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 volume—selling 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 retailers—only about twelve times a year—and by negotiating with suppliers for the best prices possible.

Walton also instructed his sales staff—known 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.

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 deficit—Americans 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."

Continuing Growth—and 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 goods—more 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.

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 , 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.