Everything about Wal-mart totally explained
Wal-Mart Stores, Inc. is an
American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008
Fortune Global 500. Founded by
Sam Walton in 1962, it was
incorporated on
October 31,
1969, and listed on the
New York Stock Exchange in 1972. It is the largest private employer in the world and the fourth largest utility or commercial employer, trailing the British
National Health Service, and the
Indian Railways. Wal-Mart is the largest
grocery retailer in the
United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S. It also owns and operates the North American company of
Sam's Club.
Wal-Mart operates in
Mexico as
Walmex, in the UK as
ASDA, and in
Japan as
Seiyu. It has wholly-owned operations in
Argentina,
Brazil,
Canada,
Puerto Rico, and the UK. Wal-Mart's investments outside North America have had mixed results: its operations in
South America and
China are highly successful, while it was forced to pull out of
Germany when its venture there was unsuccessful.
Wal-Mart has been
criticized by some community groups,
women's rights groups,
grassroots organizations, and
labor unions, specifically for its extensive foreign product sourcing, low rates of employee health insurance enrollment, resistance to union representation, and alleged
sexism.
History
Sam Walton, a businessman from Arkansas, began his retail career when he started work on
June 3,
1940, at a
J.C. Penney store in
Des Moines, Iowa where he remained for 18 months. In 1945, he met
Butler Brothers, a regional
retailer that owned a chain of
variety stores called
Ben Franklin and that offered him one in
Newport, Arkansas.
Walton could neither come to agreement on the existing store's lease renewal nor find a new location in Newport. Instead, he opened a new Ben Franklin franchise in
Bentonville, Arkansas, but called it "Walton's Five and Dime." There he achieved higher sales volume by marking up slightly less than most competitors.
On
July 2,
1962, Walton opened the first Wal-Mart Discount City store. Within five years, the company expanded to 24 stores across
Arkansas and reached $12.6 million in sales. In 1968, it opened its first stores outside Arkansas, in
Sikeston, Missouri and
Claremore, Oklahoma.
Incorporation and growth
The company was
incorporated as
Wal-Mart Stores, Inc. on
October 31,
1969. In 1970, it opened its home office and first distribution center in
Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a
publicly-held company on
October 1,
1972, and was soon listed on the
New York Stock Exchange. The first
stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340.3 million. In 1988, Sam Walton stepped down as CEO and was replaced by
David Glass. Walton remained as Chairman of the
Board, and the company also rearranged other people in senior positions.
Also in 1988, the first
Wal-Mart Supercenter opened in
Washington, Missouri. Thanks to its superstores, it surpassed
Toys "R" Us in toy sales in the late 1990s. The company also opened overseas stores, entering South America in 1995 with stores in Argentina and Brazil; and Europe in 1999, buying
ASDA in the UK for $10 billion.
In 1998, Wal-Mart entered the
grocery business, introducing the "
Neighborhood Market" concept with three stores in
Arkansas. By 2005, estimates indicate that the company controlled about 20% of the retail grocery and consumables business.
In 2000,
H. Lee Scott became President and CEO, and Wal-Mart's sales increased to $165 billion. In 2002, it was listed for the first time as America's largest corporation on the
Fortune 500 list, with revenues of $219.8 billion and profits of $6.7 billion. It has remained there every year, except for 2006.
In 2005, Wal-Mart had $312.4 billion in sales, more than 6,200 facilities around the world—including 3,800 stores in the United States and 2,800 elsewhere, employing more than 1.6 million "associates" worldwide. Its U.S. presence grew so rapidly that only small pockets of the country remained further than 60 miles (100 km) from the nearest Wal-Mart.
As Wal-Mart grew rapidly into the world's largest corporation, many critics worried about the effect of its stores on local communities, particularly small towns with many "
mom and pop" stores. There have been several studies on the economic impact of Wal-Mart on small towns and local businesses, jobs, and taxpayers. In one, Kenneth Stone, a Professor of Economics at
Iowa State University, found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening. However, in another study, he compared the changes to what small town shops had faced in the past — including the development of the railroads, the advent of the Sears Roebuck catalog, as well as the arrival of shopping malls — and concluded that shop owners who adapt to changes in the retail market can thrive after Wal-Mart arrives. (See also:
Criticism of Wal-Mart: Economic impact)
Recent initiatives
In October 2005, Wal-Mart announced it would implement several environmental measures to increase energy efficiency. The primary goals included spending $500 million a year to increase fuel efficiency in Wal-Mart’s truck fleet by 25% over three years and double it within ten, reduce
greenhouse gas emissions by 20% in seven years, reduce energy use at stores by 30%, and cut solid waste from U.S. stores and Sam’s Clubs by 25% in three years. CEO Lee Scott said that Wal-Mart's goal was to be a "good steward for the environment" and ultimately use only
renewable energy sources and produce zero waste. The company also designed three new experimental stores in
McKinney, Texas,
Aurora, Colorado, and
Las Vegas, Nevada. with wind turbines, photovoltaic solar panels, biofuel-capable boilers, water-cooled refrigerators, and
xeriscape gardens. Despite much criticism of its environmental record, Wal-Mart took a few steps in a positive direction, which included becoming the biggest seller of organic milk and the biggest buyer of organic cotton in the world, as well as reducing packaging and energy costs. Wal-Mart also spent nearly a year working with outside consultants to discover the company's total environmental impact and find where they could improve. They discovered, for example, that by eliminating excess packaging on their toy line Kid Connection, they could save $2.4 million a year in shipping costs, 3,800 trees, and a million barrels of oil.
In March 2006, Wal-Mart sought to appeal to a more affluent demographic. The company launched a new supercenter concept in
Plano, Texas, intended to compete against stores seen as more upscale and appealing, such as
Target. The new store has wood floors, wider aisles, a
sushi bar, a coffee/sandwich shop with free
Wi-Fi Internet access, and more expensive beers, wines, electronics, and other goods. The exterior has a hunter green background behind the Wal-Mart letters, similar to Wal-Mart Neighborhood Markets, instead of the blue previously used at its supercenters.
On
September 12,
2007, Wal-Mart introduced new
advertising with the
slogan,
Save Money, Live Better, replacing the
Always Low Prices, Always slogan, which it had used for the previous 19 years.
Global Insight, which conducted the research that supported the ads, found that Wal-Mart's
price level reduction resulted in savings for consumers of $287 billion in 2006, which equated to $957 per person or $2,500 per
household (up 7.3% from the 2004 savings estimate of $2,329).
Subsidiaries
Wal-Mart's operations primarily comprises three retailing subsidiaries: Wal-Mart Stores Division U.S.,
Sam's Club, and Wal-Mart International. The company does business in nine different retail formats:
supercenters,
food and drugs,
general merchandise stores, bodegas (small markets), cash and carry stores,
membership warehouse clubs,
apparel stores, soft
discount stores and
restaurants. This service was discontinued on
December 21,
2007.
Wal-Mart
Wal-Mart is a chain of
discount department stores with size varying from to, with an average store covering about .
The first Wal-Mart Discount Store opened in
Rogers, Arkansas in
1962. In
2005, it was remodeled and expanded into a 24-hour Wal-Mart Supercenter.
In 1990, Wal-Mart opened its first
Bud's Discount City location in Bentonville. Bud's operated as a closeout store, much like
Big Lots. Many locations were opened to fulfill leases in
shopping centers as Wal-Mart stores left and moved into newly-built Supercenters. All of the Bud's Discount City stores were converted into Wal-Mart Discount Stores by
1997.
Wal-Mart Supercenter
Wal-Mart Supercenter is a chain of
hypermarkets with size varying from to, with an average of about .
Wal-Mart Neighborhood Market
Wal-Mart Neighborhood Market are
grocery stores that average about . Some locations also sell
gasoline. As of
January 31,
2008, there were 591 Sam's Clubs in the United States. According to Wal-Mart's 2006 Annual Report, the International division accounted for about 20.1% of sales.
Wal-Mart has operated in Canada since its acquisition of the Woolco division of
Woolworth Canada, Inc. In 2007, it operates at 278 locations, employing 70,000 Canadians, with a local home office in
Mississauga, Ontario. On
November 8,
2006,
Wal-Mart Canada's first three Supercenters opened in
Ancaster,
London, and
Aurora, Ontario. As of
January 31,
2007, there were six Wal-Mart Supercenters in Canada.
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 about 53% of
Seiyu. Additionally, Wal-Mart owns 51% of the Central American Retail Holding Company (CARHCO), consisting of more than 360 supermarkets and other stores in Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica.
In 2004, Wal-Mart bought the 116 stores in the Bompreço supermarket chain in northeastern Brazil. In late 2005, it took control of the Brazilian operations of Sonae Distribution Group through its new subsidiary, WMS Supermercados do Brasil, thus acquiring control of the Nacional and Mercadorama supermarket chains, the leaders in the
Rio Grande do Sul and
Paraná states, respectively. None of these was rebranded. As of August 2006, Wal-Mart operates 71 Bompreço stores, 27 Hiper-Bompreço stores, 15 Balaio stores, and three Hiper-Magazines (all originally parts of Bompreço). It also runs 19 Wal-Mart Supercenters, 13 Sam's Club stores, and two Todo Dia stores. With the acquisition of Bompreço and Sonae, Wal-Mart is currently the third largest supermarket chain in Brazil, behind
Carrefour and
Pão de Açúcar.
In July 2006, Wal-Mart announced its withdrawal from Germany due to sustained losses in a highly competitive market. The stores were sold to the German company
Metro during Wal-Mart's fiscal third quarter. The partnership will involve two joint ventures; Bharti will manage the front end involving opening of retail outlets, while Wal-Mart will take care of the back end, such as
cold chains and logistics.
Private label brands
About 40% of products sold in Wal-Mart are
private label store brands, or products offered by Wal-Mart and produced through
subsidized contracts awarded to the lowest bidder. Wal-Mart began offering private label brands in 1991 with the launch of
Sam's Choice, a brand of drinks produced by
Cott Beverages exclusively for Wal-Mart. Sam's Choice quickly became popular, and by 1993 was the third beverage brand in the United States. Other Wal-Mart brands include Great Value and Equate in the US and
Smart Price in Britain. A 2006 study talked of "the magnitude of mind-share Wal-Mart appears to hold in shoppers' minds when it comes to awareness of private label brands and retailers."
Corporate affairs
Wal-Mart's
business model is based on selling a wide variety of general merchandise at "always low prices."
In June, 2007. Wal-Mart announced it was retiring the blue vest its 1.5 million associates wear, and replacing it with khakis and polos. The replacement was to help Wal-Mart increase sales.
Unlike many other retailers, Wal-Mart doesn't charge a
slotting fee to suppliers for their products to appear in the store. Instead, it focuses on selling more popular products and often pressures store managers to drop unpopular products, as well as asking manufacturers to supply more popular products.
On
September 14,
2006, the company announced that it would phase out its
layaway program, citing declining use and increased costs. Layaway ceased to be offered on
November 19,
2006, and required merchandise pickup by
December 8,
2006. Wal-Mart now focuses on other payment options, such as increased use of six- and twelve-month, zero-interest financing. The layaway location in most stores is now used for Wal-Mart's Site-To-Store program, which was introduced in March 2007. This enables
walmart.com customers to buy goods online with a free shipping option, and have goods shipped to the nearest store for pickup.
Financial
In 2006, Wal-Mart was 67th most profitable corporation (profits divided by total revenue), behind retailers
Home Depot,
Dell, and
Target, and ahead of
Costco and
Kroger. For the
fiscal year ending
January 31,
2006, Wal-Mart reported a
net income of $12.178 billion on $344.992 billion of sales revenue (3.5%
profit margin). For the fiscal year ending
January 31,
2006, Wal-Mart's international operations accounted for about 20.1% of total sales.
Governance
Wal-Mart is governed by a fifteen-member
Board of Directors, which is elected annually by
shareholders.
Robson Walton, the eldest son of founder
Sam Walton, serves as
Chairman of the Board.
Lee Scott, the
Chief Executive Officer, serves on the board as well. Other members of the board include
Aída Álvarez,
James Breyer,
Michele Burns,
James Cash,
Roger Corbett,
Douglas Daft,
David Glass,
Roland Hernandez,
Allen Questrom,
Jack Shewmaker,
Jim Walton,
Christopher Williams, and
Linda Wolf.
Notable former members of the board include
Hillary Clinton (1985–1992) and
Tom Coughlin (2003–2004), the latter having served as Vice Chairman. Clinton left the board before the
1992 U.S. Presidential Election, and Coughlin left in December 2005 after pleading guilty to wire fraud and tax evasion for stealing hundreds of thousands of dollars from Wal-Mart. On
August 11,
2006, he was sentenced to 27 months of home confinement, five years of probation, and ordered to pay
$411,000 in restitution.
Competition
In North America, Wal-Mart's primary competition includes
department stores like
Kmart,
Target,
ShopKo,
Meijer, and Canada's
Zellers,
Winners, and
Giant Tiger. Competitors of Wal-Mart's Sam's Club division are
Costco, and the smaller
BJ's Wholesale Club chain operating mainly in the eastern US. Wal-Mart's move into the
grocery business in the late 1990s also set it against major
supermarket chains in both the United States and Canada. Several smaller retailers, primarily
dollar stores, such as
Family Dollar and
Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales. In 2004, Wal-Mart responded by testing its own dollar store concept, a subsection of some stores called "Pennies-n-Cents."
Wal-Mart also had to face fierce competition in some foreign markets. For example, in Germany it had captured just 2% of German food market following its entry into the market in 1997 and remained "a secondary player" behind
Aldi with a 19% share. In July 2006, Wal-Mart announced its withdrawal from Germany. Its stores were sold to German company
Metro.
In May 2006, after entering the South Korean market in 1998, Wal-Mart withdrew and sold all 16 of its South Korean outlets to
Shinsegae, a local retailer, for $882 million. Shinsegae re-branded the Wal-Marts as
E-mart stores.
Wal-Mart struggled to export its brand elsewhere as it rigidly tried to reproduce its model overseas. In China, Wal-Mart hopes to succeed by adapting and doing things preferable to Chinese citizens. For example, it found that Chinese consumers preferred to select their own live fish and seafood; stores began displaying the meat uncovered and installed fish tanks, leading to higher sales.
In addition, under heavy pressure from the Chinese government, Wal-Mart accepted a form of organized labor in China. Chinese labor unions don't negotiate contracts but simply pay dues to the government, "to secure the social order." However, Chinese consumers may be more open to
Americana than shoppers in Europe.
Customer base
Each week, about 100 million customers, nearly one-third of the US population, visit Wal-Mart's US stores. Wal-Mart customers give low prices as the most important reason for shopping there, reflecting the
"Low prices, always" advertising slogan that Wal-Mart used from 1962 until 2006. The average US Wal-Mart customer's income is below the national average, and analysts recently estimated that more than one-fifth of them lack a bank account, twice the national rate. A Wal-Mart financial report in 2006 also indicated that Wal-Mart customers are sensitive to higher utility costs and gas prices. A poll before the
2004 US Presidential Election indicated that 76% of voters who shopped at Wal-Mart once a week planned to vote for
George W. Bush, while only 23% planned to vote for
John Kerry. When measured against other similar retailers in the US, frequent Wal-Mart shoppers were rated the most politically
conservative.
In 2006, Wal-Mart took steps to expand its US customer base, announcing a modification in its US stores from a "one-size-fits-all" merchandising strategy to one designed to "reflect each of six demographic groups – African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents." Around six months later, it unveiled a new slogan:
"Saving people money so they can live better lives". This reflects the three main groups into which Wal-Mart categorizes its 200 million customers: "brand aspirationals" (people with low incomes who are obsessed with names like
KitchenAid), "price-sensitive affluents" (wealthier shoppers who love deals), and "value-price shoppers" (people who like low prices and can't afford much more).
Employee and labor relations
Labor unions, religious organizations, and environmental groups have criticized Wal-Mart for its policies and/or business practices. In particular, several labor unions blame Wal-Mart workers' unwillingness to join their organizations on the company's anti-union stance. Others disapprove of the corporation's extensive foreign product sourcing, treatment of employees and product suppliers, environmental practices, and
use of public subsidies, and the impact of stores on the local economies of towns in which they operate.
In 2005, labor unions created several websites and organizations to shed new light on Wal-Mart. These included
Wake Up Wal-Mart (
United Food and Commercial Workers) and
Wal-Mart Watch (
Service Employees International Union). By the end of 2005, Wal-Mart launched
Working Families for Wal-Mart, an operation managed by Wal-Mart to tell the company's side of the story. Additional efforts to counter criticism included a
PR campaign in 2005, managed through its PR website walmartfacts.com, as well as several television commercials. The company retained the PR firm
Edelman to respond to negative media attention, and started interacting directly with bloggers by sending them news, suggesting topics for postings, and sometimes inviting them to visit its corporate headquarters.
Critics decry Wal-Mart's employee and workforce relations, low
wages,
poor working conditions, and inadequate
health care. They also denounce what they call the company's anti-
union policies, and claim that Wal-Mart's high
turnover rate (about 70% of its employees leave within the first year) shows that workers are dissatisfied with the lack of recognition and inadequate pay.
In response,
Jay Nordlinger of
National Review argues that Wal-Mart is attacked simply because it's a leader of the Fortune 500 list or the largest employer in America, and a "free-market success story".
Penn & Teller devoted an episode of to an analysis of Wal-Mart criticism as a social movement. They theorized that despite the noble rhetoric, the real motivation of "Wal-Mart haters" was rooted in human psychology. They suggested that hating Wal-Mart permits a person "to feel better about themselves" for three main reasons: They "don't run a greedy international conglomerate", they aren't Wal-Mart workers, widely considered "low-skilled, minimum wage drones", and they aren't Wal-Mart customers thought of as "toothless, welfare-getting hillbillies". Wal-Mart stores are unionized in every country outside of North America.
Diversity
Wal-Mart is currently facing a
gender discrimination lawsuit,
Dukes v. Wal-Mart Stores, Inc., which alleges that female employees were discriminated against in matters regarding pay and promotions. In February 2007, the
United States Court of Appeals for the Ninth Circuit issued a 2–1 ruling which affirmed a lower court ruling to certify the case as a
class-action lawsuit; plaintiffs estimate that about 1.6 million women could be included in the suit. According to a consultant hired by plaintiffs in a sex discrimination lawsuit, in 2001, Wal-Mart's EEOC filings showed that female employees made up 65% of Wal-Mart's hourly-paid workforce, but only 33% of its management. Just 35% of its store managers were women, whereas 57% were at comparable retailers. The economist Marc Bendick Jr described the ratio of women store managers in 2001 as below that of comparable companies in 1975.
A similar lawsuit,
EEOC (Janice Smith) v. Wal-Mart Stores, Inc., was filed on
August 24,
2001. It accused the retailer of discriminatory hiring practices at its
London, Kentucky Distribution Center, dating back to 1995.
Mauldin v. Wal-Mart Stores, Inc. charges that the company's denial of health insurance coverage for
birth control is unfair to female employees. In 2002, the lawsuit was granted
class action status, allowing all female employees after March 2001 to file claims if they were using contraceptives.
From 2002 through 2006, Wal-Mart received steadily increasing scores on the
Human Rights Campaign's
Corporate Equality Index, a measure of how companies treat
LGBT employees and customers. The company's rating increased from 14% in 2002 to 43% in 2004, due to an expanded antidiscrimination policy to protect gay and lesbian employees. The score increased to 57% in 2005, because of the company's new definition of family that included same-sex partners, and increased again in 2006 to a high of 65%. However, the rating for the 2008 edition dropped back to 40%, attributable to losses in two key areas: not renewing its membership in the National Gay and Lesbian Chamber of Commerce (which it joined in 2006), and a discrepancy from last year's study that was discovered in this year's answers and resulted in another 10-point loss (by comparison,
Target scored 80% and
Kmart 100%). As a result of the 40% rating, HRC encouraged consumers to "strongly consider other [shopping] options."
In January 2006, Wal-Mart announced that "diversity efforts include new groups of minority, female and gay employees that meet at Wal-Mart headquarters in Bentonville to advise the company on marketing and internal promotion. There are seven so-called Business Resource Groups: women, African-Americans, Hispanics, Asians, Native Americans, Gays and Lesbians, and a disabled group."
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