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This is an old revision of this page, as edited by Feco (talk | contribs) at 19:44, 10 September 2005 (→Supplier relations and predatory pricing: Wal-Mart differs from peers by not charging fees to suppliers). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

Wal-Mart Stores, Inc.
Company typePublic
IndustryRetail (Department & Discount)
FoundedRogers, Arkansas, 1962
HeadquartersBentonville, Arkansas, USA
Key people
Sam Walton 1918-1992, Founder
H. Lee Scott, CEO
S. Robson Walton, Chairman
ProductsWal-Mart Discount Stores
Wal-Mart Supercenter
Sam's Club
Neighborhood Markets
Revenue$288 billion USD ($29B FY 2005)
20,428,000,000 United States dollar (2022) Edit this on Wikidata
11,680,000,000 United States dollar (2022) Edit this on Wikidata
Total assets252,496,000,000 United States dollar (2021) Edit this on Wikidata
Number of employees
1.7 million
Websitewww.walmartstores.com

Wal-Mart Stores, Inc. NYSE: WMT, founded by Sam Walton in 1962, is the largest retailer and the largest company in the world based on revenue. In the fiscal year ending January 31, 2005, Wal-Mart reported a net income of US $10.3 billion & a US $285.2 billion of sales revenue (3.6% profit margin). If Wal-Mart were its own economy, it would rank 33rd in the world, with a GDP between Ukraine and Colombia. It is the largest private employer in the United States, Mexico and Canada. It holds an 8.9 percent retail store market share— $8.90 out of every $100 spent in U.S. retail stores is spent at Wal-Mart.

History

File:Walmart rollback 1.jpg
A Wal-Mart advertisement, showing a Wal-Mart greeter.
File:Walmart rollback 2.jpg
Another Wal-Mart advertisement


Business

Wal-Mart operates discount retail department stores selling a broad range of products. It typically stocks basic, rather than premium products. Wal-Mart also operates "Supercenters" which include a full line of grocery items. Wal-Mart also operates Sam's Club; these are "warehouse clubs" which, like Costco, require membership dues and sell merchandise in large and inexpensive sizes and quantities.

As of January 2005 Wal-Mart employed 1.3 million people in the United States. Wal-Mart's Home Office is located in Bentonville, Arkansas. Apart from stores and clubs, it also operated 99 Distribution Centers/Transportation Offices in the United States. Internationally Wal-Mart employs over 410,000 people (excluding Japan) for a company-wide total of 1.7 million employees. Wal-Mart is also the largest real estate company in the United States, with an entire division devoted entirely to building new stores, selling old stores, and developing shopping centers around its new and existing stores. In addition to its wholly owned international operations, Wal-Mart owns a 37.8% stake in The Seiyu Co., Ltd. in Japan, with an option to purchase a majority stake in the future.

In the past Wal-Mart has operated dot Discount Drugs, Bud's Discount City, Hypermart*USA, OneSource Nutrition Centers, and Save-Co Home Improvement stores. In 1990 Wal-Mart acquired The McLane Company, a foodservice distributor. In 2003 McLane Company was sold to Berkshire Hathaway.

Wal-Mart stock is publicly traded at the New York Stock Exchange under the symbol WMT. As of March 31, 2004, there were 333,604 shareholders of Wal-Mart's common stock.

Retail operations

Main article: List of assets owned by Wal-Mart Stores, Inc.
Wal-Mart Retail Formats
Wal-Mart Retail Formats

Wal-Mart operates 5 major retail formats under 3 retail divisions:

  • Wal-Mart Stores USA
    • Wal-Mart Discount Stores — Average 100,000 square feet (9,290 m²) and include a selection of general merchandise, including apparel, electronics, health and beauty aids, toys, sporting goods, and household products.
    • Wal-Mart Supercenter — Average 187,000 square feet (17,400 m²) and combine a standard Wal-Mart Discount Store with a full-line supermarket. (commonly known as big box stores)
    • Wal-Mart Neighborhood Market — Average 43,000 square feet (4,000 m²) and include grocery, pharmacy, and limited general merchandise products.
    • Walmart.com — Online shopping site that offers merchandise different from that in stores. The walmart.com site also offers digital music downloads with digital rights management (DRM) and online photo processing.
  • SAM'S CLUB — a membership-only wholesale warehouse club focused mainly on serving small business owners. Clubs average 128,000 square feet (11,891 m²).
  • Wal-Mart International — operates various formats internationally, including (but not limited to) SAM'S CLUB, Discount Stores, Supercenters, Supermarkets, and restaurants.
Exterior of a typical Wal-Mart discount store.
Exterior of a typical Wal-Mart Supercenter.

Store counts & revenue

Current store counts and revenue for Fiscal Year Ending January 31, 2005 (revenue amounts in U.S. Dollars):

ASDA in the United Kingdom is the largest of the international businesses by sales.

Competition

Wal-Mart's chief competitors in the discount retail space nationally include the Sears Holdings Corporation (Kmart) and the Target Corporation, along with many smaller regional chains such as Meijer in the midwest. Wal-Mart's move into grocery has also positioned it against major grocery chains such as Kroger, Publix, and local grocery chains. In the Sam's Club warehouse business, Wal-Mart's chief competitor is Costco, which is slightly larger than Sam's in terms of sales, as well as the smaller BJ's Wholesale Club chain operating mainly on the East Coast.

Wal-Mart TV Network

The Wal-Mart TV Network is an in-store network showing commercials for products sold in the stores, concert clips and music videos for recording artists products sold in the stores, trailers for upcoming movie releases, and news. According to a New York Times story, it is seen by 130 million people a month, making it the fifth largest network in America, behind NBC, CBS, ABC and Fox.

Contributions

In 2004, cash donations to non-profit organizations by Wal-Mart, its employees, and its customers made through Wal-Mart, the Wal-Mart Foundation and the Sam's Club Foundation totaled more than $170 million (less than 0.06% of Wal-Mart's gross revenue, less than 1.7% of profit). The typical Supercenter channels $30,000 to $50,000 a year to local causes and events, some of which may include self-promotion, such as ads in brochures and playbills. More than 90 percent of cash donations from Wal-Mart Stores and the Wal-Mart & SAM'S CLUB Foundation target local communities.

In Response to Hurricane Katrina Wal-Mart donated $1 million each to the Salvation Army and the American Red Cross and $15 million to the Bush-Clinton Hurricane Katrina Fund for a total of $17 million during the first week, making the company the largest single corporate contributor to the effort. In addition, Wal-Mart had truckloads of supplies en route to the affected areas on Wednesday, before FEMA had organized a demonstrated response. Wal-Mart has also donated an estimated $3 million in merchandise to Mississippi, Louisiana, and to shelters in Texas. Wal-Mart has also provided over $1.5 million in emergency aid to displaced associates. Also, separately the Walton family through their foundation donated $8 million to the Bush-Clinton fund, $4 million to the Salvation Army, $2 million to America's Second Harvest, and $1 million to the Foundation for the Mid-South. Wal-Mart also setup a emergency contact website accessible online and at every store in the country.

Renewable energy experiments

Among more than 3,300 U.S. stores, the corporation has designed one, scheduled to open in 2005 in McKinney, Texas, featuring a wind turbine, photovoltaic solar panels, and a biofuel-capable boiler. The building includes many other energy and cost-saving technologies.

The Institute for Local Self-Reliance, while acknowledging that [1] "the features incorporated into Wal-Mart's new "green" store ... create very modest improvements in energy consumption and stormwater runoff," says that it does not change "Wal-Mart's basic business model, which is extremely polluting." The ILSR contends that Wal-Mart's practices increase driving, and that it has a poor record of locating stores on environmentally sensitive sites, especially wetlands.

Employees

Wal-Mart refers to its employees as "associates," and encourages managers to think of themselves as "servant leaders." Each shift at every store, club, and distribution center (theoretically) starts with a store-wide meeting where managers discuss with hourly associates daily sales figures, company news, and goals for the day.

All Wal-Mart stores in the United States have employees referred to as "People Greeters." They welcome people to the store and help prevent shoplifting. At Sam's Club these employees inspect the contents of the shopping carts of exiting customers.

U.S. Senator Hillary Clinton (Democrat, New York) formerly worked as a lawyer for Wal-Mart and also served on its Board of Directors.

Wal-Mart benefits

According to Wal-Mart proponents, these benefits are offered to employees:

  • Health (80/20 co-pay cost varies by plan and health; Wal-Mart pays average of two-thirds of insurance cost.Template:Fn)
  • Dental (80/20 co-pay)
  • Stock Options (payroll deduction option, 15% match)
  • 401k (50% of profit sharing contribution by company, up to 4% of employees' pay)
  • Life Insurance (up to 200,000)
  • Company Paid Life Insurance (1 year's pay,up to $50,000)
  • Accidental Death and Dismemberment (100% associate paid)
  • Short Term Disability (100% associate paid)
  • Long Term Disability
  • Prescription Drug Benefit
  • 10% Discount
  • Stake Holders Bonus (varies per store based on sale threshold)
  • Sick Pay
  • Vacation pay
  • Personal time pay
  • Bereavement Pay (immediate family members)

Employees are eligible for full benefits after six months of full-time employment, two years of peak-time (part-time or seasonal) employment, or 1000 hours worked. Most benefits, including limited health insurance, start at the first day of employment.

About 30% of its 1.6 million employees have some coverage under the insurance plan.Template:Fn

Financial Results

Wal-Mart is now the largest grocery chain in the U.S., with 14 percent of all grocery sales -- nearly twice the sales of Kroger ($95 billion vs. $51 billion). Wal-Mart also does 20 percent of the retail toy business. Sam Walton's family's holdings in Wal-Mart if combined would comprise the nation's largest fortune; at $100 billion combined they are significantly ahead of Bill Gates.

Wal-Mart went public in 1975. Since then its stock has climbed from 5 cents (split adjusted) to a high of $63 in March 2002. Its stock has dropped more than 20% since then, closing under $50 in August 2005.

Different explanations have been offered for this success:

  • The company has always paid a great deal of attention to site selection; in the company's early years, Sam Walton would fly over small towns in a private plane to identify prospective locations. The company claims it analyzes potential locations to find those that would support "one and a half" stores.
  • Wal-Mart benefits from economies of scale in manufacturing and logistics; the purchase of massive quantities of items from its suppliers combined with a very efficient stock control system help make Wal-Mart's operating costs lower than those of its competitors. They are leaders in the field of vendor managed inventory—asking large suppliers to oversee stock control for a category and make recommendations to Wal-Mart buyers. This reduces the overhead of having a large inventory control and buying department. Wal-Mart's vast purchasing power also gives it the leverage to force manufacturers to change their production (usually by creating cheaper products) to suit its wishes: a single Wal-Mart order can easily comprise a double-digit percentage of a supplier's annual output.
  • One particular aspect of the economy of scale is the aggregation effect, used in other business such as The Home Depot and Wells Fargo, whereby Wal-Mart sells as many different items as possible. This allows the company to grow revenue over its fixed cost base (more sales out of the same store). This is why Wal-Mart began to sell low margin groceries.
  • Information Systems: Wal-Mart helped push the retail industry to adopt UPC codes and bar-code scanning equipment. Also, Wal-Mart's focus on cost reduction has led to its involvement in a standards effort [2] to use RFID-based Electronic Product Codes to lower the costs of supply chain management. As of June 2004, it has announced plans [3] to require the use of the technology among its top 300 suppliers by January 2006.
  • Suppliers: A spokesperson for the company told the Wall Street Journal on Nov. 18, 2004 that it imported $15 billion worth of goods from China in the year that ended Jan. 31, 2004. About $7.5 billion were directly imported by Wal-Mart; the other $7.5 came indirectly through suppliers. In the same period net sales reached $256 billion, with $209 billion coming from U.S. operations. U.S. current account imports from China was reported as $152.4 billion during 2003 ([4]). Mainland Chinese media place Wal-Mart as their 8th largest trading partner in front of Russia and the UK on the top-10 list.
  • Cost Control: Wal-Mart watches very closely controllable expenses. Hourly associates are asked to keep overtime to a minimum. Wal-Mart also squeezes out any inefficiencies in the business such as reducing paper used through computerization. Wal-Mart has closed stores in what critics claim were efforts to avoid the expense of hiring union workers.


Criticism

File:Walmart low morals.png
Bumper sticker from Wal-Mart critic ReclaimDemocracy.org
Main article: Criticism of Wal-Mart

Critics argue that a portion of Wal-Mart's financial success is due to business practices harmful to employees, the community, the economy or the environment. Specific areas of controversy include the company's product selection; treatment of suppliers, competitors and employees; impact on local communities; and effects on world trade and globalization.

In 2005, Wal-Mart officials made public statements and embarked on a campaign to counter some of the criticism through a web site, walmartfacts.com.

Opposition to unions

The target of persistent unionizing efforts, Wal-Mart aggressively resists union attempts. On several occasions, the company has been found to have acted illegally to prevent unionization. Wal-Mart is alleged to have fired workers sympathetic to unionization and has closed stores and departments after workers have voted to unionize. The company shows anti-union videos in an effort to discourage unionization. So far, only a few North American stores have successfully voted to unionize. Of these, at least one (Jonquière in the province of Québec) was closed within one year of the successful vote to unionize. Wal-Mart denies that the vote in favor of unionization was the motive for their actions.

Treatment of employees

As with many US retailers, Wal-Mart experiences a high rate of employee turnover (approximately 50% of employees leave every year, according to the company). Although they average nearly double the federal minimum wage, wages at Wal-Mart are about 20% less than at other retail stores. Founder Sam Walton once argued that his company should be exempt from the minimum wage. (Palast, 121).

Wal-Mart recently agreed to a $11 million civil settlement of a government lawsuit alledging that it had knowingly hired illegal workers and underpaid them. Wal-Mart continues to deny wrong-doing.

Wal-Mart is currently facing an $11 billion sex discrimination lawsuit that has been granted class action status by the district court hearing the case.

Wal-Mart is accused of allowing right wing, conservative or religious viewpoints to influence its product selection. Critics claim this effectively forces the company's moral opinions on customers and suppliers. Wal-Mart points out that these products are readily available from other suppliers.

Supplier relations and predatory pricing

As the single largest customer to most of its suppliers, Wal-Mart openly uses its bargaining power to negotiate lower prices from suppliers. In recent years this has increasingly led to choosing suppliers from markets such as China, which have very low labor costs. The result has been the loss of many jobs in the United States, both from bankruptcies and relocating businesses. [5]

Wal-Mart has been prosecuted for predatory pricing behavior, temporarily lowering prices in order to drive competitors out of business and develop local monopolies. The chain has been found guilty of predatory pricing in lower courts, but those convictions have been overturned on appeal. There are also several ongoing cases alleging predatory pricing. There have been no successful federal or state actions to sanction Wal-Mart for practicing predatory pricing.

Most grocers charge several fees in order to carry a supplier's product. A slotting fee is charged for placing a product on the shelf. These fees easily approach $150,000 for a single product in high-demand markets. In addition to slotting fees, retailers also charge promotional, advertising and stocking fees. Many grocers earn more profit from agreeing to carry a manufacturer's product than they do from actually selling the product to retail consumers. Wal-Mart differs from its competitors by charging no fees to suppliers. The company pays only for the actual cost of the goods themselves.

Local community impacts

Economic impact
Community activists often organize campaigns against proposed new store locations, frequently funded by organized labor. The effects of Wal-Mart stores on the communities in which they operate is a topic of controversy to which there is not yet conclusive evidence.
Critics of Wal-Mart argue and some academic studies, particularly out of the University of Iowa, demonstrate that Wal-Mart displaces locally-owned stores resulting in the reduction of locally-owned corporate assets and real estate. Other studies, including several recently from the University of Missouri, have found that Wal-Mart stores either do not have negative impacts or have been found to positively impact a community by affecting lower prices, increased employment and increased establishment counts.
Cultural impact
When Wal-Mart opened a Superstore in Teotihacan, community members protested the opening as being, "like planting the staff of globalization" ([6]), because of its proximity to cultural landmarks such as the Pyramid of the Moon. Archaeological experts were on hand during construction, and assisted in recovering a Pre-Columbian altar from the parking lot, preserving it in situ.

Trade with China

Some have criticized the company for buying so many products from businesses in the People's Republic of China, contributing to the U.S. trade deficit with China. Wal-Mart accounted for 12 billion dollars of the 103 billion dollar US trade deficit in 2002. [7] Critics say this trade helps support China's oppressive government. Others would note, however, that as economic development has occurred in China, affluence and greater appetite for civil liberties have grown as well.

Industry observers would also note, however, that most major retailers purchase goods produced in China as well as other countries where the cost of production is less than in the United States.

Statistics

Key employees

Executive Board
S. Robson Walton Chairman of the Board
H. Lee Scott, Jr. President, CEO, Director (2004 Compensation: $12,444,790 USD)
Thomas M. Schoewe CFO (2004 Compensation: $2,681,682 USD)
Non Executive Board
David D. Glass Chairman of the Executive Committee, Director
James W. Breyer Director
Michele M. Burns Director
Roland A. Hernandez Director
John D. Opie Director
Paul J. Reason Director
Jack C. Shewmaker Director
Jose H. Villarreal Director
Christopher J. Williams Director
Senior Management (non-exhaustive list)
John B. Menzer EVP and President and CEO, Wal-Mart International Division
Michael T. Duke EVP and President and CEO, Wal-Mart Stores Division
Eduardo Castro-Wright EVP and COO, Wal-Mart Stores Division
Linda M. Dillman EVP and CIO
Rollin L. Ford EVP, Logistics and Supply Chain
Lawrence V. Jackson EVP, People Division (Chief HR Officer)
Charles M. Holley, Jr. SVP, CAO, Controller
Thomas D. Hyde EVP, Legal and Corporate Affairs, Corporate Secretary
Karen Stuckey SVP of Product Development, Wal-Mart Stores USA
C. Douglas McMillon EVP; President and CEO, SAM'S CLUB USA

See also

Wal-Mart

Other

Wal-Mart corporate web sites

Articles & reports

Documentaries

Books about Wal-Mart

  • The Bully of Bentonville: How the High Cost of Wal-Mart's Everyday Low Prices Is Hurting America, by Anthony Bianco (2006)-ISBN 0385513569
  • Data Warehousing: Using the Wal-Mart Model, by Paul Westerman (2000)-ISBN 155860684X
  • How Wal-Mart Is Destroying America and the World: And What You Can Do about It (3rd edition), by Bill Quinn (2005)-ISBN 1580086683
  • In Sam We Trust: The Untold Story of Sam Walton and Wal-Mart, the World's Most Powerful Retailer, by Bob Ortega (1998)-ISBN 0812963776
  • Selling Women Short: The Landmark Battle for Workers' Rights at Wal-Mart, by Liza Featherstone (2004)-ISBN 0465023169
  • Wal-Mart: A Field Guide to America's Largest Company and the World's Largest Employer, by Nelson Lichtenstein (2006)-ISBN 1595580212
  • Wal-Mart: The High Cost of Low Price, by Disinformation Company (2005)-ISBN 1932857249
  • The Wal-Mart Decade: How a New Generation of Leaders Turned Sam Walton's Legacy into the World's #1 Company, by Robert Slater (2003)-ISBN 1591840066
  • The Wal-Mart Triumph: Inside the World's #1 Company, by Robert Slater (2004)-ISBN 1591840430
  • The Wal-Mart Way: The Inside Story of the Success of the World's Largest Company, by Don Soderquist (2005)-ISBN 0785261192
  • What I Learned from Sam Walton: How to Compete and Thrive in a Wal-Mart World, by Michael Bergdahl (2004)-ISBN 0471679984

Other Books and References

Critics

Blogs

Data

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