The Story Of World Numero Uno
Sam Walton, the former chairman and founder member of world’s largest retail giant Wal-Mart was born of of Thomas Gibson Walton and Nancy Lee Lawrence near Kingfisher Oklahoma in March 1918. His father who was a mortgage man later moved to Missouri with his younger son in 1923 where Sam completed his schooling and Colleges studies and also excelled as a good sportsperson. Having not been born from a well-to-do family he used to do anything to meet the financial needs of his family which included milking the family cow and selling the surplus in bottles to the customer and also hawking newspapers on the streets. The passion to make something out of each moment of his life voted him as “The Most Versatile Boy” during his graduation years. He also served as the president of the Student Body during his senior year of his college. Later he majored in Economics from University of Missouri and also served in “Rserved Officer’s Training Corps “which is a college based officer commissioning program to focus on leadership qualities and strategic management and was voted as the permanent president of the class upon graduating. Three days after graduating from college, he joined the J.C Penny’s which is a mid-ranged chain of Department Stores in Plano as a Management-Trainee. He resigned Penny’s in 1942 with expectation to be inducted into the the U.S Military Academy during World War II. Midway he joined Du Pont Munitions Plant, An American Chemical Company in Oklahama which was soon by followed by the post of Supervising Security of the Aircraft Plants and Prisoner Of War Camps in U.S Army Intelligence Corps and later reached to the highs of the rank of Captain.
He left Army in 1945 and started a Departmental Store and hence he purchased a Ben Franklin Variety store in New Port, Arkansas. Ben Franklin Variety Stores is a chain of Five and Dime discount stores found in streets of small town throughout U.S organized using franchise system with each stores owned by individual proprietors. A Variety Store is a store to sell inexpensive retail items usually with a single price point popularly known as Convenience Store in Canada and Philippines etc. It is aretail store carrying a variety of items in the low and popular price ranges, targeted for the family market. Variety stores carry items such as apparel, women’s accessories, gift items, and stationery. He spent some $ 25000 to own that store of which $5000 came from his savings during his service in U.S Army and $20,000 came as a loan that he took from his father-in-law. Having found this scheme running successfully he went on to open even more variety stores in coming years with the help of his Brother, father-in-law and Brother-in-law and focused more on retail business rather than big shopping centers. He had a unique concept of managing human resources and maximizing profits. He always encouraged his managers to invest in any new opening of the chain of Business he owned and in return he would give a percentage of the revenue from that new opening to the investing managers. By the year 1962 he and his brother had owned around 16 variety stores in different cities like Arkansas, Kansas etc of which 15 were Ben-Franklin chain of franchisees and the one independent of Fayetteville Stores. This was then followed by the emergence of giant Wal Mart Stores in 1962 which is now the undisputed numero uno in the list of top 500 Fortune Companies of the world.
The Foundation of Wal-Mart Stores was based on a very simple but visionary principle to sell retail commodities at a comparatively cheaper price compared to others in the market and the profit margin could be compensated by selling more and more volumes. Walton was a great visionary who changed the very fate of the American Economy with his low-cost principles. Laying stress on keeping costs low even he himself kept driving an old pick up truck and share budget hotel rooms with colleagues in business trips. While leading a lifestyle like this he always set an example to his employees on cost-cutting principles to keep it to bare minimum and this is one mentality which is prevalent here even after more than a decade of his death. Today, with $288 billion in annual revenues (more than Switzerland’s GDP) and over $10 billion in profits, Wal-Mart is the world’s largest corporation, according to 2005 Fortune 500 list. It operates over 5,000 stores worldwide and employs over 1.6 million people — 1.3 million in the United States alone. It all started in Rogers Ark in U.S. in 1962 and achieved an annual sales of $1 billion by 1979. It owned an IPO in 1970 and by 1985 it had 880 stores $8.5 billion in revenue. It surpassed K-Mart and Sears in size in 1990 and 1992 respectively and by the end of the 1994 it had overtaken both these K-Mart and Sears combined in Size. The company now operates in four major divisions: Wal-Mart Supercenters, Wal-Mart discount stores, Neighborhood Market stores and Sam’s Club warehouses.
Cost-cutting apart, Technology also played a vital role in making it a pioneer of the retail business. It pushed the entire retail industry to use Universal Bar/Product Codes which were earlier used by grocery stores to help generate a common labeling on all goods but also provide all necessary details to the manufacturers and also control inventories. The UPC (Universal Product Code) first originated with a company called Uniform Code Council. The manufacturer has to apply to UCC to enter into the code system and pays an annual fee for the same. In return the UCC gives them 12-digit code which is divided into two portions : the machine readable bar code and the naked-eye readable 12 digit UPC number. The first six digits of the UPC number is the manufacturer identification number and the next 5 digits are the item number while the last digit is the checksum to ensure that the Barcode is valid. The job of assigning unique UPC codes to all products of same category but different weights or different categories and different weights as the case may be is taken care of by the UPC coordinator hired by the manufacturer. This system created a revolutionary change in the retail world and reduced the cost of inventories to amazing figures thus leading to huge profit margins. Although these UPC codes earned a huge profit to the Wal-Mart yet the quest to keep doing something new and revolutionary never ended and by the the year 2005, it demanded manufacturers to start Using RFID codes which were once limited for tracking cattle and vehicles or passengers. RFID tags unlike the UPC codes had the capacity to process even larger volumes of goods. This is so because Bar codes scan a printed bar code label with with optical laser while RFID not only scans rather interacts with those labels using radio frequency signals. Thus data can be read, write and then locked using these codes which was an edge over the UPC code which could only be read. This technology helped solve the problem of long standing check-out queues of consumers simply by one alarm ring of the detector which could scan all your products in the bucket, calculate the total bill and reduce the same from your bank account in a matter of seconds. No sooner did Wal Mart adopted this technique than it cleared some 16% out of stock merchandise at the RFID equipped stores.
The more Wal-Mart grew in size and revenue the more were the controversies surrounding it. The frugal work culture and labor issues of company have always hit the newspaper headlines.Much of the hue and cry surfaced the media in 1985 when it advocated that “Bring it Home to the USA” scheme wherein he announced that he would offer as much as 5% to the suppliers for the products launched in USA and then in 1995 it declared that only 6% of its total merchandise were imported. A decade later experts estimated that 60% of its merchandise were imported. The ill-famed “off the clock work principle” of Wal Mart had always been in news. They set payroll targets too difficult to be achieved and in case people don’t achieve it then they are suitably treated. Cases regarding discrimination of wages on the basis of sex have also surfaced on several occasions. Walton’s hostility against Unions had been yet another question mark. People have often blamed it to be a polarizing force in the world economy. The opening of new Wal-Mart stores is generally a cue for all its competitors in the location that it’s time to put the shutters down. Emek Basker, a PHD in Economics claims that each time a new Wal-Mart store starts it gives employment to 250 and in as less as 5 years some 300 people lose their jobs.
Come what may but one thing is clear that Wal-Mart has taken the whole of the world economy with a storm on the basis of its cutting edge technology, frugal work culture and pushing merchandise selling price to as low as possible. Howsoever frugal it’s work culture may be but the fact that it generates not only employment 1.6 million people but also plays a significant role in maintaining the price balance in economy. Andrew Young, a former UN Ambassador says,” “You need to look at who’s complaining about Wal-Mart. If it’s not 100 million people shopping there every week and it’s not 8,000 people competing for 500 jobs [at a new Atlanta store], who is it? They’re complaining because they’re wrong and they don’t understand that ending poverty means generating wealth and not just fighting to redistribute the existing wealth.”
Note:The author is an amateur writer and a neophyte in economics and all contents put here have been taken from various sites many of which are already added in his blogroll. Queries, if any,can be sent to him at mihirjha27@gmail.com and comments are always welcome.
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Mihir Jha
