Wal-Mart

Wal-Mart Stores, Inc. (NYSE: WMT) is an American public corporation, currently the world's 2nd largest corporation (behind Exxonmobil Corporation). according to the 2007 Fortune 500. It was founded by Sam Walton in 1962, 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 world's fourth largest utility or commercial employer, only to the Chinese Army, the NHS 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, and the largest toy seller in the U.S., with an estimated 45% of the retail toy business, having surpassed Toys "R" Us in the late 1990s.

Wal-Mart operates in Mexico as Walmex, in the United Kingdom as ASDA, and in Japan as The Seiyu Co., Ltd. Wholly owned operations are located in Argentina, Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's investments outside North America have produced mixed results. In 2006, Wal-Mart sold its retail operations in South Korea and Germany due to sustained losses and a highly competitive market.

Wal-Mart has been the target of criticism from some community groups, women's rights groups, grassroots organizations, and labor unions. Specific criticisms include the company's extensive foreign product sourcing, low rates of employee health insurance, resistance to union representation, and alleged sexism, among other things.

The retailer's mascot is The Rollback Man, a smiley face character who appears in its ads.

History
Sam Walton's original Walton's Five and Dime, now the Wal-Mart Visitor's Center, Bentonville, Arkansas.
Sam Walton's original Walton's Five and Dime, now the Wal-Mart Visitor's Center, Bentonville, Arkansas.

Main article: History of Wal-Mart

Sam Walton's retailing career began when he accepted a job offer at a JCPenney store in Des Moines, Iowa on June 3, 1940 where he remained for 18 months. In 1945, he met with Butler Brothers, a regional retailer that owned a chain of variety stores called Ben Franklin. Butler Brothers offered him a Ben Franklin store in Newport, Arkansas.

Walton could not come to agreement on his lease renewal and could not find a new location in Newport; so he located a new variety store in Bentonville, Arkansas which he would open as another Ben Franklin franchise, but called "Walton's Five and Dime." Walton achieved higher sales volume by selling products with slightly smaller markups than most competitors.[2]

In 1962, Walton opened the first Wal-Mart store, Wal-Mart Discount City and within five years the company expanded to 24 stores across the state of Arkansas and reached $12.6 million in sales. In 1968, it opened its first stores outside Arkansas, in Sikeston, Missouri and Claremore, Oklahoma.[3]

The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969, and in 1970 opened its home office in Bentonville, Arkansas, and its first distribution center. There were now 38 stores operating with 1,500 employees and sales of $44.2 million. The company began trading stock at this time as a publicly held company on October 1, 1972, and was listed on the New York Stock Exchange shortly thereafter. 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, and 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.[3]

Wal-Mart continued to grow rapidly during the 1980s, and by its twenty-fifth anniversary in 1987, there were 1,198 stores with sales of $15.9 billion and 200,000 associates.[3] This year also marked the completion of the company's satellite network, a $24 million investment, linking all operating units of the company with their Bentonville Office via two-way voice, data, and one-way video communication. At the time, this was the largest private satellite network, and allowed the corporate office to track inventory, sales, and send instant communication to their stores.[4] Company founder Sam Walton stepped down as CEO the following year, and was replaced by David Glass. [5] Walton remained on as Chairman of the Corporate Board of Directors, and the company also restructured their senior management positions, elevating a cadre of executives to positions of greater responsibility.

Also in 1988, the first Wal-Mart Supercenter opened in Washington, Missouri.[6] Wal-Mart expanded their superstore concept during the 1990s, and shortly thereafter surpassed Toys "R" Us in toy sales.[7] The company also opened overseas stores during this period, entering the South American market in 1995 with stores in Argentina and Brazil, and purchasing ASDA in the United Kingdom for $10 billion in 1999.[8] In 1998, Wal-Mart entered the grocery business, introducing their Neighborhood Market concept with three stores in Arkansas.[9] By 2005, estimates indicate that the company controlled approximately 20% of the retail grocery and consumables business.[10]

By 2000, as H. Lee Scott was named President and CEO of the company, Wal-Mart's sales increased to $165 billion.[11] In 2002, Wal-Mart was listed for the first time on the Fortune 500 list of the world's largest corporations, with revenues of $219.8 billion and profits of $6.7 billion. The company was subsequently listed at #1 for every year after 2002 except for 2006.[12]

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 3,800 international units, and employing more than 1.6 million associates worldwide. In fact, their U.S. presence had grown so rapidly that there were only small pockets of the country that remained further than 60 miles away from the nearest Wal-Mart.[13] Also in 2005, focusing on becoming more ecologically-friendly, the company designed two new experimental stores, one in McKinney, Texas and the other in Aurora, Colorado, featuring wind turbines, photovoltaic solar panels, biofuel-capable boilers, water-cooled refrigerators, and xeriscape gardens.[14]

In March 2006, Wal-Mart sought to attempt to appeal to a more affluent demographic, with the opening of a new supercenter in Plano, Texas, and is intended to compete against stores that some view as more upscale and appealing, such as Target.[15] The new store features wooden floors, wider aisles, a sushi bar, a coffee/sandwich shop (with free Wi-Fi Internet access), and higher-end items such as microbrew beer, expensive wines, and high-end electronics. The exterior sports the less-common hunter green background behind the Wal-Mart letters instead of the trademark blue.

Subsidiaries

See also: List of assets owned by Wal-Mart Stores, Inc.

Wal-Mart's operations are comprised primarily in three retailing subsidiaries! Wal-Mart Stores Division U.S., Sam's Club (second biggest to Costco), and Wal-Mart International.[16] Wal-Mart does business under 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.

Sam's Club

Main article: Sam's Club

Wal-Mart operates Sam's Club, a chain of warehouse clubs that sells groceries and general merchandise, often in large quantities or volume. Sam's Club stores are only open to customers who subscribe to a paid, annual membership. Some locations also sell gasoline. The first Sam's Club opened in 1983 in Midwest City, Oklahoma.

According to Wal-Mart's 2006 Annual Report, Sam's Club accounted for approximately 12.7% of fiscal 2006 sales. 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.

As of May 31, 2007, there were 584 Sam's Clubs in the United States.

Wal-Mart International

Wal-Mart's international operations comprise 2,701 stores in 14 countries outside the United States.[20] According to Wal-Mart's 2006 Annual Report, International accounted for approximately 20.1% of fiscal 2006 sales.[16] Wholly owned operations are located in Argentina, Brazil, Canada, Puerto Rico and the United Kingdom (UK). With 1.8 million employees worldwide, the company is the largest private employer in the US and Mexico, and one of the largest private employers in Canada.[21]
Wal Mart store in Mexico City
Wal Mart store in Mexico City

Wal-Mart has operated in Canada since their acquisition of the Woolco division of Woolworth Canada, Inc.[22] Today, they operate 278 locations employing 70,000 Canadians, with a local home office in Mississauga, Ontario. On November 8, 2006, Wal-Mart Canada's first three Supercentres opened in Ancaster, London, and Stouffville, Ontario. As of January 31, 2007, there were six Wal-Mart Supercenters in Canada.[19] As of November 30, 2006, there were six Sam's Clubs Canada (all in Ontario: London, Richmond Hill, Vaughan, Cambridge, Pickering, and Toronto).[19] In December 2006, conversion of a Wal-Mart Discount Store into a Wal-Mart Supercentre has begun in Lethbridge, Alberta, making it the 7th in Canada and the first in Western Canada.

Sales in the fiscal year 2006 for Wal-Mart's UK subsidiary, ASDA (an abbreviation of ASquith and DAiries), were 42.7% of the International segment sales. In contrast to Wal-Mart's US operations, ASDA was originally and remains primarily a grocery chain, but it has a stronger focus on non-foods than most UK supermarket chains (a notable exception is Tesco, UK's largest grocery & Non-food retailer). At the end of fiscal year 2006, there were 236 ASDA stores, 10 George stores, 5 ASDA Living and 43 ASDA small stores.

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 approximately 53% of The Seiyu Co., Ltd.[23] Additionally, Wal-Mart owns 51% of the Central American Retail Holding Company (CARHCO) formed from more than 360 supermarkets and other store formats, operating in 5 Central American countries: Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica.[24]

In 2004, Wal-Mart bought the Bompreço supermarket chain, composed of 116 stores. Bompreço is the major supermarket chain in Northeastern Brazil. In late 2005, Wal-Mart 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 Rio Grande do Sul and Paraná states. None of those operations were rebranded. As of August 2006, Wal-Mart operates 71 Bompreço stores, 27 Hiper-Bompreço stores, 15 Balaio stores and 3 Hiper-Magazines (all originally part of Bompreço). It also runs 19 Wal-Mart Supercenters, 13 Sam's Club stores and 2 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 of operations from Germany because of sustained losses in the highly-competitive German market. The stores were sold to the German company METRO AG.[25] The sale was completed in Wal-Mart's fiscal third quarter.


In November 2006, Wal-Mart announced a joint venture with Bharti Enterprises to open "hundreds" of retail stores in India. Since foreign corporations are not allowed to enter the retail sector in India directly, Wal-Mart is expected to operate through franchises and handle the wholesale end of the venture.[26] The partnership will involve two joint ventures. While Bharti would be managing the front-end that involves opening retail outlets, Wal-Mart would take care of the back-end such as cold chains and logistics.

Private label brands

Main article: List of Wal-Mart brands

Today, approximately 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.[27] 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 cited as #3 on the list of top beverage brands in the United States.[28] Other Wal-Mart brands include Great Value and Equate in the US and Smart Price in the United Kingdom. A 2006 study recently found that, "While clearly other results in this study point to the success of other retailers, we are struck by the magnitude of mind-share Wal-Mart appears to hold in shoppers' minds when it comes to awareness of private label brands and retailers.

Competition

In North America, Wal-Mart's primary competition includes department stores like Kmart, Target, ShopKo, Meijer, or Canada's Zellers, Winners, or Giant Tiger. Wal-Mart's move into the grocery business in the late 1990s has also positioned 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.[39] In 2004, Wal-Mart responded by testing their own dollar store concept, a subsection of some stores known as "Pennies-n-Cents."[40]

Wal-Mart has struggled in other foreign markets. For example, in Germany, it had captured just 2% of German food sales following its entry into the market in 1997 and had remained "a secondary player" compared to competitor Aldi which boasts 19% share of the German market.[41] In July 2006, Wal-Mart announced its withdrawal of operations from Germany because of sustained losses. Its stores are to be sold to German company METRO AG[25] In China, Wal-Mart is "a small fish" as its strategy of "everyday low prices" has not been successful against "Chinese mom-and-pop shops that are used to cutthroat pricing."[42] In May 2006, Wal-Mart withdrew from the South Korean market when it agreed to sell all 16 of its South Korean outlets to Shinsegae, a local retailer, for $882 million who are as of late 2006 re-branding the country's Wal-Marts as E-mart. Wal-Mart had originally entered the South Korea market in 1998.[43] In the UK, Wal-Mart's ASDA subsidiary is the second largest chain after Tesco.[44] Specifically, ASDA is a distant second to Tesco in the UK grocery market, and as of 2006 the gap is widening, based on market share figures published by TNS Worldpanel.

Customer base

Each week, approximately 100 million customers, or one-third of the US population, visits Wal-Mart's US stores.[45] Wal-Mart customers place low prices as the most important reason for shopping at Wal-Mart, reflecting a, "Low prices, always," message that Wal-Mart had had from 1962 until 2006.[46] Wal-Mart's average US customer's income is below the national average, and analysts have recently estimated that more than one-fifth do not have a bank account, twice the national rate.[47] A Wal-Mart financial report in 2006 also indicated that Wal-Mart customers are sensitive to higher utility costs and gas prices.[48] A poll prior to the 2004 US Presidential Election indicated that 76% of voters who shopped at Wal-Mart once per week planned to vote for George W. Bush, while only 23% planned to vote for John Kerry.[49] When measured against other similar retailers in the US, frequent Wal-Mart shoppers were rated the most politically conservative.[50]

In 2006, Wal-Mart made steps to expand its US customer base, announcing a modification in its US stores from a, "one-size-fits-all," merchandising strategy to a custom-fitting merchandise assortment designed to, "reflect each of six demographic groups – African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents."[51] About six months later, the company went public with a variation on their customer profile: "Saving people money so they can live better lives."[46] This reflects what Wal-Mart identifies as the three main groups that its 200 million customers are organized into: "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" (who like low prices and cannot afford much more).[46] Wal-Mart has also made steps to appeal to more liberal customers, for example, by rejecting the American Family Association's recommendations and carrying the DVD Brokeback Mountain, a love story about two gay cowboys in Wyoming.

Employee and labor relations

See also: Criticism of Wal-Mart

Wal-Mart has been criticized with regard to many of its policies and/or business practices, primarily by community groups, grassroots organizations, labor unions,[53] religious organizations,[54][55] and environmental groups. In particular, several labor unions have specific concerns regarding the company's anti-union stance, as well as several employee relations issues. Other areas of concern include the corporation's extensive foreign product sourcing, treatment of employees and product suppliers, environmental practices, the use of public subsidies, and the impact of stores on the local economies of towns in which they operate.[56][57][58]

In 2005, labor unions created several organizations to confront these issues, including 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 astroturf operation, to counter the criticisms of the other two groups. Additional efforts to counter criticism include launching a public relations campaign in 2005 through their public relations website,[59] as well as several television commercials. The company retained the public relations firm Edelman to respond to negative media attention,[60] and has started interacting directly with bloggers by sending them news, suggesting topics for postings, and even inviting them to visit their corporate headquarters.[61]

Wal-Mart also faces several significant issues with regards to its employee and workforce relations. These issues involve low wages, poor working conditions, inadequate health care, as well as issues involving the company's strong anti-union policies. One of Wal-Mart's biggest issues is their high turnover rate – approximately 70% of its employees leave within the first year, primarily due to lack of recognition and inadequate pay. However, Managers and executives of Wal-Mart are paid very well and are part of a generous bonus program..

A jury in Massachusetts Superior Court awarded nearly 2 millions dollars to a ex Wal-Mart employee due to the store underpaying her and then firing her for discrimination. In the suit, she claimed that she demanded from Wal-Mart that she be paid wage differential and bonuses and also was reprimanded for reporting missing drugs to law enforcement.

Diversity

With regard to equal opportunities for women, in 1999, Wal-Mart ranked well below its retailing peers, which had an average of 56% female managers (only 11% difference from the ratio of women in the workforce, which is 45%), according to data from the Equal Employment Opportunity Commission.[65][66]In 2001, Wal-Mart's EEOC filings showed that female employees made up 72% of Wal-Mart's workforce, but only 30% of its management (a 15% difference from the population ratio, 4% higher than the rest of the industry). This ratio was typical in 1975. On April 3, 2007, Wal-Mart reported that female employees were now 61% of its workforce and 40% of its management.

Wal-Mart has received improving scores on the Corporate Equality Index, a measure of how companies treat homosexual employees and consumers, published by the Human Rights Campaign. The rating was 65% in the 2006 edition, 57% in 2005, 43% in 2003 and 2004, and 14% in 2002.[69][70] Wal-Mart's 2003 score accompanied an expanded antidiscrimination policy to protect gay and lesbian employees, The 2005 score accompanied a new definition of family that included same-sex partners.

In January 2006, Wal-Mart announced that, "diversity efforts include new groups of minority, female and gay employees that have started meeting 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."

Wal-Mart is currently facing a gender discrimination lawsuit, Dukes v. Wal-Mart Stores, Inc., alleging female employees were discriminated against in pay and promotions. In February 2007, the United States Court of Appeals for the Ninth Circuit issued a 2-1 ruling that affirmed a lower court ruling to certify the case as a class-action lawsuit that plaintiffs estimate could include approximately 1.6 million women. A similar lawsuit, EEOC (Janice Smith) v. Wal-Mart Stores, Inc., was filed on August 24, 2001, accuses the retailer of discriminating hiring practices at their 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.