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There’s Wal-Mart, and then there’s everyone else.
This story first appeared in the December 10, 2002 issue of WWD. Subscribe Today.
For inspiring fear, envy and admiration into store operators globally, for efficiently transforming America’s outskirts into homogenous, price-driven commodity meccas and humanizing the experience with smiling greeters at each door, and for emerging as the world’s largest company, Wal-Mart has been named WWD’s 2002 Newsmaker of the Year.
The gargantuan retailer — which in 2002 became the world’s largest company — could be an early bet to take the top honors next year as well, considering all the experimentation with store formats and merchandise concepts occurring behind closed doors in Bentonville, Ark. And if it actually injects a fashion aesthetic into the format, it’ll be a shoo-in.
It’s hard to drive the dreariness out of the discounter, with those impossibly high racks and that daunting square footage. But Wal-Mart is trying, particularly with its new George apparel line, being rolled out this year, and Levi Strauss, which will supply an exclusive jeans line next year.
Outside the discount box, Wal-Mart is testing a drive-thru supermarket, a dollar store called Hey Buck! and convenience stores. The company began utilizing land for leased used-car lots at five stores in Houston, and customers can have a new used car serviced at Wal-Mart lube shops.
Geographically, Wal-Mart is also taking risks, moving into new territory, creeping closer to regional malls, trying to squeeze into downtowns and sometimes meeting with opposition, like in Puerto Rico, where the government has been trying to block Wal-Mart’s acquisition of a local 35-unit supermarket chain, Supermercado Amigo’s. The government says Wal-Mart, which already has stores and warehouse clubs on the island, violates the island’s antitrust laws and wants to protect indigenous businesses. In Dallas, after months of tense debate, the City Council in November rejected a proposal for a site that would have been a two-level prototype, with multilevel parking. Wal-Mart can’t make another stab at the site for two years.
Well into the future, it’s not all that hard to imagine more fantastic scenarios and formats. Wal-Mart could replace many traditional department store anchors, which are struggling, if developers brought down rents. And what about Wal-Marts in true downtown sites, however high the occupancy costs and enormous the space requirements? Perhaps a Wal-Mart Express on 57th Street? Or a Wal-Mart bodega in the East Village?
Still hard to conjure are dramatic changes in Wal-Mart’s fashion business. There continues to be room for improvement, and a continual search for style. In the late Nineties, Wal-Mart did a good job cleaning up the apparel floor, eliminating meaningless labels, and refocusing on a narrower, easier-to-read assortment emphasizing T-shirts, shorts and basics, with just about everything under $20. The sweet spot in the assortment is at $10. That’s where Wal-Mart gets its highest turn. At that price point, no retailer can pack in much fashion or fabrication. Yet Wal-Mart is striving to create better product and seems ready to move beyond conventional parameters. For one, it’s been bringing the British-born George collection to its stores in America. George is sold at the Wal-Mart-owned Asda supermarkets in the U.K., and is more forward on the fashion spectrum than anything else sold at Wal-Mart. However, something gets lost in the translation. Aside from a few fine pieces on the racks at Wal-Mart, overall, the U.S.-designed version of the George line blends in all too well with the rest of Wal-Mart’s domestic women’s assortment. Based on the initial deliveries, it could take some time for George to stand out in the States.
Wal-Mart recently expressed satisfaction with its growing apparel business, characterizing it as a strong contributor to third-quarter sales and earnings gains. It’s rare when the company singles out apparel, yet Lee Scott, president and chief executive officer of of Wal-Mart, said he was “particularly excited” about improved apparel offerings. “Our merchants have shown that we can deliver both price and quality,” he said.
Don’t worry, Wal-Mart is not looking to be chic. Nor will it become a “fashion house,” which Scott made clear at an analysts meeting earlier in the year. Volume is more important than being chic, and because of the breadth of assortment and the everyday low prices, Wal-Mart remains one of the few stores where it’s hard to walk out without buying anything, even if you just came to browse. “They pile it high and let it fly, but it’s organized,” said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates. “Wal-Mart has no peer in terms of logistics and distribution. There’s constant replenishment of best sellers.” For a typical American family on a budget, Aronson said, “it’s very uplifting to fill a shopping cart and still go home with enough money to put dinner on the table.”
Satisfying customer demands, growing profits and improving assortments is what the Bentonville team concentrates on, and they meet their goals without patting themselves on their backs. And they don’t spend time pondering the enormity of the enterprise. If they did, they would probably give themselves the jitters. Keeping Wal-Mart running smoothly is not just a matter of concern for millions of shareholders and shoppers. It’s a matter of national security and global economic health. The company posted $217.8 billion in sales last year, and operates about 1,570 Wal-Mart stores, 1,250 supercenters, 520 Sam’s Clubs and 39 neighborhood markets in the U.S. Internationally, the company operates about 1,200 units.
Probably the biggest challenge is managing the tremendous growth without losing control. The second biggest challenge is developing management and a talent pool. So far, Wal-Mart has maintained strength in its organization, and the proof is in the smooth ceo successions. From Sam Walton to David Glass to Lee Scott, Wal-Mart hasn’t missed a beat. Even though the legendary founder has passed on, Walton’s legacy lives on. For Wal-Mart employees, many of whom got rich off their stock shares, Walton was a folk hero, driving a truck to work and keeping his wealth discreet. Unlike other super wealthy retail ceos running mass chains, Walton was more of a jeans guy, not suited up in designer duds.
The corporation manages to perpetuate that folksy persona, even if its managers are better dressed these days. But they don’t become celebrities, and they still stay two to a hotel room on business trips. Wal-Mart is of the people and for the people, despite blocking union organizing. Apparently, employees are happy to have jobs there, without the union benefits. Wal-Mart employs more than 1 million associates in the U.S. and more than 300,000 internationally, and many buy into the old Walton cheer: “We do have fun, we do work hard, and we always remember whom we’re doing it for — the customer.”
And there’s not a shopper in the world that Wal-Mart couldn’t attract. It’s obvious when you visit a Wal-Mart supercenter and see people in all sizes, shapes, skin tones, ages and tax brackets. Wal-Mart has been reaching for higher income customers and at a recent analysts’ meeting, showed merchandise to prove they could interpret hot trends, including bohemian tops and stainless steel kitchenware, to attract a trendier audience.
With all that’s been accomplished, Lee Scott doesn’t rate his company’s performance all that high. On a scale of one to 10, he recently gave Wal-Mart a six. That’s like Michael Jordan thinking of himself as just another jock.