A history of Wal-Mart Stores Inc.

Wal-Mart Stores Inc. - or Wal-Mart as many people know it - is a unique company. With consolidated net sales of some $473 billion in 2014 worldwide it is the largest company in the world. It is also much debated for its success and its way of doing business. Wal-Mart was a rather popular business while being led by its founder Sam Walton. But after Walton's dead in 1992 the appreciation of the company changed. Principals of the founder were sometimes taken too literally by his successors and profits were given higher priority than employer-employee relationships. Lately however the company is seriously making an effort in trying to more satisfy employees and customers by raising wages for both female and male workers and paying more attention to working conditions at supplier’s factories that are generally situated in China.

The start

Born in 1918 in Kingfisher, a small town in Oklahoma, Sam Walton grows up during the Great Depression. During these demanding years he helps his family by selling milk and by working as a newspaper boy. At high school  he distinguishes himself mainly in sport. After high school he studies economics at the University of Missouri. Three days after his graduation, Walton is hired by retail department store giant, JCPenney, in Des Moines, Iowa, as a $75-a-month trainee. In 1942, he meets Helen Robson, a banker's daughter and graduate in commerce. They marry in early 1943. Soon after, Walton is drafted into the US Army. He serves in the Army supervising security at aircraft plants and POW camps in the US.

After the war in 1945 he decides to open his own store. Using a loan of $20,000 from his father-in-law he rents a franchise in Newport, Arkansas from Butler Brothers. Butler Brothers is a regional retailer that owns a chain of stores called Ben Franklin Stores. In this store Sam, together with his wife, develops and tests some of the concepts that will make him very successful in the following years. His store is open late and the shelves are abundantly filled with a large selection of merchandise at low prices. The store is centrally located and easily accessible to customers. Walton develops the idea of discount merchandising by buying wholesale goods from the lowest-priced supplier. Contrary to his competitors Walton drives up the sales by not cashing the savings himself but by passing them on to his customers. Higher sales volumes allow him to negotiate even lower prices with wholesalers.

The store soon develops into one of the most successful stores of the Butler Brothers chain but Walton is not receiving the credits for this. The owner of Butler Brothers attributes the success to the good location of the store and not to the revolutionary methods of Walton and he decides not to renew the lease and to assign it to his own son. Walton and his wife are forced to leave. With $50,000 pocket profits they open a new store in Bentonville, Arkansas, from Butler Brothers in 1950. He calls it Walton’s Five and Dime. In Bentonville Walton is involved in all kind of social activities: the local hospital, the baseball team, the Rotary Club and the Chamber of Commerce.

In his new shop Walton is again very successful thanks to low prices. He starts apprehending the potential of stores in small and rural communities. And he is grateful having listened to his wife Helen who wanted to live in a small town and not in St. Louis where Walton first wanted to run a store. Soon in 1951 Walton opens a second store in Fayetteville, a village nearby and continues to open new stores which make him with 16 stores in Arkansas, Kansas and Missouri the largest Ben Franklin franchise owner. Walton offers managers the opportunity to become limited partners. This encourages the managers to maximize profits and advances their managerial abilities.

The first Wal-Mart

In 1962 when he cannot convince Butler Brothers to let him experiment with more new sales methods he, together with his younger brother Bud, starts his own large discount store Wal-Mart Discount City in Rogers, Arkansas. In 1968 Walton runs a total of 18 stores with sales of some $9 million.

The company is incorporated as Wal-Mart Stores, Inc. in 1969 and in 1970 it opens its home office and first distribution center in Bentonville, Arkansas. At that time it has 38 stores operating with 1,500 employees and sales of $44.2 million. In 1975 the number of stores is already up to 125 with 7,500 employees and total sales of $340.3 million. In the 1980s, Wal-Mart continues to grow rapidly. In 1983 Walton also sets up Sam's Wholesale Club, a chain of deep-discount wholesale warehouse outlets. By its 25th anniversary in 1987 there are 1,198 Wal-Mart stores with sales of $15.9 billion and 200,000 employees. New advanced communication technology makes the company a consistent leader in innovations and puts the company further ahead of its competitors.

Sam Walton's charism and pragmatism

During his live Walton develops himself as an expert on keeping costs down. He hates overhead and preferres to hire as few people as possible and paying them no more than he has to. Despite his lack of generosity he is charismatic and able to motivate his employees and managers. He addresses them as his associates. Walton tells them he is working on behalf of the consumer and is involved in a quest for a better life for all Americans. He convinces many of his workers that unions are just operating for their own gains. What helps is that once he becomes very wealthy he doesn’t show it. Though he flies his own plane to visit the stores, he drives an old truck.

Walton however is rational with his beliefs and flexible when required. In 1971, for example, he introduces a plan for employees to purchase subsidized Wal-Mart stocks. For many employees in the end this turns out to be very profitable. In 1972 the stocks are listed on the New York Stock Exchange. Another example is his campaign Made in America that he launches in 1985. He commits Wal-Mart to buy American-made goods if providers can get within 5 percent of the price of a foreign competitor. Walton understands the long-term benefit of convincing employees and customers that the company will come up for American welfare and employment.

The leader wasn’t doctrinaire, but his followers were

In 1988, Sam Walton steps down as CEO but remains as Chairman of the Board until he dies in 1992 of bone cancer. The next Sam-less years are difficult for the new management and a shift is manifest in how the company is perceived by de media and by consumers. Some scandals contribute to this. NBC finds out that although Wal-Mart’s Made in America campaign is still in effect Made in America signs have been put on merchandise that was actually produced abroad. This media exposure is bad for sales and the performance of the stocks on Wall Street. Things become worse when the new management is also more and more focusing on profit. Employees no longer have a feeling they have a stake in the company. The appeal of stock ownership drops when the company continues its growth, though the growth rate is slower than in the starting years.

At the end of the century however growth progresses again at its old pace. Between 1997 and 2001, the company’s stock value increases by over 500 percent, rising by 70 percent in 1997 alone. Between 1996 and 1999, sales increase by 78 percent.

Nevertheless the business triumphs, discussions on the way of doing business by Wal-Mart continue during these years. Wal-Mart is accused of saving money in avoiding paying people for all the hours that they work, a practice called off-the-clock work. It is also accused of underpaying female workers doing the same work as male workers.

The company is also the subject of economic research resulting in different scientific views on its impact on the economy and not all negative. In the sidebar to the right documentaries on YouTube are added where admirers and opponents of Wal-Mart are explaining their personal and economic views on the company. In addition below two links to articles can be found with many more details about Wal-Mart and its business model. From these excellent articles much of the information given on this page was taken.

In 2015 the company is still very successful and it is taking criticism more and more serious. It has for example implemented several environmental measures to increase energy efficiency. Wal-Mart’s leadership management is also in the process of establishing long lasting resolutions regarding equal opportunities between male and female employees. The organization has also successfully gone through the first phase of improving some of the external environmental factors. Reduction of cost for retail stores as one of Wal-Mart’s culture is still getting improved, since it entails the organization’s regulations, customs and principles. But the Wal-Mart leadership is engaged in a strategic plan aimed at establishing a sustainable organizational culture that still values the organizational behavior once conceived by Sam Walton.

An important video was released in February 2015. In the video CEO Doug McMillon announces a package of changes in Walmart U.S. that will kick off a new approach to Wal-Mart jobs. McMillions states in the video that the company is pursuing comprehensive changes to the hiring, training, compensation, and scheduling programs, as well as to the store structure, and that the changes will be sustainable over the long term. The video is added as the last video in the sidebar.

Sources for further reading and exploring:

Copyright information:

"Walmart Home Office" by Brandonrush - Own work. Licensed under CC BY-SA 3.0 via Commons.
"Walmart’s Grease Fuel Truck" by Walmart from Bentonville, USA - Walmart’s Grease Fuel Truck. Licensed under CC BY 2.0 via Commons.
The Airdrome
Sam Walton in 1936
The McDonald's Barbecue restaurant in San Bernardino 1940
Wal-Mart home office
1948: closed for alterations
Wal-Mart truck