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Walmart Case
Walmart Case
Sam Walton
Born: 1918
USA
Died: 1992
Occupation: Chairman, Wal-Mart
Net worth: $15.2 Billions 1985- 1988 Forbes 400
Samuel Moore Walton (March 29, 1918 – April 6, 1992) was the founder of two American
retailers, Wal-Mart and Sam's Club. He was the patriarch of the Walton family, the richest family
in the world.
Early Life
Sam Walton was born to Thomas Gibson Walton and Nancy Lee Walton near Kingfisher,
Oklahoma on March 29, 1918. There, he lived with his parents on their farm until 1923. Sam's
father decided farming did not generate enough income on which to raise a family, so he decided
to go back to a previous profession of a mortgage man. So he and his family (now with another
son, James, born in 1921) moved from Oklahoma to Missouri. There they moved from one small
town to another for several years. While attending 8th grade in Shelbina, Sam became the
youngest Eagle Scout in the state's history. In adult life, Walton became a recipient of the
Distinguished Eagle Scout Award from the Boy Scouts of America.
Walton excelled physically in high school, playing basketball and football as starting quarterback
for Columbia's Hickman High School in 1935, when they won the state title. While at Hickman,
he also served as vice president of the student body his junior year and as president his senior
year. He performed well enough academically to become an honors student.
Growing up during the Great Depression, Walton had numerous chores to help make financial
ends meet for his family. He milked the family cow, bottled the surplus and drove it to
customers. Afterwards, he would deliver newspapers on a paper route. Upon graduating, he was
voted "Most Versatile Boy."
Upon graduating, Walton decided to attend college, hoping to find a better way to help support
his family. He attended the University of Missouri - Columbia and majored in economics and
was an ROTC officer. During this time, he worked various odd jobs, including waiting tables in
exchange for meals. Also during his time in college, Walton joined the estimable Zeta Phi
chapter of Beta Theta Pi fraternity. He was also tapped by QEBH, the well-known secret society
on campus honoring the top senior men. Upon graduating, he was voted "permanent president"
of the class. He was also a member of the professional business fraternity Alpha Kappa Phi.
Walton joined JCPenney as a management trainee in Des Moines, Iowa three days after
graduating from college. This position earned him $75 a month. He resigned in 1942 in
anticipation of being inducted into the military for service in World War II. In the meantime, he
worked at a DuPont munitions plant near Tulsa, Oklahoma. There he met his future wife, Helen
Robson, in April 1942.
Robson was the valedictorian of her high school class and a graduate of the University of
Oklahoma at Norman with a degree in business. She was the daughter of L.S. Robson, a
prosperous banker and rancher. She and Sam were married February 14, 1943.
Soon afterwards, Walton joined the military in the US Army Intelligence Corps, supervising
security at aircraft plants and prisoner of war camps.
In this position he served in the continental United States. He eventually reached the rank of
captain.
Quotations
It’s a story about entrepreneurship, and risk and hard-work and knowing″ where you want to go
and being willing to do what it takes to get there. And it’s a story about believing in your idea
even when may be some other folks don’t and about sticking to your guns.”
"I guess in all my years, what I heard more often than anything was: a town of less than 50,000
populations cannot support a discount store for very long.
"I'd hate to see any descendants of mine fall into the category of what I call "idle rich"...I hope
they'll feel compelled to do something productive and useful and challenging...working on cures
for cancer, or figuring out ways to bring culture and education to the underprivileged, or
becoming missionaries for free enterprise in the Third World. Or maybe - and this is strictly my
idea - there's another Walton merchant lurking in the wings somewhere down the line. "
"There is only one boss: the customer, and he (or she) can fire everyone in the company from the
chairman and down, simply by spending their money somewhere else"
Running a successful business, tens rules that worked for me”″
– Sam Walton
1) Commit to your business
2) Share your profits with all your associates and treat them as partners.
3) Motivate your partners
4) Communicate everything you possibly can to your partners.
5) Appreciate everything your associates do for the business.
6) Celebrate your successes
7) Listen to everyone in your company.
8) Exceed to your customer’s expectations.
9) Control your expenses better than your competition.
10) Swim upstream: Against the common stream of the world.
Company History
The history of Wal-Mart can be traced back to the 1940s Sam Walton began his career in
retailing. After being interviewed by recruiters from both Sears Roebuck and JC Penney just
before graduating from the University of Missouri in Columbia, Sam accepted a job offer from
JC Penney. He began working at a JC Penney store in Des Moines, Iowa on June 3, 1940,
making a salary of $75 a month. During his employment there, Sam was able to meet James
Cash Penney, the department store's founder, during a visit to the store. He remained at JC
Penney for eighteen months.
In 1945, Sam met with Butler Brothers, a regional retailer that owned two franchise operations: a
chain of department stores called Federated Stores, and a chain of variety stores called Ben
Franklin. Butler Brothers offered Sam a Ben Franklin store in Newport, Arkansas. Unable to
come to agreement on his lease renewal and unable to find a new location in Newport, Walton
located a variety store in Bentonville, Arkansas which he would open as another Ben Franklin
franchise, but called "Walton's Five and Dime."
As a typical businessman, he was always looking for better deals from his suppliers, and he
realized that he could obtain higher sales volume by passing on the savings to his customers,
instead of pocketing them. And in 1962, the first Wal-Mart store opened in Rogers, Arkansas. By
1967, the company grew to 24 stores across the state of Arkansas, and had reached $12.6 million
in sales, and by 1968, the company opened its first stores outside of Arkansas in Sikeston,
Missouri and Claremore, Oklahoma.
Before moving out in 1951, Walton arranged for another location for a new store. Unable to find
a new location in Newport, Walton located a variety store in Bentonville, Arkansas which he
would open as another Ben Franklin franchise, but called "Walton's Five and Dime." In
Bentonville, the Walton’s became involved in numerous civic activities. Walton served as
president of the Rotary Club and the Chamber of Commerce. He was also elected to the city
council, served on the hospital board, and launched a Little League baseball program in the city
in 1954.
Walton went on to found another variety store in Fayetteville, Arkansas, about 20 miles south of
Bentonville in 1952. It would share the same name as the store in Bentonville but was not a Ben
Franklin franchise. It went on to become as successful as the original Five and Dime. Of this
time, Walton said, "I did something I would do for the rest of my run in the retail business
without any shame or embarrassment whatsoever: nose around other people's stores searching
for good talent."
His search turned up Willard Walker, a manager of a TG&Y variety store in Tulsa, Oklahoma.
With Walker he did something else that is commonplace today, but was unusual for the time
when he did it. Walton offered Walker a percentage of the store's profit, what today is known as
profit sharing. Walton proceeded to visit the store once a week to handle any problems and
reviewed the store's profit and loss statement once a month.
About this time, Walton introduced the concept of check-out counters at one location in the
store.
Registers throughout the store were moved to one location near the exits. Customers could be
rung up for all their purchases and pay for them at one time, instead of paying for several things
at several locations. Walton also insisted that his stores be clean, well-lit, and on sharing profits
with employees, increasing their loyalty.
Sam Walton’s tiny chain of variety stores in Arkansas and Kansas was already facing
competition from regional discount chains. Sam traveled the country to study this radical, new
retailing concept and was convinced it was the wave of the future.
Today, Sam’s gamble is a global company with more than 1.8 million associates worldwide and
nearly 6,500 stores and wholesale clubs across 15 countries.
But it all started with an understanding of what consumers want from a retailer.
"The secret of successful retailing is to give your customers what they want," Sam wrote in his
autobiography. "And really, if you think about it from the point of view of the customer, you
want everything: a wide assortment of good quality merchandise; the lowest possible prices;
guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours;
free parking; a pleasant shopping experience.
"You love it when you visit a store that somehow exceeds your expectations, and you hate it
when a store inconveniences you, or gives you a hard time, or pretends you’re invisible."
While other discounters such as Kmart quickly expanded across the country in the 1960s, Sam
was able to raise the funds to build only 15 Wal-Mart stores. Wal-Mart got the boost it needed in
1970, when its stock was offered for the first time on the New York Stock Exchange. The public
offering created the capital infusion that grew the company to 276 stores by the end of the
decade. By focusing on customer expectations, Wal-Mart was growing rapidly in 11 states.
In the 1980s, Wal-Mart became one of the most successful retailers in America. Sales grew to
$26 billion by 1989, compared to $1 billion in 1980. Employment increased tenfold. At the end
of the decade there were nearly 1,400 stores. Wal-Mart Stores, Inc. branched out into warehouse
clubs with the first SAM´S Club in 1983. The first Super center, featuring a complete grocery
department along with the 36 departments of general merchandise, opened in 1988. Wal-Mart
had become a textbook example of managing rapid growth without losing sight of a company’s
basic values. In Wal-Mart’s case, the basic value was, and is, Customer Service.
Ironically, technology plays an important role in helping Wal-Mart stay customer focused. Wal-
Mart invented the practice of sharing sales data via computer with major suppliers, such as
Proctor & Gamble. Every time a box of Tide is rung up at the cash register, Wal-Mart’s data
warehouse takes note and knows when it is time to alert P&G to replenish a particular store. As a
result, Wal-Mart stores rarely run out of stock of popular items.
Wal-Mart’s Legacy:-
1960s
1962 Company founded with opening of first Wal-Mart in Rogers, Ark.
1992 Wal-Mart has entered 45 states with the addition of Idaho, Montana and Oregon.
1992 Wal-Mart enters Puerto Rico.
1996 Wal-Mart has first $100 billion sales year, with sales totaling $118.1 billion for 1997 per
AR ´98.
1997 Wal-Mart replaces Woolworth on the Dow Jones Industrial Average.
1997 Wal-Mart introduces OneSource nutrition centers.
1997 Wal-Mart acquires 21 Wertkauf units in Germany.
1998 Wal-Mart introduces Neighborhood Market concept with three stores in Arkansas.
1998 Wal-Mart exceeds $100 million in annual charitable contributions, with donations totaling
$102 million.
1998 Wal-Mart enters Korea through a joint venture agreement.
1999 Wal-Mart has 1,140,000 associates, making the company the largest private employer in
the world.
1999 Eleventh 100 percent stock split in March. Market price: $89.75.
1999 Wal-Mart acquires the ASDA Group plc. in the United Kingdom (229 stores).
1999 Wal-Mart ranked #1 Corporate Citizen in America in the 1999 Cone/Roper Report, an
annual national survey on philanthropy and corporate citizenship.
2000s
2000 Wal-Mart ranked 5th by FORTUNE magazine in its Global Most Admired All-Stars list.
2000 H. Lee Scott named president and CEO of Wal-Mart Stores, Inc.
2000 Wal-Mart ranked #1 Corporate Citizen in America in the 2000 Cone/Roper Report, an
annual national survey on philanthropy and corporate citizenship.
2001 Wal-Mart named by FORTUNE Magazine as the 3rd most admired company in America.
2001 Wal-Mart ranked by Hispanic Business Magazine as one of the Top 25 Diversity
Recruitment Programs in 2001 for its aggressive program to hire and promote Latinos.
2002 Wal-Mart received the 2002 Ron Brown Award, the highest Presidential Award
recognizing outstanding achievement in employee relations and community initiatives.
2002 Wal-Mart ranked #1 on the FORTUNE 500 listing.
2002 Wal-Mart has the biggest single day sales in history: $1.43 billion on the day after
Thanksgiving.
2003 Wal-Mart named by FORTUNE magazine as the most admired company in America.
2004 FORTUNE magazine placed Wal-Mart in the top spot on its "Most Admired Companies"
list for the second year in a row.
2004 Wal-Mart was presented the "Corporate Patriotism Award" which is presented to a
company that exhibits exceptional dedication to raising awareness and support of U.S. service
members and their families.
2005 Wal-Mart Stores, Inc. closed out the year with $312.4 billion in sales, while expanding to
more than 6,200 facilities around the world, including 3,800 stores in the United States, along
with 3,800 international units. Around the globe, we now have a strong presence in Argentina,
Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico,
Nicaragua, Puerto Rico, South Korea and the United Kingdom. Wal-Mart employs more than 1.6
million associates worldwide. There are more than 138 million customers who visit our Wal-
Mart stores each week all over the world.
2005 Wal-Mart Stores, Inc. leads the corporate drive to assist in U.S. hurricane relief efforts with
$18 million in cash donations.
2005 In McKinney, Texas, and Aurora, Colorado, Wal-Mart creates experimental stores that
save energy, conserve natural resources, and reduce pollution.
2005 Wal-Mart launches the Acres for America program, which will conserve critical wildlife
habitats for future generations
The operations of Wal-Mart International comprise 2,700 stores in 14 countries outside the
United States. According to Wal-Mart's 2006 Annual Report, International accounted for
approximately 20.1% of fiscal 2006 sales. Wholly-owned operations are located in Argentina,
Brazil, Canada, South Korea, Puerto Rico and the United Kingdom.
Wal-Mart has operated in Canada since their acquisition of the Wool co division of Woolworth
Canada, Inc. Today, they operated 278 locations employing 70,000 Canadians, with a local home
office in Mississauga, Ontario.
Fiscal 2006 for Wal-Mart's United Kingdom subsidiary, ASDA, was 42.7% of the International
segment sales. In contrast to Wal-Mart's U.S. operations ASDA was originally and remains
primarily a grocery chain, but it has a stronger focus on non-foods than most UK supermarket
chains. At fiscal 2006, there were 236 ASDA stores, 10 George stores, 5 ASDA Living and 43
ASDA small stores.
In addition to its wholly-owned international operations, Wal-Mart has joint ventures in China
and several majority owned subsidiaries. Wal-Mart's majority owned subsidiary in Mexico is
Walmex. In Japan, Wal-Mart owns 55.3% of The Seiyu Co., Ltd.Additionally, Wal-Mart owns
51% of the Central American Retail Holding Company (CARHCO) formed from more than 360
supermarkets and other store formats, operating in 5 Central American Countries: Guatemala, El
Salvador, Honduras, Nicaragua and Costa Rica.
In 2004, Wal-Mart bought the Bompreço supermarket chain, comprised by 116 stores. Bompreço
is the major supermarket chain in Northeastern Brazil. In late 2005, Wal-Mart took control of the
Brazilian operations of Sonae Distribution Group through its new subsidiary, called WMS
Supermercados do Brazil, thus acquiring control of the National, Big and Mercadorama
supermarket chains, the leaders in Rio Grande do Sol and Paraná states. None of those operations
were rebranded. As of August 2006, Wal-Mart operates 71 Bompreço stores, 27 Hyper-
Bompreço stores, 15 Balaio stores and 3 Hyper-Magazines (all were originally part of
Bompreço). It also operates 67 National stores, 24 Mercadorama stores, 15 Big stores through
WMS. It also runs 19 Wal-Mart Super centers, 13 Sam's Club stores and 2 To-do Dia (small
stores) stores. With the acquisition of Bompreço and Sonae, Wal-Mart is currently the third
biggest supermarket chain in Brazil, only behind Carrefour and Pão de Açúcar.
In July 2006, Wal-Mart announced its withdrawal of operations from Germany because of
sustained losses. Their stores will be sold to the German company METRO AG. he sale is
subject to regulatory approval.
Corporate Affairs
Wal-Mart's business model is based on selling a wide variety of general merchandise and
marketing, "always low prices." The company refers to its employees as, "associates." All Wal-
Mart stores in the United States and Canada also have designated "people greeters," whose
general role is to welcome shoppers at the store entrance, as well as playing a role in loss
prevention and security.
Unlike many other retailers, Wal-Mart does not charge a slotting fee to suppliers for their
products to appear on the store. Alternatively, they focus on selling more popular products, and
often pressure store managers to drop unpopular products in favor of more popular ones, as well
as manufacturers to supply more popular products.
Europe
• Vivendi Universal; Vivendi SA and Seagram (agreed 19 June 2000) ($32 billion, Stock: 100%,
Cash: 0%) (Law firm)
• GlaxoWellcome with SmithKline Beecham (2000) (US$76 billion)
• Alcatel and Lucent Technologies, announced April 2006
• Alcatel acuiring the UMTS radio access business of Nortel Networks, announced September
2006
Japan
• Sumitomo Mitsui Banking Corporation; Sumitomo Bank and Sakura Bank
• Square Enix; Square and Enix
• Konica Minolta; Konica and Minolta
• Mitsubishi UFJ Financial Group (merger of Mitsubishi Tokyo Financial and UFJ, $88 billion in
combined market capitalization at the time of announcement)
• SoftBank; acquiring Vodafone Japan
Board Of Directors
Wal-Mart is governed by a thirteen-member Board of Directors, which is elected annually by
shareholders.
From the executive offices to associates, a look at the people who make Wal-Mart successful
every day.
Aida Alveraz
• Former Administrator of the U.S. Small Business Administration and a member of President
Clinton’s Cabinet from 1997 to 2001
• The founding Director of the Office of Federal Housing Enterprise Oversight
• The financial regulator of Fannie Mae and Freddie Mac, from 1993 to 1997
• A director for UnionBanCal Corporation
• A member of the diversity advisory board for Deloitte & Touché LLP
• Aida joined the board June of 2006
James W. Breyer
• Executive Vice President and CFO of Marsh and McLennan Companies, Inc.
• A director for Cisco Systems, Inc.
• Michele joined the Board in 2003
James Cash, Jr., Ph.D.
Roland A. Hernandez
• Former chairman of the board and CEO of Leo Burnett Worldwide, Inc., a division of Publicis
Groupe S.A.
• A trustee for investment companies advised by the Janus Capital Group, Inc.
• Linda been a member of the Board since 2005
Competition
In the United States, Wal-Mart's chief competitors in low-end general merchandise include Sears
Holdings Corporation's Kmart chain and Target. Many smaller regional chains, such as Meijer in
the Midwest, are also competitors. Wal-Mart's move into the grocery business has also
positioned it against major grocery chains such as HEB, Kroger, Albertsons, Public, Giant Eagle,
Safeway, Winn-Dixie, Ahold and many other regional chains and independents. A niche has
been carved out of Wal-Mart's dominance in the United States by several retail corporations. By
focusing on a small number of low-cost products, dollar store retailers such as Family Dollar and
Dollar General have successfully competed head-to-head with Wal-Mart for home consumer
sales. In 2004, Wal-Mart responded by testing their own dollar store concept, a subsection of
some stores known as "Pennies-n-Cents."
In Canada, Wal-Mart competes with the Hudson Bay Company's low-cost department store
Zellers, which is the second largest chain of discount department stores in Canada after Wal-
Mart. Wal-Mart also competes with Canadian department stores Sears Canada, Winners, Giant
Tiger, and various other regional chains. For grocery in Canada Wal-Mart competes with
Safeway, Sobeys, Loblaw Companies which operates under various names such as Loblaws, No
Frills, Zehrs Markets, Real Canadian Superstore, Fortinos, and various other Canadian grocery
store chains.
Wal-Mart has struggled in other foreign markets. For example, in Germany, Wal-Mart had
captured just 2% of German food sales following its entry into the market in 1997 and had
remained "a secondary player" compared to competitor Aldi which boasts 19% share of the
German market. In July 2006, Wal-Mart announced its withdrawal of operations from Germany
because of sustained losses. Wal-Mart's stores are to be sold to German company METRO AG
In China, Wal-Mart is "a small fish" as its strategy of "everyday low prices" has not been
successful against "Chinese mom-and-pop shops that are used to cutthroat pricing." On 2006-05-
22, Wal-Mart withdrew from South Korea market when it agreed to sell all 16 of its South
Korean outlets to Shinsegae, a local retailer, for $882 million. Wal-Mart had originally entered
the South Korea market in 1998. In the United Kingdom, Wal-Mart's Asda subsidiary is the
second largest chain in the UK after Tesco. Specifically, ASDA is a distant second to Tesco in
the UK grocery market, and as of 2006 the gap is widening, based on market share figures
published by TNS Super panel.
Customer Base
Wal-Mart is a global company with a diverse customer base. Wal-mart customers place low
prices and value as the most important reason for shopping at Wal-Mart. Financial results in
2006 have indicated Wal-Mart customers are sensitive to higher utility costs and gas prices.
In the United States, it has been reported that eighty percent of residents of the United States
shop at Wal-Mart at least once a year. And each week, 100 million customers visit Wal-Mart's
U.S. stores - "more than one-third of the U.S. population."
Frequent Wal-Mart customers show some demographic trends. In the U.S., Wal-Mart customer's
average incomes are below the national average. Analysts have estimated that more than one-
fifth of Wal-Mart's U.S. customers have no bank accounts, twice the national rate. Polling Data
reported by John Zogby suggests there is a correlation between how often consumers shop at
Wal-Mart and how conservative they are. In the 2004 US Presidential election 76% of voters
who shopped at Wal-Mart once a week voted for George W. Bush while only 23% voted for
John Kerry.
By contrast 80% of voters who never shopped there voted for Kerry with 18% voting for Bush.
African American and Hispanic voters who shop there are described as "significantly more
conservative" than their non Wal-Mart shopping peers. When measured against other similar
retailers in the United States, Wal-Mart frequent shoppers were rated the most politically
conservative.
Wal-Mart has recently taken actions to expand its U.S. customer base. On September 7, 2006,
the Wall Street Journal reported that Wal-Mart was modifying its U.S. stores from a one-size-
fits-all merchandising strategy to a custom-fitting merchandise assortment designed to "reflect
each of six demographic groups -- African-Americans, the affluent, empty-nesters, Hispanics,
suburbanites and rural residents." An example of the company's efforts to broaden its U.S.
customer base include a focus on gay and lesbian customers including a December 2005 internal
seminar and the August 2006 joining of the corporate advisory council of the National Gay and
Lesbian Chamber of Commerce in what is described as a "pragmatic" effort "to broaden its
appeal as it tries to expand into new territories, particularly in the more liberal and union-friendly
urban and coastal regions". It's noted that Wal-Mart rejected the American Family Association's
recommendations by carrying the movie "Broke back Mountain," a love story about two
cowboys in Wyoming.
Business Strategies
Cost Leadership Strategy
For the financial year ending January 31, 2003, retailing giant Wal-Mart reported revenues of
$244.5 billion, making it the world's largest company. The company topped Fortune's list of the
world's largest companies for the second year in succession (Refer Exhibit I). Considering the
modest beginning of this company four decades ago, nobody, including the company officials
expected Wal-Mart to emerge such a dominant player in the retailing industry (Refer Exhibit II).
The company was able to foster its growth in the 1980s by making heavy investments in
information technology (IT) to manage its supply chain and by expanding business in bigger
metropolitan cities. In the late 1980s, when Wal-Mart felt that the discount stores business was
maturing, it ventured into food retailing by introducing Super centers. In the late 1990s, Wal-
Mart launched exclusive groceries/drug stores known as "neighborhood markets" in the US
(Refer Exhibit III for the various types of Wal-Mart stores).
Though Wal-Mart had achieved huge success over the decades, the company drew severe
criticism from industry analysts for its strategies that aimed at killing competition. At the speed
at which Wal-Mart was growing, analysts feared that the company would soon face an anti-trust
suit for its monopolistic practices. Christopher Hoyt, president of Scottsdale, an Arizona-based
supermarket store, Hoyt & Company, said, "The only thing that could stop Wal-Mart is if the
government gets involved, just as it did with Microsoft."...
It's not a sale; it's a great price you can count on every day to make your dollar go further at Wal-
Mart." From the very beginning, Walton made efforts to procure products at the lowest prices
possible from manufacturers. He always shared these savings with customers by charging them
lower prices, thus giving them the maximum value for their money. Wal-Mart's products were
usually priced 20% lower than those of its competitors. Walton's pricing strategy led to increased
loyalty from price-conscious rural customers. It helped the company to generate more profits due
to larger volumes. Explaining his pricing strategy, Walton said, "By cutting your price, you can
boost your sales to a point where you earn far more at the cheaper retail price than you would
have by selling the item at the higher price. In retailer language, you can lower your markup but
earn more because of the increased volume.
EDLP was extremely attractive to rural customers and emerged as the key contributor to Wal-
Mart's growth over the years. The strategy of setting up large discount stores in small towns
worked wonders for Wal-Mart. The stores attracted a sizeable customer base. The customers had
a wide variety of branded merchandize to choose from, that were priced attractively. Wal-Mart
stores were located at convenient places in big warehouse-type buildings and catered to those
customers who bought merchandise in bulk.
The strategy discouraged competitors since it was impractical for them to compete with Wal-
Mart in small towns by setting up stores of such size, owing to the lack of volumes. As Wal-Mart
continued to build on its store count, it ensured that it recruited and retained service-oriented
individuals who were prepared to go the extra mile to serve customers better.
This pricing strategy worked extremely well for Wal-Mart. By 1967, Wal-Mart had 24 stores,
generating total revenues of $12.6 million. In October 1969, Wal-Mart was formally
incorporated, with its headquarters at Bentonville, Arkansas. By the financial year ending
January 1970, the company's revenues had crossed $31 million and its store count was 32.....
Targeting Upscale Shoppers
Wal-Mart Stores Inc. has overcome its rural roots and downscale image to attract affluent
shoppers, but executives admit that many of those well-heeled consumers come only for cheap
groceries and steer clear of the other merchandise.
In its boldest effort yet to target upscale shoppers, the nation's largest retailer is opening a new
store this week with an expanded selection of high-end electronics, more fine jewelry, hundreds
of types of wine ranging up to $500 a bottle, and even a sushi bar.
Wal-Mart says it won't duplicate this format anywhere else. But if plasma TVs, microbrewery
beer and fancy balsamic vinegar sell in Plano, those items could be added to stores in other
affluent communities.
Retail experts say nearly half of American families shop at Wal-Mart at least once a week. They
say the retail giant has nearly tapped out its middle-class base and must attract consumers who
love Target and Costco but not Wal-Mart.
With about 3,700 U.S. stores, Wal-Mart has nearly saturated the market, and analysts say future
growth depends on boosting sales by offering a better shopping experience. The company is
renovating 1,800 stores as many of its older outlets have started looking a little tired.
Wal-Mart profits keep rising, but not as fast as Wall Street expects, and same-store sales, those at
locations open at least a year, rose faster in 2005 at smaller but trendier Target Corp. Wal-Mart
stock has slipped about 20 percent in the past two years while Target shares gained about the
same percentage. Wal-Mart shares rose 35 cents Tuesday, to $48.11, in a 52-week range of
$42.31 to $51.46.
Analysts say that despite low prices, Wal-Mart suffers from a perception that its merchandise is
lower quality, which turns off consumers who can afford better.
"The challenge they face is value, and upper-end consumers define value differently than a
moderate-income shopper," said Patricia Edwards, who helps manage retail funds for
Wentworth, Hauser and Violich investment counselors. "If it was just price, they would drink the
office coffee instead of going to Starbucks."
In recent months, some Wal-Marts began selling upscale bed-and-bath items and its new Metro 7
and no boundaries clothing lines all of which are highlighted in the new store.
Wal-Mart listened to focus groups of "selective shoppers" the company's term for affluent
customers in designing the store, said regional general manager John Murphy.
"The upscale customer is shopping our store," Murphy said. "Are they interested in everything
we have to offer? No. This is a test store. Can we make that leap to where they are interested in
other parts of the store?"
Murphy said Wal-Mart hopes to prove it can reach affluent consumers, which should help
persuade vendors who are reluctant to sell their goods there. Target has succeeded in selling
designer lines.
Don Gher, an analyst with Cold stream Capital Management, said it took Target years to shift
upscale and it won't happen quickly at Wal-Mart either. In the meantime, he said the stores must
guard against changing too much, which could alienate its core customers.
Gher predicted that Wal-Mart will succeed at selling high-end electronics to upscale consumers,
but selling them apparel will be more difficult. "Fashion can be fickle," he said.
The new store, which opens Wednesday, is 217,000 square feet, about 20,000 square feet bigger
than the average Super center. It sits across the street from a Super Target, and you can see
Costco from the parking lot. The blue and gray Wal-Mart exterior gave way to two-tone brick.
Inside, wood floors and wide aisles abound. Shelves are lower to reduce clutter. Even employees
look different in khaki pants and navy polo shirts instead of blue smocks.
The new store is just as notable for what's missing. The store won't sell guns. It has far less space
devoted to lawn and garden, fishing, camping and automotive products.
"This customer is telling us they're not doing it themselves," said Ryan Lincks, the store's project
manager. "They don't change their own oil."
But the store has rows of high-definition televisions, several of them over $2,000, plus pricier
bikes and even an expanded yoga section. It features an expanded baby clothes area, a cards and
books section with cherry-finish wood racks and arching halogen gallery lights, and daggers at
the checkout lines a first for Wal-Mart.
Hungry shoppers will search in vain for McDonald's. An espresso bar with a sandwich menu and
free wireless Internet service has replaced it.
Cosmetics and pharmacy aren't relegated to the far end of the store; they're next to the food and
wine because female customers in focus groups said they want it that way for convenience and
speed. Apparel areas have their own cash registers and more discrete fitting rooms.
Strategies In China
On March 04, 2004, Wal-Mart Stores Inc. (Wal-Mart) held its Board of Directors' annual
meeting in China. It was an indication of the importance the company accorded to its Chinese
operation. Although Wal-Mart entered China way back in 1996, it had adopted a slow expansion
approach in the country.
In December 2004, the Chinese government eased restrictions on foreign retailers to fulfill its
commitments as a World Trade Organization (WTO) Member.
Experts commented that this would help Wal-Mart's expansion efforts in the country (Refer
Exhibit I for regulations in retail industry in China pre and post 2004).
Most analysts said that Wal-Mart's expansion in China would create more jobs and improve
supply chain efficiencies in the retail sector of the country. However, a few analysts were critical
of Wal-Mart's operations in China. They pointed out that Wal-Mart had reduced wages to below
sustenance levels not just at its own stores but at supplier's end as well
Since the time it entered the Chinese market, Wal-Mart had offered the Chinese 'Tian Tian Ping
Jia'; its global practice of Every Day Low Prices (EDLP). At the same time, it had also
successfully localized its offerings to Chinese consumers with significant innovations.
Initially, the Walton’s concentrated on opening stores in small towns and introduced innovative
concepts such as self-service. By 1967, Wal-Mart had 24 stores with sales of $12.6 million.
Encouraged by the early success of Wal-Mart, Sam Walton expanded Wal-Mart's operations to
Oklahoma and Missouri in 1968. In the following year, Wal-Mart was incorporated as a
company under the name Wal-Mart Stores Inc. In 1970, Wal-Mart established its first
distribution center in Bentonville, Arkansas.
The same year, it was also traded for the first time as a public limited company in over-the-
counter stock trading. In 1972, Wal-Mart was listed on the New York Stock Exchange.
Wal-Mart continued to grow in the 1970s, benefiting from its highly automated distribution
system, which reduced shipping costs and time, and its computerized inventory system, which
speeded up the checkout and reordering of stocks
International Operations
2005 was a busy year for Wal-Mart International. In December alone, the company acquired 545
new stores and gained more than 50,000 new associates in Japan and South America, capping a
year of robust growth.
In December, The Seiyu Ltd., a leading Japanese retail chain with 405 stores, announced that
shareholders had taken the steps necessary for Wal-Mart to acquire a majority interest in the
company. In addition, three Wal-Mart executives, including two women, were elected to the
Board of Directors. This will be the first time that two women have taken positions on the Seiyu
board.
Also in December, Wal-Mart announced the acquisition of 140 Sonae stores in Brazil, adding a
variety of retail formats to the company’s wide range of existing formats in the country. And
Wal-Mart Canada confirmed the company would build expanded stores next year, offering fresh
food and a wider selection. When complete, the stores will dedicate additional space to enhanced
product offerings in food, fashion, electronics and home products.
These developments follow the September announcement that Wal-Mart had purchased a one-
third interest in Central American Retail Holding Co. (CARHCO) with 363 supermarkets and
other stores in Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. In March 2006,
Wal-Mart increased its interest to 51% and the name CARHCO was changed to Wal-Mart
Central America.
For many companies, any one of these announcements would be major news for the year. We are
grateful for the loyalty of customers all over the world who shop with us and allow us to grow.
Clearly, our savings matter to working families -- in any currency.
And we will continue to deliver savings to customers in 2006 with plans to open as many as 230
new international stores. Currently, Wal-Mart International operates over 2,670 retail units and
employs more than 500,000 associates in Argentina, Brazil, Canada, China, Costa Rica, El
Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, South Korea
and the United Kingdom.
Bibliography
¬ Sam Walton – Made In America (Book)
¬ Penguin.com
¬ www.wal-martstores.com
¬ www.wikepedaia.com