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 __BODY__.25 billion in 1979.
Sam's Clubs—100,000-square-foot, cash-and-carry discount membership warehouses—made 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 towns—specifically, 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 __BODY__,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.
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.
