Shaila’s Weblog

The Walmart Story – Birth of discount Retailing

Posted on: February 18, 2008

Many trace discount retailing’s birth to 1962, the first year of operation for Kmart, Target and Wal-Mart. But by that time, Sam Walton’s tiny chain of variety stores in Arkansas and Kansas was already facing competition from regional discount chains.

Sam traveled the country to study this radical, new retailing concept and was convinced it was the wave of the future. He and his wife, Helen, put up 95 percent of the money for the first Wal-Mart store in Rogers, Arkansas, borrowing heavily on Sam’s vision that the American consumer was shifting to a different type of general store.
wal-mart
Today, Sam’s gamble is a global company with more than 1.9 million associates worldwide and nearly 6,500 stores and wholesale clubs across 13 countries. The “most admired retailer” according to FORTUNE magazine has just completed one of the best years in its history: Wal-Mart generated more than $312.4 billion in global revenue in the fiscal year ended January 31, 2006, establishing a new record and an increase of 9.5 percent. The company earned almost $11.2 billion in net income in fiscal 2005. But it all started with an understanding of what consumers want from a retailer.

“The secret of successful retailing is to give your customers what they want,” Sam wrote in his autobiography. “And really, if you think about it from the point of view of the customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.

“You love it when you visit a store that somehow exceeds your expectations, and you hate it when a store inconveniences you, or gives you a hard time, or pretends you’re invisible.” While other discounters such as Kmart quickly expanded across the country in the 1960s, Sam was able to raise the funds to build only 15 Wal-Mart stores.

Wal-Mart got the boost it needed in 1970, when its stock was offered for the first time on the New York Stock Exchange. The public offering created the capital infusion that grew the company to 276 stores by the end of the decade. By focusing on customer expectations, Wal-Mart was growing rapidly in 11 states. In the 1980s, Wal-Mart became one of the most successful retailers in America. Sales grew to $26 billion by 1989, compared to $1 billion in 1980. Employment increased tenfold. At the end of the decade, there were nearly 1,400 stores.

Wal-Mart Stores, Inc. branched out into warehouse clubs with the first Sam’s Club in 1983. The first Supercenter, featuring a complete grocery department along with the 36 departments of general merchandise, opened in 1988. Wal-Mart had become a textbook example of managing rapid growth without losing sight of a company’s basic values.

In Wal-Mart’s case, the basic value was, and is, customer service. Ironically, technology plays an important role in helping Wal-Mart stay customer focused. Wal-Mart invented the practice of sharing sales data via computer with major suppliers, such as Proctor & Gamble.

Every time a box of Tide is rung up at the cash register, Wal-Mart’s data warehouse takes note and knows when it is time to alert P&G to replenish a particular store. As a result, Wal-Mart stores rarely run out of stock of popular items.

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