The Success of Wal-Mart

You know the deal. You are watching an advertisement for Wal-Mart. The video talks about a random item. It mentions that said product costs less than it would at another retail store. Then, near the end of the video, the famous motto is uttered: “Save Money. Live Better.”

As you know, Wal-Mart is one of the largest retailers in America. An American citizen who has never heard the word “Wal-Mart” lives not under a rock; instead, such an individual sleeps deeply under the ocean floor, six miles beneath the surface of the water. Since Wal-Mart is so popular, you probably think it will continue to be a competitive corporation for the rest of your lifetime. You are most likely right. Wal-Mart won’t be disappearing anytime soon. But how did the retail chain become successful in the first place?

To answer this question, let’s first direct our attention to the starting point of the retailer. Who founded the company? An entrepreneur named Sam Walton. Two outstanding characteristics of the late Walton were competitiveness and ambition. Born in 1918, Walton grew up during the Great Depression. As a child, Walton made a bet with his Boy Scouts friends to see who would be the first to reach the rank of Eagle. Walton’s fierce determination enabled him to be the first one to reach said rank. Walton also played baseball, basketball, and football during his childhood.

It’s a well-known fact that any for-profit business needs to continually sharpen its edges to become, as well as remain, a worthy opponent among a sea of adversaries. With this in mind, does Walton attribute any one factor as the primary reason for Wal-Mart’s success? Surprisingly, no.

“One thing you’ll notice if you spend very much time talking with Sam about Wal-Mart’s success. He’s always saying things like ‘This was the key to the whole thing,’ or ‘That was our real secret.’ He knows as well as anyone that there wasn’t any magic formula. A lot of different things made it work, and in one day’s time he may cite all of them as the ‘key’ or the ‘secret.’ What’s amazing is that for almost fifty years he’s managed to focus on all of them at once—all the time. That’s his real secret.” — David Glass

The quote above was taken from Walton’s autobiography Made in America (1992). The late Glass, formerly a CEO of Wal-Mart, was right. Multiple components contributed to the success of the national chain. However, a major theme of the book is the concept of serving the customer. Give the customers what they want in a manner superior to your competitors. Anticipate the additional wants of the customers; again, more swiftly than your opponents. As a rule of thumb, customers want low prices and quality service. That’s it. Simple.

At this point, we shall focus on the first customer expectation mentioned above – low prices. Because items cost money, any retailer must sell an item for more than it purchased said item. As a reminder, retail chains don’t make the majority of their products; they buy them from distributors or wholesale providers. Knowing this, it’s easy to understand why Wal-Mart can’t just randomly decide to sell HD TVs for, say, $20. They’d go out of business.

In his early days working in the retail industry, Walton learned a significant lesson with regards to making a profit. The lesson is as follows: the total amount of money you make for selling a batch of items is more important than the amount you make per item. If a retail store buys 1,000 tubes of Crest toothpaste for $2.00 each, then sells 100 tubes for $3.99 each, the store makes a profit of $1.99 per tube. If, instead, the store sells 700 tubes for $2.99 each, the store makes only $0.99 per item. But, the total amount of money earned – over $2,000 – is greater. In retailer language, the focus on volume triumphs that of the markup.

By fighting for the customer through negotiations, Wal-Mart is able to buy consumer goods from vendors at lower prices than their competitors. One such negotiation occurred between Claud Harris, Wal-Mart’s first buyer, and Procter & Gamble (P&G). If the latter stubbornly refused to lower their prices on items, then the former would threaten to not carry the latter’s merchandise. The less merchandise carried by Wal-Mart, the less profit for P&G. The P&G executives were offended and went to consult with Walton. Walton went with whatever decision Harris would make with regards to price point negotiations.

Besides fair prices, customers want quality service. Who doesn’t? Would you go back to a McDonald’s franchise if the employees displayed a nasty attitude? Since you can find another fast-food joint easily, you would likely never come back. Would you go to a place riddled with roaches or mounts of mold? Again, you’d never step inside the place again. Therefore, Wal-Mart makes sure that you have a pleasant experience while in any of the company’s shopping centers, from the time you enter the building to the time you leave.

Upon entering a Wal-Mart store, who is one of the first people you notice? The greeter. Have you ever wondered when Wal-Mart decided to deploy said greeters? If so, you’ve come to the right post. Walton decided to employ a greeter at every store after going to a Wal-Mart in Crowley, Louisiana. Said store was managed by an old-line merchant named Dan McAllister. McAllister noticed that the inventory in his store was being stolen on a consistent basis. He decided to hire greeters to implicitly send the message to the customers that they are being watched. Gracious greeters are less intimidating than grim guards. Walton loved McAllister’s decision.

People want to feel safe and welcome at any store they enter. With guards, the stiffness in the atmosphere in a store would swiftly drive customers away. Coming from humble beginnings, the amiable Walton possessed an excellent understanding of the common man. He understood the usefulness of people skills. To be an effective leader, one must be skilled in dealing with people. Taking initiative is a part of leadership – a lesson Walton applied during his days as a university student. While going on walks, he would be the first to make conversation with a passerby. Due to his leadership skills, Walton was elected to be the senior president of his university. He was also president of Scabbard and Blade, the elite military organization of Reserve Officers’ Training Corps (ROTC).

Cognizant of the importance of relationship skills, Walton held a meeting around Christmas time about customer service with the associates (workers) of a Wal-Mart in Bentonville. “I want you to promise that whenever you come within ten feet of a customer, you will look him in the eye, greet him, and ask him if you can help him.” Walton speculated that this strategy enabled Wal-Mart to surpass Sears and Kmart in sales. Effective communication is vital for the implementation of pleasant customer service.

As stated above, the success of Wal-Mart can be attributed to many factors. Though, if only one of them is to be singled out, then it would be the corporation’s superb ability to cater to its customer base. Thrifty deals and splendid service attract customers no differently than sweet nectar and pretty flowers attract hummingbirds. Without fail, people keep coming back to Wal-Mart for the great customer experience. From its inception in 1962 to the early 1990s, Wal-Mart generated over 100 billion dollars in sales. If Sam Walton were alive and could go back in time, he’d not change a single decision he made with regards to Wal-Mart. Should this retailer ever go out of business, it will be viewed as a legacy by future generations of people.