The Secret of Wal-Mart’s Success

The world's largest retailer, Wal-Mart, is moving into Europe, and the UK is its second target after Germany. BBC News Online's Tim Weber looks at the secrets behind the company's success.

The figures make the owners of corner shops and small retail chains shudder: Wal-Mart operates 3,601 stores, employs more than 910,000 people world-wide, sales amounted last year to $137.6bn (Ј85.7bn) - equivalent to a tenth of Britain's total economic output.

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The company serves about 90 million customers every week and has stores in the United States, Puerto Rico, Canada, China, Mexico, Brazil, Germany, Argentina and South Korea.

Where Wal-Mart treads, competitors tremble.

UK supermarkets will face tough times, but consumers are bound to reap the benefits.

Expansion

Wal-Mart is the grand-daddy of all discount chains.

Its huge US stores, twice the size of the largest European hypermarket, sell everything from food to clothing to sporting goods to hardware.

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Operating from cheap out-of-town warehouse sites, Wal-Mart's discount prices have trounced the competition.

After the death of founder Sam Walton in 1992, the company briefly seemed to have lost its way. But under the guidance of new chief executive and chairman David Glass it soon re-invented itself.

Wal-Mart offers a one-stop shopping experience, from groceries and clothing to hardware and work-out equipment

Wal-Mart is now stronger than ever. Sales are rising again - up 17% last year. Strong consumer spending in the United States has helped the company's fortunes.

But the main driving force of future revenues will be Wal-Mart's programme of relentless international expansion.

In Europe the company has only entered the German market so far, buying 21 Wertkauf stores a year ago and adding 74 Interspar shops last autumn.

Bob Martin, president of Wal-Mart's international operations, says he wants to serve "a good deal of Europe". And one of his vice-presidents, Carlos Criado-Perez, adds: "We are looking for any open door that could open in Europe."

Wal-Mart wants to set up shop in cyberspace as well. Mr Martin believes the Internet is "at the threshold" of taking off and he wants his company to be "a dominant player".

The secret of Sam's success

Wal-Mart is a relatively young company, founded 37 years ago by Sam Walton.

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He set up his first Wal-Mart discount-store in Rogers, Arkansas. Piling it high and selling it cheap was not a new idea. The winner was the location - serving the small-town market.

Growth was initially slow. When the company offered its shares on the stock market in 1970, there were just 18 stores with sales of $44m.

Ten years later, it had grown to an operation with 276 stores and sales of $1.2bn.

Two key developments made the success possible:

Distribution:

Wal-Mart set up highly automated distribution centres, cutting down on delivery time and costs.

Inventory flow:

The company's computerised inventory systems gave managers real-time information on their stocks, speeding up the re-ordering of goods.

Today this may be best practice. In the 1970s it was revolutionary.

The power of associates

Wal-Mart has other strengths as well. It can buy cheaply in bulk to undercut its rivals. The company commands a huge database, giving it unrivalled information on shopping habits, customer preferences and consumer trends.