Walmart

$5000 invested in Walmart in 1970=$6.5 mil in

2011
$5000 invested in Walmart in 1980=$2.6 mil in
2011
In 1993, the growth rate was 7-8% --first time
fell under 10% since 1985
In 1993, stock price fell 22% from Mar to Apr

 Started from a small town in South

Started from franchising
Opened his own store in 1962

Walmart
Empowering associates
Maintaining tech superiority
Loyalty among associates, customers and
suppliers

Low price
Always the low price to always low prices
(exibit 5)
2.2 % lower than K by average, but 3% below on
items priced at all stores
Private label ---- 26% price advantage than
comparables

Vendor relationship

No-nonsense
No agents; only manufacturer: 3-4% saving
One table four chairs
Centralized buying
No single suppliers account for more than 2.4% of its purchases in
1993
Sharing information and improving performance but not about
pricing , 10% of P&G total revenue
EDI: vendors receive orders electronically: forecast, plan, replenish,
ship , invoice, fund transfer
EDI: 1.5% vs. 1.3%
Failure: Gitano: 780mil sales (26% of gitano) on time delivery. 90%
million loss, $3 drop per share in 1992

Store operation (exhibit 6)

Leased 70%
Rental :3% vs. 3.3%
120 days to open
Leave expansion space
Sales per sq foot: 300 vs. 209 vs. 147
Storage space: 10% vs. 25%
Operating cost: 18.1 vs. 25%
Various cards
UPC began in 1983, two years ahead K

Merchandizing

Merchandizing
Tech --- IT
Less promotions : 13 vs. 50-100
Ad spending: 1.5% vs. 2.1%
No hassle return
Decentralized pricing : 1% lower than Kmart if
next door to competitor; 10.4% , 7.6% lower than
K and Target if separated by 4-6 miles ; 6% higher
than Kmart if it is standing alone

Distribution
Two-step hub-and-spoke distribution network :
40 hours for distribution
Merchandize replenish system
80% purchase were shipped from own
distribution center vs. 50% for K
Cross-decking: delivfer directly to warhouses ,
repacked , dispatched to stores
Inbound cost: 3.7% vs. 4.8%
Truck consolidations , 60^ on backhauls

Human resources management

528000 employees
Largest after GM
Non-unionized
Open door information
Lean management
Decentralized training at distribution centers
Yes we can Sam : 650 suggestions in 1993 , saving 85 million
Store within store: Shrinkage cost: 1.7% vs. 2%
Performance pay: relocate every 24 months
Profit sharing
Stock purchase plan

Management
Joint after high school, started from Wal-Mart
No regional office, but visits from the central
Knowledge exchange
Saving 2%
Passion for ideas
Customers saved 12 billion from 1962-1993

Diversification

Sams in 1983
Dot deep Drugstore closed
Helens Arts and crafts store closed
Hyperstore in 1987 (closed)
Sepercenters in 1987
M&A: Western in 1991: wholesaler in music ,
videos and books distribution ,
Buds : damaged etc.

Sams first in 1980s (exhibit 7)

Largest now, caught up price club within 4 years
Limited units (3500 vs. 30000)
Limited working capital

High inventory turnover

Located close to Wal-Mart
Normal by cash
Biz license is need for membership
70% directly from suppliers
Rose 19% in 1993

Over capacity in industry

Wave of M&A (PAGE 12)

SUPER CENTERS exhibit 8

In between supermarket and discount stores

Limited package sizes and brands
Normally independent, though declining , local, regional
The margin is low and the existing players were there
1993: 30-68; 1 bil-3.5 bil
Supermarket (exhibit 9) 2% margin (exhbit 10 comparing the two)
Industry of super center: 11.8 bil sales in 1992 to 14.6 bil in 1993
(exhibit 11)
Food; 40%--traffic draw , profit comes from general merchandise
Testing size of the locality
Bought McLanegrocery store

International expansion
Emerging market
Mexico: 1992 JVstrong competitions from US
firms
Canada: 1994 M&A---900 mil sales with no
profits

Future

You cannot replace Walton

Social issues
Advertisement from targets
They learned from Sears, Penney and Kmart.