They Don't Call It Wal-Mart For NothingWal-Mart is the godfather of retail. When he asks you for a favor, you do it. If you want to do business with the world's largest retailer, what are you going to say.....'no'? In 1945 Sam Walton launched the beginning of Wal-Mart. The company was founded and based in Bentonville, Arkansas. Today revenues surpass $380 billion dollars. Suppliers will change whatever is necessary about their product to make it acceptable to Wal-Mart buyers. Most department stores develop a reputation they want to be known by. Lord & Taylor is known by serving a “stuffier” customer, Brooks Brothers has their Wall Street suits, Macy’s has the Thanksgiving Day parade and Wal-Mart is known for cheap. That is their mantra: To offer the widest variety of products at the cheapest possible price. Is it working? Take a look at their stock price and see what Wall Street thinks of Sam Walton’s strategy.
Assuming you don’t work for Wal-Mart or a Chinese manufacturer that supplies their goods, Wal-Mart offers a bright spot for the consumer. Cheap prices. Offering the cheapest price while maintaining a frugal corporate mentality is part of the culture. There are stories of employees buying their own office supplies, sharing hotel rooms on business trips, using a vendor’s 1-800 number or calling collect. All this contributes to delivering rock bottom prices. To provide low prices you must eliminate costs. When prices go down, sales will go up. When sales go up, the cost per sale goes down. • Monitor what you spend and be disciplined. • Review your expenses periodically. • Simplify systems and methods whenever possible. • Eliminate waste and consolidate. • Improve productivity with the best technology and automation. • Implement systems to make people accountable. There you go. You’re on your way to Wal-Mart culture indoctrination. Look, I mean that in a good way. Shareholders are happy. Customers are happy. That's the definition of a good company. If you own the stock that is. Wal-Mart has a lion's share of bad press. Low wages, sexual discrimination, poor benefits, overworking employees, anti-union....and I thought my office was bad.
Management understands that “buying it cheap and selling it cheap” is not the only key to success. Disseminating the corporate culture is just as important. Wal-Mart management expects employees to work hard, be loyal, strive for improvement and get in by 6am. Hey, your company probably expects the same thing. But is your office buzzing with executives on a Saturday? Wal-Mart’s is. The corporate culture is based on “integrity, respect, teamwork, communication, excellence, accountability and trust.” Communicating the message is an integral part of success. Each week different levels of management have set days for meetings. In addition to reviewing weekly business issues, it’s an opportunity to reinforce the Wal-Mart way. Are you a new manager at Wal-Mart? Here’s your cheat-sheet: • Hire the right people. • Pick the right person to be the manager. • Support that person with an experienced team. • Explain to each person what is expected. • Make the setup fun. • Demonstrate the culture by action from day one. • Work hard. • Serve the customer every single day. • Constantly review operations and strip away excess cost.
Selling to Wal-Mart is a mixed blessing. If you have scale, are sophisticated and flexible you’re in luck. Unlike many retailers, the company does not charge "slotting fees" for access to its shelves and is unusually generous in sharing sales data with manufacturers. In return, you’re expected to adhere to delivery & inventory schedules and possibly design your product to achieve the lowest possible cost. Critics charge that in the global pursuit of low-cost goods, Wal-Mart contributes to the loss of U.S. manufacturing jobs. Let’s not say it's the sole cause….but a part of the dynamic. Last year approximately $15 billion dollars worth of Chinese products were purchased. Wal-Mart is experiencing remarkable growth. Especially now since the U.S. is in a recession. Low prices come in handy for the consumer. The issue here is finding workers to staff the stores. Currently, there are fewer than 2 million employees. Open new stores….you'll need to find more working bodies. There has been an increase in grass roots organizations rallying against the opening of new super-centers. The stores present problems for local retailers and as mentioned earlier….employee wages are lower. Wal-Mart is loved and hated. Their advantage over everyone else is price. And they make sure the customer knows about it. There doesn’t seem to be any major threats in the near future to the dominance of these super-centers. However retail business models change. They creep up on you and you won’t see it coming. What might the next business model be that gives Wal-Mart a run for their money? I don’t think a bigger store would close the deal. And I don’t know how much lower prices could get. Until I find the next great retail stock, remember these famous words…..Save Money. Live Better. Go From Wal-Mart To Celebrity Companies
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