putting on sales and running from 50 to 100 advertising circulars per year, but Wal-Mart kept its prices low and only ran 12 promotions a year.

By the end of the 1960s the brothers had opened 18 Wal-Mart stores, while still owning 15 Ben Franklin franchises throughout Arkansas, Missouri, Kansas, and Oklahoma. These ventures became incorporated as Wal-Mart 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 200-square-mile areas around the distribution points. This practice cut Wal-Marts 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.

Wal-Mart went public in 1970, initially trading over the counter; in 1972 the company was listed on the New York Stock Exchange. By 1976 the Waitons had phased out their Ben Franklin stores so that the company could put all of its expansion efforts into the Wal-Mart stores. In 1977 the company made its first significant acquisition when it bought 16 Mohr-Value 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 Wal-Mart ranked first in return on equity, return on capital, sales growth, and earnings growth.

In 1978 Wal-Mart began operating its own pharmacy, auto service center, and jewelry divisions, and acquired Hutchenson Shoe Company, a shoe-department lease operation. By 1979 there were 276 Wal-Mart stores in 11 states. Sales had gone from $44 million in 1970 to $1.25 billion in 1979.

Sams Clubs Are Established in 1983

Wal-Mart 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 100,000-square-foot cash-and-carry 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 Wal-Mart acquired 18 Supersaver Wholesale Clubs, which became Sams Clubs. The most significant event of that year, however, was the opening of a new Wal-Marts 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 to $200,000 for a conventional-sized discount store.

Making customers feel at home in such a large-scale 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.

Hypermart Evolves into the Wal-Mart Supercenter

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 well-stocked or maintained as it needed to be to compete against nearby grocery stores. Wal-Mart began addressing these problems by, for example, redesigning the grocery section of the Arlington, Texas, store. Wal-Mart also opened five smaller supercentersaveraging around 150,000 square feetfeaturing a large selection of merchandise and offering better-stocked grocery sections, without the outside services such as restaurants or video stores. These stores, dubbed Wal-Mart Supercenters, proved much more successful than the Hypermart format, which was eventually abandoned. Hundreds of Supercenters were subsequently opened during the 1990s.

Wal-Mart 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 Wal-Mart: 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. Wal-Mart 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, 100,000 independent manufacturers representatives initiated a public information campaign to fight Wal-Marts 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, Wal-Marts revenues kept going up, and the company moved into new territory. Wal-Mart enjoyed a 12-year streak of 35 percent annual profit growth through 1987. In 1988 the company operated in 24 statesconcentrated in the Midwest and South1,182 stores, 90 wholesale clubs, and two hypermarts. President and Chief Executive Officer David D. Glass, who had been with the company since 1976, was a key player in Wal-Marts expansion.

Company Perspectives:

Yes! We Can. Its much more than a slogan or icon. Its a frame of mind; a principle; a commitment to taking care of the business. Its the guide for success.

Retail merchants, no matter how small or how large, must remember this principle if they plan to grow the business: customers are an asset, not a disruption. By listening to them, meeting their needs and making their shopping experience a positive one, a local store can rise above all attacks of the competition. Even when success comes your way, the best response must be a heightened commitment to these basic principles. The final product of the Wal-Mart experience is a complete mixture of the efforts of all associates. It includes a family atmosphere with outstanding customer service, quality name brand products, low prices and fun and exciting memories.

In a move motivated by good business sense and public relations efforts, Wal-Mart sent an open letter to U.S. manufacturers in March 1985 inviting them to take part in a Buy-American 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 U.S.-made goods in place of importswere regularly highlighted at weekly managers meetings. William R. Fields, executive vice-president of merchandise and sales, estimated that Wal-Mart cut imports by approximately five percent between 1985 and 1989. Nonetheless, analysts estimated that Wal-Mart 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

Wal-Mart also came under criticism for its impact on small retail businesses. Independent store owners often went out of business when Wal-Mart 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 Wal-Mart has been for 8 or 10 years, the downtowns are just ghost towns. He found that businesses suffering most were drug, hardware, five-and-dime, sporting goods, clothing, and fabric stores, while major appliance and furniture businesses picked up, as did restaurants and gasoline stations, due to increased traffic.

Nevertheless, Wal-Mart developed a record of community service. The company began awarding $1,000 scholarships to high school students in each community Wal-Mart served. At the same time, the companys refusal to stock dozens of widely circulated adult and teen magazines, including Rolling Stone, had some critics claiming that Wal-Mart was willfully narrowing the choices of the buying public by bowing to pressure from conservative special interest groups.

In 1990 Wal-Mart added its first stores in California, Nevada, North Dakota, Pennsylvania, South Dakota, and Utah. The company also opened 25 Sams Clubs, of which four were 130,000-square-foot prototypes incorporating space for produce, meats, and baked goods. In mid-1990, the company acquired Western Merchandise, Inc., of Amarillo, Texas, a supplier of music, books, and video products to many of the Wal-Mart stores. Late in 1990 Wal-Mart acquired the McLane Company, Inc., a distributor of grocery and retail products based in Temple, Texas. Early in 1991 The Wholesale Club, Inc. of Indianapolis merged with Sams Clubs, adding 28 stores that were to be integrated with Sams by year-end. Also, Wal-Mart agreed to sell its nine convenience store-gas station outlets to Conoco Inc.

Wal-Marts expansion continued, and by 1992 the company opened about 150 new Wal-Mart stores and 60 Sams Clubs, bringing the total to 1,720 Wal-Mart stores and 208 Sams Clubs. Some of these stores represented a change in policy for the company, opening near big cities with large populations. Another policy change was instituted by the company when it announced that it would no longer deal with independent sales representatives.

In 1991 Wal-Mart introduced its new store brand, Sams American Choice, the first products for which were such beverages as colas and fruit juices. The beverages were made by Canadas largest private-label bottler, Cott Corp., but the colas were supplied from U.S. plants. Future plans called for the introduction of many different types of products that would match the quality of national brands, but at lower prices.

Expanding Outside the United States in 1991

Also in 1991 Wal-Mart ventured outside the United States for the first time when it entered into a joint venture with Cifra, S.A. de C.V., Mexicos largest retailer. The venture developed a price-club store called Club Aurrera which required an annual membership of about $25. Shoppers could choose from about 3,500 products ranging from fur coats to frozen vegetables. Within the year, the joint venture operated three Club Aurreras, four Bodegas discount stores, and one Aurrera combination store.

Expansion in the United States also continued, and from 1992 to 1993,161 Wal-Mart stores were opened, while only one was closed. Another 48 Sams Clubs and 51 Buds Warehouse Outlets were also opened. Expansions or relocations took place at 170 Wal-Mart stores and 40 Sams Clubs. All told, there was a net addition of 34.5 thousand square feet of retail space. By 1993 the 2,138 stores included 34 Wal-Mart Supercenters and 256 Sams Clubs.

Founder Sam Walton died on April 5, 1992, of bone cancer. A fairly smooth management transition at Wal-Mart ensued, since Walton had already hand-picked his successor, David Glass, who had served as CEO since 1988.

In January 1993 Wal-Marts reputation was shaken when a report on NBC-TVs Dateline news program reported on child laborers in Bangladesh producing merchandise for Wal-Mart stores. The program showed children working for five cents an hour in a country that lacked child labor laws. The program further alleged that items made outside the United States were being sold under Made in USA signs as part of the companys Buy American campaign instituted in 1985. Glass appeared on the program saying that he did not know of any child exploitation by the company, but did apologize about some of the signs incorrectly promoting foreign-made products as domestic items.

In April 1993 Wal-Mart introduced another private label, called Great Value. The brand was initially used for a line of 350 packaged food items for sale in its supercenter stores. The proceeds from the companys other private label, Sams American Choice, were to be channeled into the Competitive Edge Scholarship Fund, which the company launched in 1993 in partnership with some vendors and colleges. In the same year, Wal-Mart purchased 91 Pace Membership Warehouse clubs from Kmart, which had decided to shut down the Pace chain. Wal-Mart subsequently converted the new units into Sams Clubs. The Sams Club chain was thereby solidifiedparticularly in California, where it gained 21 storessoon after the emergence of a rival, PriceCostco Inc. The product of the October 1993 merger of Price Co. and Costco Wholesale Corp., Price Costcolater renamed Costco Cos.would within a few years overtake the Sams Club chain as the nations top warehouse membership club.

Mid-1990s Growth Slowdown

In the mid-1990s Wal-Mart continued to grow in the United States, but at a slower pace than previous years. Whereas the company had always posted double-digit, comparable stores, sales increases, starting in fiscal 1994 these sales increases had fallen to levels closer to the retail industry averagefour to seven percent. Furthermore, overall net sales had typically risen 25 percent or more per year in the 1980s and early 1990s. For fiscal years 1996, 1997, and 1998, however, net sales increased 13 percent, 12 percent, and 12 percent, respectively. The company was beginning to reach the limits of expansion in its domestic market. This was reflected in the scaling back of the Wal-Mart discount store chain, which reached a peak of 1,995 units in 1996 before being reduced to 1,921 units by 1998. The company staked its domestic future on the Wal-Mart Supercenter chain, which was expanded from 34 units in 1993 to 441 units in 1998. Most of the new Supercenters377 in totalwere converted Wal-Mart discount stores, as the company sought the additional per-store revenue that could be gleaned from selling groceries. Meanwhile, the Sams Club chain was struggling and was not as profitable as the company overall. As it attempted to turn this unit around, Wal-Mart curtailed its expansion in the United States; there were only 17 more Sams Clubs in 1998 than there were in 1995.

Another vehicle for company growth was aggressive international expansion. Following its earlier move into Mexico, Wal-Mart entered into the other NAFTA market in 1994 when it purchased 122 Woolco stores in Canada from Woolworth Corporation. Over the next few years Wal-Mart entered Argentina, Brazil, and China through joint ventures. By 1997 Wal-Mart had set up several joint ventures with its Mexican partner, Cifra. That year, these joint ventures were merged together and then merged into Cifra. Wal-Mart then took a controlling, 51 percent stake in Cifra for $1.2 billion. The company thereby held a majority stake in the largest retailer in Mexico, whose 402 stores included 27 Wal-Mart Supercenters, 28 Sams Clubs, and 347 units consisting of several chains, including Bodegas discount stores, Superamas grocery stores, and Vips restaurants.

In December 1997 Wal-Mart entered Europe for the first time when it acquired the 21-unit Wertkauf hypermarket chain in Germany. The Wertkauf format was similar to that of the Wal-Mart Supercenter. The profitable Wertkauf chain had annual sales of about $1.4 billion and was the eighth largest hypermarket operator in Germany. Also in December 1997 Wal-Mart bought out its minority partner in its Brazilian joint venture, which by that time ran five Wal-Mart Supercenters and three Sams Clubs. By early 1998 the company also operated nine Wal-Mart Supercenters and five Sams Clubs in Puerto Rico. Later that year Wal-Mart announced plans to triple its retail base in China by the end of 1999, aiming for a total of nine stores at that time. Moreover, in July 1998 the company announced that it had purchased a majority stake in four stores and six additional development sites in Korea, extending its expansion in Asia. Around this same time, however, a Wal-Mart expansion into the troubled nation of Indonesia under a franchise agreement appeared to have failed.

During fiscal 1997 Wal-Marts international operations were profitable for the first time. By 1998 international sales had reached $7.5 billion, an impressive figure given that the company had only begun its foreign expansion in 1991; still this figure represented only 6.4 percent of overall sales. Although growth in sales at home were slowing down, Wal-Mart managed to exceed the $100 billion mark in overall revenues for the first time during fiscal 1997 and that year also gained further prestige through its selection as one of the 30 companies on the Dow Jones Industrial Average, a replacement for the troubled Woolworth.

As another possible outlet for shoring up its top position in retailing in the United States and for increasing sales amid its reaching the saturation point for its Supercenters, Wal-Mart in late 1998 began testing a new format, the Wal-Mart Neighborhood Market. In an attempt to compete directly with traditional supermarkets and with convenience stores, this new concept consisted of a 40,000-square-foot store offering produce, deli foods, fresh meats, other grocery items, and a limited selection of general merchandise. The new store also featured a drive-through pharmacy. The company hoped that the Neighborhood Market would allow it to penetrate markets unable to support the huge 100,000-square-foot Supercenters, such as very small towns and certain sections within metropolitan areas. Even if this attempt to penetrate the grocery sector ended in failure, Wal-Mart was sure to remain a giant retailer representing stiff competition for others in the industry.

Principal Subsidiaries

Wal-Mart Stores East, Inc.; Sams West, Inc.; Sams East, Inc.; Wal-Mart Property Company; Sams Property Company; Mc-Lane Company, Inc.; Cifra, S.A. de C.V. (Mexico; 51%).

Further Reading

Bowermaster, Jon, When Wal-Mart Comes to Town, New York Times Magazine, April 2, 1989.

Donlon, J.P., A Glass Act, Chief Executive, July/August 1995, pp. 40 +.

Fitzgerald, Kate, Suppliers Rallying Against Negative Dateline Report, Advertising Age, January 4, 1993, pp. 3, 38.

Friedland, Jonathan, and Louise Lee, The Wal-Mart Way Sometimes Gets Lost in Translation Overseas, Wall Street Journal, October 8, 1997, pp. Al, A12.

Kelly, Kevin, Wal-Mart Gets Lost in the Vegetable Aisle, Business Week, May 28, 1990.

Koepp, Stephen, Make That Sale, Mr. Sam, Time, May 18, 1987. Laing, Jonathan R., Super-Saviors, Barrons, May 6, 1996, pp. 17-19.

Lee, Louise, Discounter Wal-Mart Is Catering to Affluent to Maintain Growth, Wall Street Journal, February 7, 1996, pp. Al, A8.

_____, Facing Superstore Saturation, Wal-Mart Thinks Small, Wall Street Journal, March 25, 1998, pp. Bl, B8.

Malkin, Elisabeth, Warehouse Stores Move into Mexico, Advertising Age, January 18, 1993, p. 13.

Nelson, Emily, Why Wal-Mart Sings, Yes, We Have Bananas!, Wall Street Journal, October 6, 1998, pp. Bl, B4.

Ortega, Bob, In Sam We Trust: The Untold Story of Sam Walton and How Wal-Mart Is Devouring America, New York: Times Business, 1998.

Ortega, Bob, and Christina Duff, Kmart Will Sell 91 Warehouse Clubs to Wal-Mart, Shut Rest of Pace Chain, Wall Street Journal, November 3, 1993, p. A4.

Saporito, Bill, And the Winner Is Still ... Wal-Mart, Fortune, May 2, 1994, pp. 62 +.

_____, David Glass Wont Crack Under Fire, Fortune, February 8, 1993, pp. 75 +.

_____, Is Wal-Mart Unstoppable?, Fortune, May 6, 1991, pp. 50-59.

Schwartz, Nelson D., Why Wall Streets Buying Wal-Mart Again, Fortune, February 16, 1998, pp. 92 +.

Sellers, Patricia, Can Wal-Mart Get Back the Magic?, Fortune, April 29, 1996, pp. 130+.

Sparks, Debra,Life After Sam, Financial World, December 6,1994, pp. 52, 54.

Trimble, Vance H., Sam Walton: The Inside Story of Americas Richest Man, New York: Penguin, 1990, 319 p.

Vance, Sandra S., and Roy V. Scott, Wal-Mart: A History of Sam Waltons Retail Phenomenon, New York: Twayne, 1994, 220 p.

Wal-Mart: Will It Take Over the World?, Fortune, January 30,1989.

Walton, Sam, with John Huey, Sam Walton, Made in America: My Story, New York: Doubleday, 1992, 269 p.

Waltons Mountain, Nations Business, April 1988.

Zellner, Wendy, A Grand Reopening for Wal-Mart, Business Week, February 9, 1998, pp. 86, 88.

_____, The Sams Generation, Business Week, November 25, 1991, pp. 36-38.

Zellner, Wendy, et al, Wal-Mart Spoken Here, Business Week, June 23, 1997, pp. 138-41, 143-44.

Carole Healy and Dorothy Kroll
updated by David E. Salamie

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Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc.

702 Southwest 8th Street
Bentonville, Arkansas 72716
U.S.A.
(501) 273-4000

Fax: (501) 273-8650
Public Company
Incorporated: 1969
Employees: 434,000
Sales: $55.48 billion
Stock Exchanges: New York Pacific
SICs: 5331 Variety Stores; 5311 Department Stores

Wal-Mart Stores, Inc., is a national discount department store chain operating primarily in small towns throughout the United States. In 1993 the company had more than 1,900 stores in 45 states and Puerto Rico. Its founder, Samuel Walton, was among the richest people in the United States at his death in 1992.

Walton graduated from the University of Missouri in 1940 with a degree in economics and became a management trainee with J. C. 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 J. L. (Bud) Walton owned nine Ben Franklin franchises.

In the early 1960s Sam Walton took what he had learned from studying mass-merchandising 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 decided to go into that market themselves and opened their first Wal-Mart Discount City in Rogers, Arkansas, in 1962. The brothers typically opened their department-sized stores in towns with populations of 5,000 to 25,000, and the stores tended to draw from a large radius. We discovered people would drive to a good concept, Walton said in Financial World on April 4, 1989.

Wal-Marts good concept involved huge stores offering customers a wide variety of name-brand goods at deep discounts that were part of an every day-low-prices strategy. Walton was able to keep prices low and still turn a profit through sales volume and an uncommon marketing strategy. Wal-Marts advertising costs generally came to one-third that of other discount chains; most competitors were putting on sales and running from 50 to 100 advertising circulars per year, but Wal-Mart kept its prices low and only ran 12 promotions a year.

By the end of the 1960s the brothers had opened 18 Wal-Mart stores and owned 15 Ben Franklin franchises throughout Arkansas, Missouri, Kansas, and Oklahoma. These ventures became incorporated as Wal-Mart 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 200-square-mile areas around the distribution points. This cut Wal-Marts costs and gave it more control over operations. It meant that merchandise could be restocked as quickly as it sold, and that advertising was specific to smaller regions and cost less to distribute.

Wal-Mart 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 phased out their Ben Franklin stores so the company could put all of its expansion efforts into the Wal-Mart stores. In 1977 the company made its first significant acquisition when it bought 16 Mohr-Value in Missouri and Illinois. Also in 1977, based on data from the previous five years, Forbes ranked the nations discount and variety stores, and Wal-Mart ranked first in return on equity, return on capital, sales growth, and earnings growth.

In 1978 Wal-Mart began operating its own pharmacy, auto service center, and jewelry divisions, and acquired Hutchenson Shoe Company, a shoe-department lease operation. By 1979 there were 276 Wal-Mart stores in 11 states. Sales had gone from $44 million in 1970 to $1.25 billion in 1979.

Wal-Mart 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 100,000-square-foot cash-and-carry discount membership warehouses proved to be good; the company had 148 such clubs in 1991, by which time the name had been shortened to Sams Clubs.

The company continued to grow by leaps and bounds. In 1987 Wal-Mart acquired 18 Supersaver Wholesale Clubs, which became Sams Clubs. The most significant event of that year, and perhaps the decade, was the opening of Wal-Marts newest merchandising concepttaken from one originated by a French entrepreneurthat Walton called Hypermart USA. Hypermart USA stores combine a grocery store, a general merchandise market, and services such as restaurants, banking, shoe shines, and videotape rentals in a space that covers more area than six football fields. Prices are reduced as much as 40% below full retail level, and sales volume averages $1 million per week, compared to $200,000 for a conventional-sized discount store. Dubbed malls without walls, there were four of these facilities in the United States in 1991.

Making customers at home in such a large-scale shopping facility required inventiveness. The Dallas store had phone hot-lines installed in the aisles for customers needing directions. Hypermart floors are made of a rubbery surface for ease in walking, and the stores offer electric shopping carts for the disabled. To entertain children, there is a playroom filled with plastic ballsan idea taken from the Swedish furniture retailer Ikea.

There have also been wrinkles to work out. Costs for air conditioning and heating the gigantic spaces have been higher than expected. Traffic congestion and parking nightmares have proven a drawback. Customers also have complained that the grocery section is not as well-stocked or maintained as it needs to be to compete against nearby grocery stores. Wal-Mart has tried addressing these problems by, for example, redesigning the grocery section of the Arlington, Texas, store. Wal-Mart has also opened five smaller supercentersaveraging around 150,000 square feetfeaturing a large selection of merchandise and offering better-stocked grocery sections, without the outside services such as restaurants or video stores.

Wal-Mart has received some criticism for its buying practices. For example, according to Fortune (January 30, 1989), sales representatives are given this treatment: 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. Wal-Mart has been known not only for setting the tone with its vendors for buying and selling, but often for only dealing directly with the vendor, bypassing sales representatives. In 1987, 100,000 independent manufacturers representatives initiated a public information campaign to fight Wal-Marts effort to remove them from the selling process, claiming that their elimination jeopardized a manufacturers right to choose how it sells its products.

Meanwhile, Wal-Marts revenues kept going up, and the company has moved into new territory. Wal-Mart enjoyed a 12-year streak of 35% annual profit growth through 1987. In 1988 the company operated in 24 statesconcentrated in the Midwest and South1,182 stores, 90 wholesale clubs, and 2 hypermarts. President and chief executive officer David D. Glass, who had been with the company since 1976, was a key player in Wal-Marts expansion.

In a move that was part good business and part public relations, Wal-Mart sent an open letter to U.S. manufacturers in March 1985 inviting them to take part in a buy-American 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 U.S.-made goods in place of importsare regularly highlighted at weekly managers meetings. William R. Fields, executive vice-president of merchandise and sales, estimated that Wal-Mart cut imports by approximately 5% between 1985 and 1989. Nonetheless, analysts estimated that Wal-Mart still purchased between 25% and 30% of its goods from overseas, about twice as much as Kmart. Wal-Mart has also been criticized for its impact on small retail businesses. Independent store owners often went out of business when Wal-Mart 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 Wal-Mart has been for 8 or 10 years, the downtowns are just ghost towns. He found that businesses suffering most were drug, hardware, five-and-dime, sporting goods, clothing, and fabric stores, while major appliance and furniture businesses picked up, as did restaurants and gasoline stations, due to increased traffic.

Wal-Mart has a record of community service, however. It awards a $1,000 scholarship to a high school student in each community Wal-Mart serves. But the companys refusal to stock dozens of widely circulated adult and teen magazines, including Rolling Stone, had some critics claiming that Wal-Mart was willfully narrowing the choices of the buying public by bowing to pressure from conservative groups.

In 1990 the company continued to grow, adding its first Wal-Mart stores in California, Nevada, North Dakota, Pennsylvania, South Dakota, and Utah. It also opened 25 Sams Clubs, of which four were 130,000-square-foot prototypes incorporating space for produce, meats, and baked goods. In mid-1990, the company acquired Western Merchandise, Inc., of Amarillo, Texas, a supplier of music, books, and video products to many of the Wal-Mart stores. Late in 1990 Wal-Mart acquired the McLane Company, Inc., a distributor of grocery and retail products. Early in 1991 The Wholesale Club, Inc., merged with Sams Clubs, adding 28 stores that were to be integrated with Sams by year end. Also, Wal-Mart agreed to sell its nine convenience store-gas station outlets to Conoco Inc.

Wal-Marts expansion continued in 1991, and by 1992 the company opened about 150 new Wal-Mart stores and 60 Sams Clubs, bringing the total to 1,720 Wal-Mart stores and 208 Sams Clubs. Some of these stores represented a change in policy for the company, opening near big cities with large populations. Another policy change was instituted by the company when it announced that it would no longer deal with independent sales representatives.

In 1991 Wal-Mart introduced its new store brand, Sams American Choice, and its first products were beverages, colas, and fruit juices. The beverages were made by Canadas largest private-label bottler, Cott Corp., but the colas were supplied from U.S. plants. Future plans called for the introduction of many different types of products that would match the quality of national brands, but at lower prices.

In 1992 Wal-Mart moved into Mexico, where it entered into a joint venture with Cifra, that nations largest retailer. The venture developed a price-club store called Club Aurrera which required an annual membership of about $25. Shoppers could choose from about 3,500 products ranging from fur coats to frozen vegetables. Within the year, the joint venture operated three Club Aurreras, four Bodegas discount stores, and one Aurrera combination store.

Expansion in the United States also continued, and from 1992 to 1993, 161 Wal-Mart stores were opened and one was closed. Another 48 Sams Clubs and 51 Buds Warehouse Outlets were also opened. Expansions or relocations took place at 170 Wal-Mart stores and 40 Sams Clubs. All told, there was a net addition of 34,556,271 square feet of retail space. By 1993, the 1,914 stores included 40 Supercenters in 45 states and Puerto Rico, and 27 Sams Clubs in 41 states.

In January 1993 Wal-Marts reputation was shaken when a report on Dateline on NBC-TV showed child laborers in Bangladesh producing merchandise for the stores. The program showed children working for 5 cents an hour in a country that lacked child labor laws.

The program further alleged that items made outside the United States were being sold under Made in USA signs as part of the companys Buy American campaign instituted in 1985. CEO David Glass appeared on the program saying that he didnt know of any child exploitation by the company, but did apologize about some of the signs incorrectly promoting foreign-made products as domestic items.

In April 1993 Wal-Mart introduced another private label, called Great Value. The brand was initially used for a line of 350 packaged food items for sale in its supercenter stores. The proceeds from the companys other private label, Sams American Choice, were to be channeled into the Competitive Edge Scholarship Fund, which the company launched in 1993 in partnership with some vendors and colleges. In the same year, Wal-Mart started to build an experimental store that would sell products made from recycled materials, in keeping with the companys environmental position of using recycled paper and plastic materials.

The company planned to open 150 new Wal-Mart stores and 65 Sams Clubs in 1994. About 100 older stores and 25 clubs were to be expanded or relocated, including 40 Wal-Mart stores to be operated as Supercenters. Also planned was the construction of two new full-line distribution centers, two grocery distribution centers, a distribution center to process clothing, and a storage center, as well as the introduction of the first Wal-Mart Supercenters in Monterrey and Mexico City.

Principal Subsidiaries

Kuhns Big K Stores Corp.; North Arkansas Wholesale Co., Inc.; Wal-Mart Realty Co.; Super Saver Warehouse Club, Inc.; McLane Company, Inc.; The Wholesale Club, Inc.

Further Reading

Bowermaster, Jon, When Wal-Mart Comes To Town, New York Times Magazine, April 2, 1989.

Fitzgerald, Kate, Suppliers Rallying Against Negative Dateline Report, Advertising Age, January 4, 1993, p. 3, 38.

Kelly, Kevin, Wal-Mart Gets Lost in the Vegetable Aisle, Business Week, May 28, 1990.

Koepp, Stephen, Make That Sale, Mr. Sam, Time, May 18, 1987.

Malkin, Elisabeth, Warehouse Stores Move Into Mexico, Advertising Age, January 18, 1993, p. 13.

Retailing: Wal-Kart Stores Inc., Wall Street Journal, April 6, 1993, B8.

Saporito, Bill, Is Wal-Mart Unstoppable? Fortune, May 6, 1991, pp. 5059.

Wal-Mart: Will It Take Over the World?, Fortune, January 30, 1989.

Waltons Mountain, Nations Business, April 1988.

Zellner, Wendy, The Sams Generation, Business Week, November 25, 1991, pp. 3638.

Carole Healy

updated by Dorothy Kroll

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Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc.

702 Southwest Eighth Street
Bentonville, AR 72716-8611
(800) 925-6278
www.walmartstores.com

On July 2, 1962, a new store opened in the small town of Rogers, Arkansas. The sign outside the store assured customers, "We Sell for Less" and "Satisfaction Guaranteed." The man making those promises was Sam Walton, founder of Wal-Mart. From his first store in Rogers to the company's thousands of stores around the world today, Wal-Mart Stores, Inc. has continued to give customers low prices in a friendly shopping environment. That combination has made Wal-Mart the largest retailer in the world, and, as of 2001, the largest U.S. corporation based on total sales.

A New Store for Changing Times

Sam Walton entered the retail business after serving in World War II (1939-45), buying a Ben Franklin variety store, or what used to be called a "five-and-dime." These stores sold a variety of small, inexpensive items, such as kitchen gadgets and toys. Walton's store was part of a franchise: Walton owned and operated the store, but the parent company, Butler Brothers, educated him in retailing and told him what to sell and how much to charge. By 1960, Walton and his brother James L. (Bud) Walton owned fifteen stores in Arkansas and several neighboring states.

In 1962, Walton wanted to try a new concept. Discount stores had emerged in the 1950s, selling a wide assortment of everyday items, and charging much less than department stores or variety stores. Larger than five-and-dimes, discount stores made their profits on volumeselling in huge quantities. Walton approached Butler Brothers about opening a discount store in Arkansas, but the company wasn't interested. Fearing the death of variety stores as discount stores grew Walton decided to pursue the new business on his own. As he wrote in his autobiography, Sam Walton: Made in America, "I wasn't about to sit there and become a target." With his brother and his wife Helen, he launched Wal-Mart.

Based in Bentonville, Arkansas, where Walton ran one of his Ben Franklin stores, Wal-Mart grew quickly from one store to more than two dozen. Walton's strategy was to place large discount stores in rural areas where other retailers believed they could not make enough money to survive. Walton drew customers with his steep price cuts, which he called "everyday low prices," on a wide variety of goods. He saved money by advertising less frequently than most retailersonly about twelve times a yearand by negotiating with suppliers for the best prices possible.

Wal-Mart at a Glance

  • Employees: 1.24 million
  • CEO: H. Lee Scott
  • Subsidiaries: ASDA Group Ltd.; McLane Company, Inc.; Sam's East, Inc.; Sam's Property Company; Sam's Real Estate Business Trust; Sam's West, Inc.; Wal-Mart Property Company; Wal-Mart Real Estates Business Trust; Wal-Mart Stores East, Inc.; Wal-Mart de Mexico S.A. de C.V.; Wal-Mart.com, Inc.; Wares Delaware Corporation
  • Major Competitors: Kmart Corporation; Target Corporation; Kohl's; Sears, Roebuck & Company; May Department Stores; J. C. Penney Company, Inc.; Costco
  • Notable Stores: Wal-Mart Sam's Club; Wal-Mart Supercenters; Wal-Mart Neighborhood Markets

Walton also instructed his sales staffknown as "associates"to treat customers with courtesy. Later he added greeters to his stores, who met customers at the door. Walton also promoted what he called the ten-foot rule. Any time associates came within ten feet of customers, they were expected to greet the customers and offer assistance.

Innovations in Retail

Walton's philosophy reflected the small-town values he grew up with, and that his customers shared. But there was nothing small about Walton's vision on how to run his business. In the mid-1960s, before most retailers were using computers, Wal-Mart started keeping track of its inventory, or the products it carried, on computers. By the 1990s, the company had the largest commercial computer database in the United States. Walton also built his own warehouses so he could buy large quantities of goods at a lower price. He then built new stores close to the warehouses. Shipping costs fell, and stores could be restocked quickly if an item sold out.

Timeline

1962:
Sam Walton opens the first Wal-Mart discount store in Rogers, Arkansas.
1969:
Sam Walton incorporates his stores as Wal-Mart Stores, Inc.
1970:
Wal-Mart sells its stock to the public for the first time.
1977:
Wal-Mart buys sixteen Mohr-Value stores, its first purchase of existing stores.
1979:
Wal-Mart Stores, Inc, has $1 billion in annual sales for the first time.
1983:
The first Sam's Wholesale Club opens in Midwest City, Oklahoma.
1988:
The first Supercenter opens in Washington, Missouri.
1990:
Wal-Mart becomes the largest U.S. retailer and profits reach $1 billion.
1991:
The first Wal-Mart outside the United States opens in Mexico City.
1992:
Sam Walton dies and his son S. Robson Walton becomes chairman of the board.
1997:
Wal-Mart sales pass $100 billion per year.

Another way Wal-Mart lowered prices was by introducing private-label goods. The company hired manufacturers to make items for them then Wal-Mart put their own labels on the products. Since Wal-Mart bought the goods in huge volume and did not spend money advertising them, it could sell the goods cheaper than similar name-brand items. Some of Wal-Mart's private labels include Sam's American Choice, 01 Roy, and Great Value.

Walton also was quick to borrow good ideas from other retailers. In 1983, he opened the first Sam's Wholesale Club, using the warehouse concept introduced by Price Club. Customers paid a fee to become members and shop in a large warehouse filled with heavily discounted items, such as office supplies, electronics, and groceries. Today the stores are known as Sam's Clubs. Wal-Mart also tried an idea first used in Europe and Brazil: hypermarkets. These gigantic supermarkets sold groceries and featured restaurants, banks, and video stores under one roof. Walton opened a few Hypermarkets, which evolved into Wal-Mart Supercenters. The first of these stores opened in 1988. Not as large as the Hypermarkets, the Supercenters combined a typical Wal-Mart with a grocery store; some also featured one-hour photo developing and oil-change facilities for cars.

In 1985, Wal-Mart introduced a new purchasing program that won public attention. With "Bring It Home to the USA," Wal-Mart actively sought U.S. manufacturers for many items the company previously bought from overseas companies. The program started at a time when some U.S. companies were firing American workers and opening factories abroad. The country also had a growing trade deficitAmericans bought more goods from foreign nations than they sold overseas. Wal-Mart estimated that from 1985 to 1991, it spent $5 billion on American-made items that used to come from foreign sources. In his autobiography, Sam Walton noted that the program helped both the country and his company: "Every job we save creates another potential Wal-Mart customer who's not worrying about where his or her next dollar is coming from."

The first Wal-Mart store in Rogers was 18,000 square feetabout four times the size of the five-arid-dime Sam Walton ran in Bentonville, Arkansas. Today, a typical Wal-Mart has more than 90,000 square feet of retail space; Supercenters are twice as big.

Continuing Growthand Criticism

By the time of Sam Walton's death in 1992, Wal-Mart was the largest retailer in the United States, with almost two thousand stores (including Sam's Clubs). Some of this growth came from acquiring other discount chains. Wal-Mart stores were now located in larger towns and in cities, as well as in rural areas, and had spread across the country. In 1991, the company began its first foreign operation, opening a store in Mexico. Since then, Wal-Mart has continued to expand overseas, often by buying local stores and turning them into Wal-Marts. By 2001, the company had more than one thousand stores overseas.

Wal-Mart's innovations and amazing growth has served as a model for other retailers and companies in other industries. Some of Wal-Mart's effects and practices, however, have led to criticism. Several Web sites on the Internet are dedicated to complaints about the company. The charges include:

  • Wal-Mart forces the closing of small, local retailers unable to compete with the chain's volume;
  • the stores' "big box" building style has created environmental problems and traffic congestion;
  • even with the "Bring It Home to the USA" program, Wal-Mart sells a large number of foreign-made goodsmore than some of its competitors;
  • employees are low paid and discouraged from joining unions, which help workers earn better salaries and benefits.

To counter critics, Wal-Mart points to its impressive record of encouraging good relations with employees and the communities it serves. From the beginning, Sam Walton let employees buy stock in the company; some became wealthy from their investments. In a 2001 profile of Wal-Mart, the Sunday Times of London noted, "Staff enthusiasm for the company is obvious." The company has also been praised for its attempts to hire more minorities. For charitable giving, Wal-Mart contributes more than $100 million a year to promote education, health, and other worthwhile causes. And in yearly surveys conducted by Fortune magazine, Wal-Mart is usually ranked as one of the most admired companies in the world.

Stopping Wal-Mart

Some towns see the opening of a new Wal-Mart as a positive. The store brings jobs and lower prices. But in several states, local citizens sometimes feel threatened when they hear that Wal-Mart wants to come to their town. In 1998, some residents in the Mesa, Arizona, area opposed the building of a Supercenter. The increase in traffic and noise, they argued, would lower property values. In rural states, such as Vermont, Wal-Mart opponents have used an economic argument: Wai-Marts take away business from local stores, which are then forced to close. During a 1993 fight to stop Wal-Mart from opening a store in Williston, Newsday reported that one Vermont resident called the retail chain "bloodsuckers," and other opponents referred to the company as "Sprawl-Mart." Wal-Mart responds to this kind of criticism by pointing out a store's benefits to local communities, including the taxes it pays and the other new businesses that often follow Wal-Mart into a town.

Looking Ahead

In 2000, H. Lee Scott took over as chief executive officer (CEO) of Wal-Mart Stores, Inc. That year, the company operated almost thirty-five hundred stores in the United States and had more than $190 billion in sales worldwide. At the time, Wal-Mart was promoting its newest concept, the Neighborhood Market, which it started in 1998. Much smaller than the traditional Wal-Mart stores, Neighborhood Markets let the company enter areas where it could not find the space for a larger store. The typical Neighborhood Market features items normally sold at grocery stores, drug stores, and stationery stores. Wal-Mart also joined the world of "e-tailing," or selling on the Internet, offering goods through Wal-Mart.com, a partnership with Accel Partners.

Since becoming the number-one retailer, Wal-Mart's profit growth has slowed, compared to the booming years of the 1970s and 1980s. But the company's sales reached $220 billion in 2001, and its stores still attracts more than one hundred million people every week looking for the low prices and good service Sam Walton first promised them in 1962.

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Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc.

702 Southwest 8th Street
Bentonville, Arkansas 72716
U.S.A.
(501) 273-4000
Fax: (501) 273-8650

Public Company
Incorporated: 1969
Employees: 328,000
Sales: $32.60 billion
Stock Exchanges: New York Pacific

Wal-Mart Stores, Inc., is a national discount department store chain operating primarily in small towns throughout the United States. In 1991 the company had more than 1,700 stores. Its founder, Samuel Walton, at that time was estimated to be among the richest people in the United States.

Walton graduated from the University of Missouri in 1940 with a degree in economics and became a management trainee with J.C. 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 J. L. (Bud) Walton owned nine Ben Franklin franchises.

In the early 1960s Sam Walton took what he had learned from studying mass-merchandising 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 decided to go into that market themselves and opened their first Wal-Mart Discount City in Rogers, Arkansas, in 1962. The brothers typically opened their department-sized stores in towns with populations of 5,000 to 25,000, and the stores tended to draw from a large radius. We discovered people would drive to a good concept, Walton said in Financial World on April 4, 1989.

Wal-Marts good concept involved huge stores offering customers a wide variety of name-brand 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 and an uncommon marketing strategy. Wal-Marts advertising costs generally came to one third that of other discount chains; most competitors were putting on sales and running from 50 to 100 advertising circulars per year, but Wal-Mart kept its prices low and only ran 12 promotions a year.

By the end of the 1960s the brothers had opened 18 Wal-Mart stores and owned 15 Ben Franklin franchises throughout Arkansas, Missouri, Kansas, and Oklahoma. These ventures became incorporated as Wal-Mart 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 200-square-mile areas around the distribution points. This cut Wal-Marts costs and gave it more control over operations. It meant that merchandise could be restocked as quickly as it sold, and that advertising was specific to smaller regions and cost less to distribute.

Wal-Mart 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 phased out their Ben Franklin stores so the company could put all of its expansion efforts into the Wal-Mart stores. In 1977 the company made its first significant acquisition when it bought 16 Mohr-Value 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 Wal-Mart ranked first in return on equity, return on capital, sales growth, and earnings growth.

In 1978 Wal-Mart began operating its own pharmacy, auto service center, and jewelry divisions, and acquired Hutchen-son Shoe Company, a shoe-department lease operation. By 1979 there were 276 Wal-Mart stores in 11 states. Sales had gone from $44 million in 1970 to $1.25 billion in 1979.

Wal-Mart 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 100,000-square-foot cash-and-carry discount membership warehouses proved to be good; the company had 148 such clubs in 1991, by which time the name had been shortened to Sams Clubs.

The company continued to grow by leaps and bounds. In 1987 Wal-Mart acquired 18 Supersaver Wholesale Clubs, which became Sams Clubs. The most significant event of that year, and perhaps the decade, was the opening of WalMarts newest merchandising concepttaken from one originated by a French entrepreneurthat Walton called Hypermart USA. Hypermart USA stores combine a grocery store, a general merchandise market, and services such as restaurants, banking, shoe shines, and videotape rentals in a space that covers more area than six football fields. Prices are reduced as much as 40% below full retail level, and sales volume averages $1 million per week, compared to $200,000 for a conventional-sized discount store. Dubbed malls without walls, there were four of these facilities in the United States in 1991.

Making customers at home in such a large-scale shopping facility required inventiveness. The Dallas store had phone hotlines installed in the aisles for customers needing directions. Hypermart floors are made of a rubbery surface for ease in walking, and the stores offer electric shopping carts for the disabled. To entertain children, there is a playroom filled with plastic ballsan idea taken from the Swedish furniture retailer Ikea.

There have also been wrinkles to work out. Costs for air conditioning and heating the gigantic spaces have been higher than expected. Traffic congestion and parking nightmares have proven a drawback. Customers also have complained that the grocery section is not as well-stocked or maintained as it needs to be to compete against nearby grocery stores. Wal-Mart has tried addressing these problems by, for example, redesigning the grocery section of the Arlington, Texas, store. Wal-Mart has also opened five smaller supercentersaveraging around 150,000 square feetfeaturing a large selection of merchandise and offering better-stocked grocery sections, without the outside services such as restaurants or video stores.

Wal-Mart has received some criticism for its buying practices. For instance, according to Fortune (January 30, 1989) sales representatives are given this treatment: 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. Wal-Mart has been known not only for setting the tone with its vendors for buying and selling, but often for only dealing directly with the vendor, bypassing sales representatives. In 1987, 100,000 independent manufacturers representatives initiated a public information campaign to fight Wal-Marts effort to remove them from the selling process, claiming that their elimination jeopardized a manufacturers right to choose how it sells its products.

Meanwhile, Wal-Marts revenues kept going up, and the company has moved into new territory. Wal-Mart enjoyed a 12-year streak of 35% annual profit growth through 1987. In 1988 the company operated in 24 statesconcentrated in the Mid west and South1,182 stores, 90 wholesale clubs, and 2 hypermarts. President and chief executive officer David D. Glass, who had been with the company since 1976, was a key player in Wal-Marts expansion.

In a move that was part good business and part public relations, Wal-Mart sent an open letter to U.S. manufacturers in March 1985 inviting them to take part in a buy-American 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 US-made goods in place of importsare regularly highlighted at weekly managers meetings. William R. Fields, executive vice president of merchandise and sales, estimated that Wal-Mart cut imports by approximately 5% between 1985 and 1989. Nonetheless, analysts estimated that Wal-Mart still purchased between 25% and 30% of their goods from overseas, about twice as much as Kmart.

Wal-Mart has also been criticized for its impact on small retail businesses. Independent store owners often went out of business when Wal-Mart 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 Wal-Mart has been for 8 or 10 years, the downtowns are just ghost towns. He found that businesses suffering most were drug, hardware, five-and-dime, sporting goods, clothing, and fabric stores, while major appliance and furniture businesses picked up, as did restaurants and gasoline stations, due to increased traffic.

Wal-Mart has a record of community service, however. It awards a $1,000 scholarship to a high school student in each community Wal-Mart serves. But the companys refusal to stock dozens of widely circulated adult and teen magazines, including Rolling Stone, had some critics claiming that Wal-Mart was willfully narrowing the choices of the buying public by bowing to pressure from conservative groups.

In 1990 the company continued to grow, adding its first Wal-Mart stores in California, Nevada, North Dakota, Pennsylvania, South Dakota, and Utah. It also opened 25 Sams Clubs, of which four were 130,000-square-foot prototypes incorporating space for produce, meats, and baked goods. Late in 1990 Wal-Mart acquired the McLane Company, Inc., a distributor of grocery and retail products. Early in 1991 The Wholesale Club, Inc., merged with Sams Clubs, adding 28 stores that were to be integrated with Sams by year end. Also, Wal-Mart agreed to sell its nine convenience store-gas station outlets to Conoco Inc. Wal-Marts expansion plans in 1991 included 150 to 160 Wal-Mart stores, 35 Sams Clubs, and 2 supercenters.

Principal Subsidiaries

Kuhns Big K Stores Corp.; North Arkansas Wholesale Co., Inc.; Wal-Mart Properties, Inc.; Wal-Mart Realty Co.; Super Saver Warehouse Club, Inc.; McLane Company, Inc.

Further Reading

Koepp, Stephen, Make That Sale, Mr. Sam, Time, May 18, 1987; Waltons Mountain, Nations Business, April 1988; Wal-Mart: Will It Take Over the World? Fortune, January 30, 1989; Bowermaster, Jon, When Wal-Mart Comes To Town, The New York Times Magazine, April 2, 1989; Kelly, Kevin, Wal-Mart Gets Lost in the Vegetable Aisle, Business Week, May 28, 1990; Facts About Wal-Mart Stores, Inc., Wal-Mart Stores, Inc., corporate typescript, 1990.

Carole Healy

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Wal-Mart

WAL-MART

WAL-MART was founded by Samuel Moore Walton in Rogers, Arkansas, in July 1962. He built a chain of huge discount stores mostly situated in small rural towns. Wal-Mart's success was based on everyday low prices, item merchandizing, volume movement of goods, and customer-orientated, non-unionized employees known as "associates." By Walton's death in 1992, Wal-Mart had displaced thousands of small town "Main Street" stores and become America's biggest retailer. During the 1990s Wal-Mart successfully expanded into Canada, Latin America, Europe, and the Far East. At the beginning of the twenty-first century, Wal-Mart was the largest employer in the United States and the world's biggest retailer.

BIBLIOGRAPHY

Ortega, Bob. In Sam We Trust: The Untold Story of Sam Walton, and How Wal-Mart is Devouring America. New York: Times Business, 1998.

Vance, Sandra S., and Roy V. Scott. Wal-Mart: A History of Sam Walton's Retail Phenomenon. New York: Twayne, 1994.

Richard A.Hawkins

See alsoRetailing Industry .

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Wal-Mart Stores

WAL-MART STORES


Wal-Mart Stores, Inc. was founded by Samuel Walton who graduated from the University of Missouri in 1940 with a degree in economics and went on to become a management trainee for J. C. Penney Company. After two years he went into the army, and upon his return 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 J. L. (Bud) Walton owned nine Ben Franklin franchises.

In the early 1960s Sam Walton took what he had learned from studying mass merchandising 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 decided to go into that market themselves and opened their first Wal-Mart Discount City in Rogers, Arkansas, in 1962. The brothers typically opened their department-sized stores in towns with populations of 5,000 to 25,000, and the stores tended to draw from a large radius. "We discovered people would drive to a good concept," Walton said in Financial World on April 4, 1989.

Wal-Mart's "good concept" involved huge stores offering customers a wide variety of name-brand goods at deep discounts that were part of an everyday-lowprices strategy. Walton was able to keep prices low and still turn a profit through sales volume and an uncommon marketing strategy. Wal-Mart's advertising costs generally amounted to one-third that of other discount chains. Most competitors were putting on sales and running from 50 to one hundred advertising circulars per year, but Wal-Mart kept its prices low and only ran 12 promotions a year. By the end of the 1960s the brothers had opened 18 Wal-Mart stores and owned 15 Ben Franklin franchises throughout Arkansas, Missouri, Kansas, and Oklahoma. These ventures became incorporated as Wal-Mart 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 two hundred square mile areas around the distribution points. This cut Wal-Mart's costs and gave it more control over operations. It also meant that merchandise could be restocked as quickly as it was sold, and that advertising was specific to smaller regions and cost less to distribute.

Wal-Mart went public in 1970 to be listed on the New York Stock Exchange two years later. By 1976 the Waltons phased out their Ben Franklin stores so the company could put all of its expansion efforts into the Wal-Mart stores. By 1979 there were 276 Wal-Mart stores in 11 states. Sales had gone from $44 million in 1970 to $1.25 billion in 1979.

Sam's Clubs100,000-square-foot, cash-and-carry discount membership warehousesmade their first appearance in 1983, proving so popular in the bigger markets that there were 148 of them by 1991. Overall the company had 1,500 stores in 29 states by 1990 with net sales of nearly $26 billion. Wal-Mart surpassed Sears as the number one retailer in the United States in 1991.

Wal-Mart came under much scrutiny for its impact on small townsspecifically, small retail businesses in those towns. Independent store owners often went out of business when Wal-Mart came to town, unable to compete with the superstore's economies of scale. In fact Iowa State University economist Kenneth Stone conducted a study on this phenomenon and told the New York Times Magazine, "If you go into towns in Illinois where Wal-Mart has been for eight or 10 years, the downtowns are just ghost towns." He found that the businesses suffering most were drug, hardware, five-and-dime, sporting goods, clothing, and fabric stores, while major appliance and furniture businesses picked up, as did restaurants and gasoline stations, because of increased traffic. Wal-Mart did, however, develop a record of community service by awarding a $1,000 scholarship to a high school student in each community Wal-Mart operated in.

Wal-Mart continued to expand throughout the 1990s both in the United States and abroad. The U.S. growth was notable for the emergence of the new Wal-Mart Supercenter format, which was a Wal-Mart discount store with an integrated grocery store. The success of the Supercenters catapulted Wal-Mart into the top five U.S. food retailers. By the late 1990s Wal-Mart's domestic operations included more than 1,900 Wal-Mart discount stores (located in all 50 states), about 440 Wal-Mart Supercenters, and about 440 Sam's Clubs. Wal-Mart, whose revenue stood at $137.63 billion, had also become the largest retailer in the world, the fourth-largest company overall in the United States, and the nation's largest non-governmental employer with 825,000 employees.

See also: Chain Stores


FURTHER READING

Bowermaster, Jon. "When Wal-Mart Comes to Town." New York Times Magazine, April 2, 1989.

Ortega, Bob. In Sam We Trust: The Untold Story of Sam Walton and How Wal-Mart Is Devouring America. New York: Times Business, 1998.

Trimble, Vance H. Sam Walton: The Inside Story of America's Richest Man. New York: Penguin, 1990.

Vance, Sandra S., and Roy V. Scott. Wal-Mart: A History of Sam Walton's Retail Phenomenon. New York: Twayne, 1994.

Walton, Sam, with John Huey. Sam Walton, Made in America: My Story. New York: Doubleday, 1992.

Zellner, Wendy, et. al. "Wal-Mart Spoken Here." Business Week, June 23, 1997.

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