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Wal-Mart Stores, Inc. (), an American public corporation founded by Sam Walton in 1962, first incorporated on October 31, 1969, and listed on the New York Stock Exchange in 1972, is the largest retailer in the world and the second largest corporation in the world, behind Exxon Mobil, based on revenue as of 2006.[Staff Writer. "Fortune Global 500." CNN/Fortune. July 24, 2006. Retrieved on July 25, 2006.] For the fiscal year ending January 31, 2006, Wal-Mart reported net income of $11.2 billion on $316 billion of sales revenue (3.5% profit margin).["Wal-Mart Reports Record Fourth Quarter Sales and Earnings." Wal-Mart. February 21, 2006. Retrieved on July 25, 2006.] As of November 2, 2006, revenue was $26.7 billion higher than it was one year ago.["October Sales." Wal-Mart. November 2, 2006. Retrieved on November 2, 2006.] It is the largest private employer in the United States and Mexico.[Wal-Mart Corporate Facts." Wal-Mart. Retrieved on August 12, 2006.]
Wal-Mart is the largest grocery retailer in the United States, with an estimated 20 percent of the retail grocery and consumables business,[Ortiz, John. "Can Kroger slow Wal-Mart?" Deseret Morning News. October 26, 2005. Retrieved on July 25, 2006.] and is also the largest toy seller in the United States, with an estimated 22 percent of the retail toy business, having surpassed Toys "R" Us in the late 1990s.[Byrnes, Nanette; Eidam, Michael. "Toys 'R' Us: Beaten At Its Own Game." Business Week. March 29, 2004. Retrieved on July 25, 2006.]
Internationally, Wal-Mart operates in Mexico as Walmex, in the United Kingdom as ASDA and in Japan as The Seiyu Co., Ltd.. In 2006, Wal-Mart's international operations accounted for approximately 20.1% of total sales.[."Wal-Mart 2006 Annual Report." Wal-Mart. 2006. Retrieved on July 26, 2006.] Wholly owned operations are located in Argentina, Brazil, Canada, South Korea, Puerto Rico, and the United Kingdom. Wal-Mart's investments outside of North America have produced mixed results. Recently Wal-Mart moved to sell its retail operations in South Korea and Germany.[."Wal-Mart Reports Second Quarter Sales and Earnings." Wal-Mart. August 15, 2006. Retrieved on August 15, 2006.]
Wal-Mart has been widely criticized for its policies and business practices by community groups, grassroots organizations, labor unions,[Kabel, Marcus. "Wal-Mart, Critics Slam Each Other on Web." Washington Post. July 18, 2006. Retrieved on July 31, 2006.] religious organizations,[Sellers, Jeff M. "Women Against Wal-Mart." Christianity Today. April 22, 2005. Retrieved July 31, 2006.][Sellers, Jeff M. "Deliver Us from Wal-Mart?." Christianity Today. April 22, 2005. Retrieved on July 31, 2006.] and environmental groups. Specific concerns 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.[Copeland, Larry. "Wal-Mart's hired advocate takes flak." USA Today. March 13, 2006. Retrieved on July 31, 2006.][Rodino Associates. "Final Report on Research for Big Box Retail/Superstore Ordinance." Los Angeles City Council. October 28, 2003. Retrieved on July 31, 2006.][Smith, Hedrick. "Who Calls the Shots in the Global Economy?" PBS. Retrieved on July 31, 2006.]
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History
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Sam Walton's retailing career began when he accepted a job offer at a JC Penney store in Des Moines, Iowa on June 3, 1940 where he remained for eighteen months. In 1945, Walton 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. After a period of success, Walton was unable to come to agreement on his lease renewal and unable to 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.
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Subsidiaries
Wal-Mart's operations are comprised primarily in three retailing subsidiaries: Wal-Mart Stores Division U.S., SAM'S CLUB, and Wal-Mart International.[ 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.][ ]
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Wal-Mart Stores Division U.S.
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Wal-Mart Stores Division U.S. is Wal-Mart's largest business subsidiary, accounting for 67.2% of fiscal 2006 net sales.[ This segment consists of three traditional retail formats: discount stores, supercenters, and neighborhood markets, all of which are located in the United States, as well as Wal-Mart's online retailer, walmart.com.]
Wal-Mart Stores operates retail department stores selling a range of non-grocery products, though emphasis is now focused on the supercenters, which include more grocery items.
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Wal-Mart Discount Stores
Wal-Mart Discount Stores are a chain of discount department stores that range in size from 30,000 square feet (3,000 m²) to 224,000 square feet (21,000 m²) with an average size of approximately 102,000 square feet (9,500 m²).[ They carry an amount of general merchandise products with a selection of food items. Many Wal-Mart Discount Stores also feature a garden center, a pharmacy, Tire & Lube Express, optical center, one-hour photo processing lab, portrait studio, as well as a fast food outlet.]
The first Wal-Mart store opened in 1962 in Rogers, Arkansas, and has since been remodeled and expanded, becoming a 24-hour Wal-Mart Supercenter; a similar Wal-Mart concept, Discount City, opened in Rogers, Arkansas a year earlier, but all of these stores were later closed or converted into Discount Stores.
As of October 31, 2006, there were 1,100 Wal-Mart Discount Stores in the United States. The busiest Wal-Mart in the world is in Southaven, Mississippi.["Corporate Profile." Wal-Mart. Retrieved on July 26, 2006.]
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Wal-Mart Supercenter
Wal-Mart Supercenter is a chain of hypermarkets that range in size from 99,000 square feet (9,000 m²) to 261,000 square feet (24,000 m²) with an average size of approximately 187,000 square feet (17,000 m²).[ They carry everything a Wal-Mart Discount Store does in addition to a full-line supermarket (including meat and poultry, baked goods, delicatessen, frozen foods, dairy products, garden produce and fresh seafood). Many Wal-Mart Supercenters also feature a garden center, a pharmacy, a Tire & Lube Express, optical center, one-hour photo processing lab, portrait studio, and numerous alcove shops such as a cellular phone store, hair and nail salons, a video rental store, a family fun center, a branch of a local bank, and possibly a fast food outlet. Some locations also sell gasoline, either through Murphy Oil Corporation, whose Wal-Mart stations are branded as "Murphy USA", or Tesoro Corporation, who uses the "Mirastar" banner on theirs. ]
The first Supercenter opened in 1988 in Washington, Missouri; a similar Wal-Mart concept, Hypermart USA, opened in Garland, Texas a year earlier, but all of those stores were later closed or converted to Supercenters. The most recent Supercenter opened its doors in 2006 in Rosemead, California.
As of October 31, 2006, there were 2,176 Wal-Mart Supercenters in the United States.
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Wal-Mart Neighborhood Market
Wal-Mart Neighborhood Market is a chain of supermarkets that average about 42,000 square feet (3,900 m²).[ They offer a variety of products (including a full-line of groceries, pharmaceuticals, health and beauty aids, photo developing services, and a limited selection of general merchandise).]
The first Neighborhood Market opened in 1998 in Bentonville, Arkansas.
As of October 31, 2006, there were 110 Neighborhood Markets in the United States.
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Sams 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 United States.
As of September 31, 2006, there were 574 Sam's Clubs in the United States.
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Wal-Mart International
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The operations of Wal-Mart International comprise 2,700 stores in 14 countries outside the United States. Wholly owned operations are located in Argentina, Brazil, Canada, South Korea, Puerto Rico and the United Kingdom.
Wal-Mart has operated in Canada since their acquisition of the Woolco division of Woolworth Canada, Inc.
In 2004, Wal-Mart bought the Bompreço supermarket chain, comprised by 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, called WMS Supermercados do Brasil, thus acquiring control of the Nacional, Big 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 were originally part of Bompreço). It also operates 67 Nacional stores, 24 Mercadorama stores, 15 Big stores through WMS. It also runs 19 Wal-Mart Supercenters, 13 Sam's Club stores and 2 Todo Dia (small stores) stores. With the acquisition of Bompreço and Sonae, Wal-Mart is currently the third biggest supermarket chain in Brazil, only behind Carrefour and Pão de Açúcar.
In July 2006, Wal-Mart announced its withdrawal of operations from Germany because of sustained losses. Their stores will be sold to the German company METRO AG.
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Corporate affairs
Wal-Mart's business model is based on selling a wide variety of general merchandise and marketing, "always low prices."[ The company refers to its employees as, "associates." All Wal-Mart stores in the United States and Canada also have designated "people greeters," whose general role is to welcome shoppers at the store entrance, as well as playing a role in loss prevention and security.][Mikkelson, Barbara. "Code Adam." Snopes. December 31, 1998. Retrieved on August 3, 2006.]
Unlike many other retailers, Wal-Mart does not charge a slotting fee to suppliers for their products to appear on the store.[Nelson, Emily. "Too Many Choices --- Nine Kinds of Kleenex Tissue, Eggo Waffles in 16 Flavors: Blame Brand Managers." Wall Street Journal. April 20, 2001. Retrieved on August 1, 2006.] Alternatively, they focus on selling more popular products, and often pressure store managers to drop unpopular products in favor of more popular ones, as well as manufacturers to supply more popular products.
On September 14, 2006, the company announced that it would be phasing out its layaway program, citing declining use and increased costs.[Staff Writer. "Wal-Mart Will Phase Out Layaway Program." Wal-Mart. September 14, 2006. Retrieved on October 8, 2006.] Layaway will be offered until November 19, 2006, with merchandise pickup by December 8, 2006. They plan to focus on alternative payment options, such as increased use of 6 and 12 month zero interest financing, online shopping, and gift cards.
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Governance
Wal-Mart is governed by a thirteen-member Board of Directors, which is elected annually by shareholders. S. Robson Walton, the eldest son of founder Sam Walton, serves as Chairman of the Board, and H. Lee Scott, the Chief Executive Officer, serves on the board as well. Other members of the board include Aida M. Alvarez, James W. Breyer, M. Michele Burns, James I. Cash, Jr., Douglas N. Daft, David D. Glass, Roland A. Hernandez, Jack C. Shewmaker, Jim C. Walton, Christopher J. Williams, and Linda S. Wolf.
Former members of the board include Hillary Clinton (1985-1992) and Tom Coughlin (2003-2004), who also served as Vice Chairman. Clinton left the board prior to the 1992 U.S. Presidential Election, and Coughlin left the board 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 twenty-seven months of home confinement, five years of probation, and ordered to pay $411,000 in restitution.
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Competition
In the United States, Wal-Mart's chief competitors in low-end general merchandise include Sears Holdings Corporation's Kmart chain and Target. Many smaller regional chains, such as Meijer in the midwest, are also competitors. Wal-Mart's move into the grocery business has also positioned it against major grocery chains such as H-E-B, Kroger, Albertson's, Publix, Giant Eagle, Safeway, Winn-Dixie, Ahold and many other regional chains and independents. A niche has been carved out of Wal-Mart's dominance in the United States by several retail corporations. 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." 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. In the United Kingdom, Wal-Mart's Asda subsidiary is the second largest chain in the UK after Tesco. 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 Superpanel.
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Customer base
Wal-Mart is a global company with a diverse customer base. Wal-mart customers place low prices and value as the most important reason for shopping at Wal-Mart. Financial results in 2006 have indicated Wal-Mart customers are sensitive to higher utility costs and gas prices.
In the United States, it has been reported that eighty percent of residents of the United States shop at Wal-Mart at least once a year. And each week, 100 million customers visit Wal-Mart's U.S. stores - "more than one-third of the U.S. population."
Frequent Wal-Mart customers show some demographic trends. In the U.S., Wal-Mart customer's average incomes are below the national average. Analysts have estimated that more than one-fifth of Wal-Mart's U.S. customers have no bank accounts, twice the national rate. Polling Data reported by John Zogby suggests there is a correlation between how often consumers shop at Wal-Mart and how conservative they are. In the 2004 US Presidential election 76% of voters who shopped at Wal-Mart once a week voted for George W. Bush while only 23% voted for John Kerry. By contrast 80% of voters who never shopped there voted for Kerry with 18% voting for Bush. African American and Hispanic voters who shop there are described as "significantly more conservative" than their non Wal-Mart shopping peers. When measured against other similar retailers in the United States, Wal-Mart frequent shoppers were rated the most politically conservative. This also roughly correlates with the geographic distribution of Wal-Mart stores, as the company has yet to significantly penetrate major urban areas, which tend to be less conservative than suburban and rural areas, where most of Wal-Mart's stores can be found.
Wal-Mart has recently taken actions to expand its U.S. customer base. On September 7, 2006, the Wall Street Journal reported that Wal-Mart was modifying its U.S. 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."
An example of the company's efforts to broaden its U.S. customer base include a focus on gay and lesbian customers including a December 2005 internal seminar and the August 2006 joining of the corporate advisory council of the National Gay and Lesbian Chamber of Commerce in what is described as a "pragmatic" effort "to broaden its appeal as it tries to expand into new territories, particularly in the more liberal and union-friendly urban and coastal regions". It's noted that Wal-Mart rejected the American Family Association's recommendations by carrying the movie "Brokeback Mountain," a love story about two cowboys in Wyoming.
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Private label brands
Wal-Mart's private label store brands include: Great Value, Equate, and Sam's Choice. In a 2006 study, The Hartman Group marketing research firm issued a report that 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."
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Diversity
In 1999, according to data from the Equal Employment Opportunity Commission, Wal-Mart ranked well below its current retailing peers, which have an average of 56% female managers, female employees at Wal-Mart make up 73% of its workforce, but only one-third of its management, a percentage that was typical in 1975.
Wal-Mart has received improving scores on the Corporate Equality Index, published by the Human Rights Campaign, a measure of how companies treat gay and lesbian employees and consumers. The company received a 65% rating in the 2006 edition. Previously, Wal-Mart had received a 57% rating in the 2005 edition, a 43% rating in the 2003 and 2004 editions, and a 14% rating in the 2002 edition. Wal-mart's improved score in 2003 accompanied an expanded antidiscrimination policy to protect gay and lesbian employees, Walmart's improved score in 2005 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."
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Criticism
Wal-Mart has been the subject of criticism from community groups, grassroots organizations, trade unions,[ and environmental groups. Specific concerns include the company's extensive foreign product sourcing, treatment of employees and product suppliers, environmental carelessness, use of public subsidies, and store impacts on local communities and businesses. Additionally, Wal-Mart has faced accusations of illegal activities, including predatory pricing, discrimination and violation of labor laws.]
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Local Communities
When planning new store locations, Wal-Mart often faces many concerns from the affected communities. Local critics that oppose new Wal-Mart store openings cite concerns such as traffic problems, environment problems, public safety, absentee landlordism, bad public relations, low wages and benefits, and predatory pricing. Critics that defend Wal-Mart cite consumer choice, economic studies, as well as the underlying political response.
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Use of foreign labor
In the United States, one common criticism derives from claims that Wal-Mart uses cheap, foreign labor in an attempt to provide its customers with lower prices. According to the AFL-CIO, "Wal-Mart is the single largest importer of foreign-produced goods in the United States", their biggest trading partner is China, and their trade with China alone constitutes approximately 10 percent of the total US trade deficit with China as of 2004.•
While Wal-Mart highlights its US suppliers, 60% of its products are imported from other countries as of 2004, compared with 6% in 1996. Other Wal-Mart goods have been manufactured and imported from such places as South Korea, Philippines, Malaysia, Cambodia, Thailand, and Vietnam.
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Health care and employee benefits
Another United States-specific criticism concerns Wal-Mart's health insurance. According to an October 2005 article in BusinessWeek, Wal-Mart's health insurance covers 44% or approximately 572,000 of its 1.3 million U.S. workers.[(article archived on Global Exchange).] Further, Wal-Mart spends an average of $3,500 per employee for health care, 27% less than the retail-industry average of $4,800.[Freking, Kevin. "Wal-Mart to Offer More Health Coverage." ABC News. April 17, 2006. Retrieved on August 7, 2006.] The company estimates that this new change could add 150,000 workers to health coverage plans, if all eligible choose to take part.[ However, there is concern that since the new plan provides a benefit only after a $1,000 deductible is paid ($6,000 for a family), many workers will be unable to afford the coverage and will opt not to participate in the plan.]
The State of Maryland passed a controversial bill in January of 2006 requiring that all corporations with more than 10,000 employees in the state spend at least 8% of their payroll on employee benefits, or pay into a state fund for the uninsured. Wal-Mart, with about 17,000 employees in Maryland, was the only known company to not meet this requirement before the bill passed.
On July 7, 2006, the Maryland law was overturned in federal court by U.S. District Judge Frederick Motz who ruled that the law would "hurt Wal-Mart by imposing the administrative burden of tracking benefits in Maryland differently than in other states."
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Employee and labor relations
Wal-Mart has been criticized for their aggressive policies against labor unions. In North America, the company has largely thwarted unionization through aggressive anti-union tactics such as managerial surveillance and pre-emptive closures of stores or departments who choose to unionize.[Dicker, John. "Union Blues at Wal-Mart." The Nation. June 20, 2002. Retrieved on July 26, 2006.] Wal-Mart's anti-union policy at home is also used in Canada, as well as several other countries. For example, when workers at a Jonquière, Quebec Wal-Mart voted to unionize, Wal-Mart closed the store five months later, citing weak profits.[Bianco, Anthony. "No Union Please, We're Wal-Mart." Business Week. February 13, 2006. Retrieved on July 26, 2006.][Staff Writer. "Wal-Mart faces Canadian labour clash." MSNBC. April 30, 2006. Retrieved on July 26, 2006.]
Wal-Mart's strict work regulations and management practices have repeatedly invoked criticism in foreign countries. For instance, a German court ruled in 2005 that Wal Mart's policy of forbidding dating relationships and strongly discouraging flirting among coworkers is against German law and therefore does not apply to the company's German stores. The same court also ruled that Wal-Mart's efforts to set up a telephone hotline enabling fellow employees to report violations of these restrictions are equally illegal under German labor legislation.[*]
In August 2006 Wal-Mart announced that it will allow workers at all of its Chinese stores to become members of trade unions. The US retailer said it would work with the state-sanctioned All-China Federation of Trade Unions (ACFTU) on representation for its 28,000 staff. [Wal-Mart workers in China form first union AFP July 29, 2006]["Wal-Mart SEC Form 10-Q." United States Securities and Exchange Commission. October 31, 2005. Retrieved on July 31, 2006.]
In August, 2006, the company announced that it would roll out an average pay increase of 6% for all new hires at 1,200 Wal-Mart and Sam's Club locations nationwide, and at the same time would institute pay caps on veteran workers.[Goldman, Abigail. "Wal-Mart to Raise and Limit Wages." Los Angeles Times. August 8, 2006. Retrieved on August 24, 2006.] While Wal-Mart claims the measures are necessary to stay competitive, critics claim the salary caps are primarily an effort to push higher-paid, veteran workers out of the company.
Wal-Mart's United Kingdom subsidiary, ASDA, was voted a top ten UK employer by the UK newspaper Sunday Times Top 100 Best Employers Survey in 2003, 2004 and 2005.[Staff Writer. "100 Best Companies to Work For: 2005 (ASDA)." The Times. Retrieved on September 6, 2006.]
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See also
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Further reading
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