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13 Meeting The Competition
`Sam phoned to tell me he was going to start a wholesale club.
It was no surprise. He is notorious for looking at what everybody else does,
taking the best of it, and then making it better."
— sol price,
founder—1955—Fed-Mart,
and founder—1976—Price
Club
I don`t know what would have happened to Wal-Mart if we had laid low and
never stirred up the petition. My guess is that we would have remained strictly
regional operator. Then, eventually, I think would have been forced to sell out
to some national looking for a quick way to expand into the heart-market. Maybe
there would have been 100 or 150 Sal-Marts on the street for a while, but today
they
242 sam walton: made in america
would all have Kmart or Target signs in front of them, and I would have
become a full-time bird hunter.
We`ll never know, because we chose the other route. We decided
that instead of avoiding our competitors, or waiting for them to come to us, we
would meet them head-on. It was one of the smartest strategic decisions we ever
made. In fact, if our story doesn`t prove anything else about the free market
system, it erases any doubt that spirited competition is good for business—not
just customers, but the companies which have to compete with one another too.
Our competitors have honed and sharpened us to an edge we wouldn`t have without
them. We wouldn`t be nearly as good as we are today without Kmart, and I think
they would admit we`ve made them a better retailer. One reason Sears fell so far
off the pace is that they wouldn`t admit for the longest time that Wal-Mart and
Kmart were their real competition. They ignored both of us, and we both blew
right by them.
bud walton:
"Competition is very definitely what made Wal-Mart—from the very beginning.
There`s not an individual in these whole United States who has been in more
retail stores—all types of retail stores too, not just discount stores—than Sam
Walton. Make that all over the world. He`s been in stores in Australia and South
America, Europe and Asia and South Africa. His mind is just so inquisitive when
it comes to this business. And there may not be anything he enjoys more than
goin§ into a competitor`s store trying to learn something from it."
meeting the competition 243
At first, we only butted heads with other regional discounters,
like Gibson`s and the Magic Mart discount division of Sterling. We didn`t
compete directly with Kmart. To put things into perspective, compare Kmart and
Wal-Mart after they had both been on the street : r ten years. Our fifty-plus
Wai-Marts and eleven variety stores were doing about $80 million a year in sales
compared to Kmart`s five hundred stores doing more than $3 billion a year. But
Kmart had interested me ever since the first store went up in 1962.1 was in
their stores constantly because they were the laboratory, and they were better
than we were. I spent a heck of a lot of my time wandering through their stores
talking to dieir people and trying to figure out how they did
things.
For a long time, I had been itching to try our luck with them, and finally,
in 1972, we saw a perfect opportunity in Hot Springs, Arkansas—a much larger
city than we were accustomed to moving into but still ciose to home and full of
customers we understood. We saw Kmart sitting there all alone, really having
their with the market. They had no competition, and I Iike their prices and
margins were so high that they almost weren`t even discounting. We sent Phil
Green in to `Open store number 52, which, you may remember, is where he stirred
up all the fuss with the world`s largest Tide display and all his other
outrageous promotions. He cut prices to the bone and stole a bunch of Kmart`s
customers.
Coincidentally, it was right about that time that Harry
Cunningham chose to retire as the CEO of I Kmart, which he had founded while he
was chairman S. S. Kresge. This was a big break for us. Harry was
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really the guy who, in just ten years, had legitimized the
discount industry and made Kmart into the model for us all—though my good
friend, John Geisse, who helped found the Target and Venture stores, was another
pioneer way ahead of his time.
harry cunningham:
"From the time anybody first noticed Sam, it was obvious he had
adopted almost all of the original Kmart ideas. I always had great admiration
for the way he implemented—and later enlarged on— those ideas. Much later on,
when I was retired but still a Kmart board member, I tried to advise the
company`s management of just what a serious threat I thought he was. But it
wasn`t until fairly recently that they took him seriously."
I guess we really were a flea attacking an elephant, and the
elephant didn`t respond right away. Maybe Harry`s right. Maybe they didn`t take
us seriously until much later. But I always believed it made them mad, our going
in on them like that in Hot Springs. Just a few years later, around 1976 and
197" we definitely got the message that Kmart—with 1,000 stores—thought
Wal-Mart—with 150—had gotten too big for its britches. All of a sudden they took
a direct shot right into our backyard, by opening up in four of our better
towns: Jefferson City and Poplar Bluff, M: souri; and Fayetteville and Rogers,
Arkansas. They were expanding like that all over the country at the time, and
all the regional discounters were worried. In 1976, we had a session of
our discounters` trade group in Phoenix, and a lot of guys were talking about
ways to
meeting the competition 245
avoid competing with Kmart directly. I got a little mad, and
told everybody they ought to stand up and fight them. I made it clear we planned
to.
b fisher, founder, chairman, and ceo, sway corporation:
"Kmart was opening so many stores it was regarded as the
Genghis Khan of the discounting business. Sam has always been clear about his
attitude: `Meet them head-on. Competition will make us a better company.`
"He is that way with everyone. Personally, he`s such a fine,
unassuming, quiet gentleman. But he`s always picking your brain, and he always
has a notebook or that tape recorder. He`ll learn everything you know, but he
shares his information freely with you in return.
"Now, of course, he`s a competitor to James-way. But he
wouldn`t ever apologize for that. He thinks it makes us a better company. And
he`s right."
Something else happened in late 1976 which really helped us
gear up for competition. A re-jearch group set up by a bunch of us regional
Ascounters—who at the time didn`t compete in each other`s territories—had its
first meeting here in Bentonville. Guys like Herb Fisher of Jamesway, and Herb
Gillman of Ames, and Dale Worman of Fred I Meyer all came down here and went
through our bines to give us their opinion of how they thought we were doing.
And, man, what they had to say really shocked us.
246 sam walton: made in america
nick white, executive vice president,
wal-mart:
"Bill Fields was running the Rogers store, Dean Sanders was
running Siloam Springs, and I was running Springdale—all close to Bentonville—so
we were all on the tour. These guys—the presidents of all these companies—they
just ripped our stores apart, telling us how poorly we did everything.
`The signing isn`t worth a damn.` `You`ve got your prices too high on this.`
`This stuff isn`t even priced.` `You`ve got too much of this and not enough of
that.` I mean, it was really critical."
That was really a turning point in our business. We listened to
everything they had to say, and made huge adjustments based on those critiques.
It helped us gear up for any competition, especially Kmart, whose attack on us
was probably the best single external event in Wal-Mart`s history. We pulled
ourselves together and designed a big plan—a promotional program and a people
program and a merchandising program—for how we were going to react. Since our
run on Kmart in Hot Springs had turned out well, we were confident we could
compete.
THOMAS JEFFERSON:
"Kmart really took us on in about 1977, and I remember Little
Rock particularly. They took us on there in North Little Rock, where store
number 7 had been one of our better stores. They got aggressive, and we fought
back. We told our manager there, `No matter what, don`t let them undersell you
at all, on anything.` I remember he called me one Saturday night and said, `You
know,
meeting the competition 247
we have Crest toothpaste down to six cents a tube now.` And I
said, `Well, just keep it there and see what they do.` They didn`t lower it any
more than that, and we both just kept it at six cents. Finally, they backed off.
I always thought they learned something about us at that store—that we don`t
bend easy—because they never came at us with that degree of price cutting
anywhere else."
We got so much better so quickly it was hard to believe. We
totally stood Kmart off in those small stores of ours. Almost from the
beginning, they weren`t very successful at taking our customers away in Jeff
City and Poplar Bluff. Once Kmart arrived, we worked even harder at pleasing our
customers, and they stayed loyal. This gave us a great surge of confidence in
ourselves.
But at the time, remember, our sales were about 5 percent of
Kmart`s. And we had recently suffered that exodus of executives following the
Ron Mayer departure. So we were having a heck of a time convincing Wall Street
to stick with us. A lot of people didn`t think we could stand up to real
competition. One analyst, Margo Alexander of Mitchell Hutchins Inc., really
worried about the exodus in her report on Wal-Mart. She wondered if it wouldn`t
discourage other executives from coming on board. She said they might see an
inevitable conflict with "the entrepreneur who will never be satisfied with
another person running Tiis` company," in other words, me. She also questioned
whether I, having retired once, was as committed to running the business as I
had been previously.
Here`s some of what she wrote about us in Janu-arv of 1977:
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One of the key elements in Wal-Mart`s success has been the lack
of competition in its small, rural markets ... It is clearly easier to operate
in this land of situation than in a competitive one: pricing need not be so
sharp, and the "right" merchandise is less critical, simply because customers
have no alternative . . . Although Wal-Mart says its stores compete effectively
against Kmart, the company will avoid a Kmart if possible. While we don`t expect
Kresge to stage any massive invasion of Wal-Mart`s existing territory, Kresge
could logically act to contain Wal-Mart`s geographical expansion . . . Assuming
some containment policy on Kresge`s part, Wal-Mart could run into serious
problems in the next few years.
We would very much like to recommend purchase of the stock . .
. Unfortunately, however, the future of the company appears uncertain, and we
think that Wal-Mart is one of those threshold companies that runs the risk of
stumbling.
Reports like that one didn`t help us much, but the truth is
that her analysis of the situation wasn`t necessarily as wrong as it looks
today. All those things could have come true. She missed a few key points,
though. Her biggest mistake was the uncertainty she felt about the management
team that followed Ron Mayer. As I said earlier, having David Glass and Jack
Shewmaker both on board in senior positions gave us about as much talent under
one roof as any one retailer could ever hope to have. In recent years, I`ve
taken a lot of pride in the fact that our fastest expansion—the greatest growth
period in the history of retail—actually
meeting the competition 249
came after everybody thought our goose was cooked *nd ready to
be eaten by the Kmart folks from Detroit.
Another point missed by Margo Alexander and others was that a
very fortunate thing happened to us on the competitive front: Kmart was
developing its iwn problems. Toward the end of 1976, they had purchased more
than two hundred store locations left over from the defunct Grant`s chain, and
they had their hands full trying to make that work. Not only that, they ieemed
to have a management philosophy at the time of avoiding all change, something
that never works in this business. I`m sure that worrying about Wal-Mart fell
way down on their priority list, and I occasionally think back to how lucky we
were not to have had to face Harry Cunningham—or Kmart`s current management
team—during that period.
Regardless of what was going on at Kmart, the
team we had in place in Bentonville by the late seventies had
us well positioned for the next decade of growth. It was around this same time
that many of the high-flying promoters in the discounting business be-zan to
struggle for their lives. The national economy weakened in the mid-seventies,
and the intense competition among the real merchants began to drive the
fast-buck types out of the business. The more efficient Kmart, Target, Wal-Mart,
and some of the regionals became, and the more we bumped into each other in
c-ompetitive situations, the more we were able to lower prices.
The percentage of gross margin in this industry— really, the
markup on merchandise—has dropped steadily from around 35 percent in the early
sixties to only 22 percent today. Almost all of that represents increased value
and savings to the customers who shop
250 sam walton: made in america
discount stores. So the guys who weren`t running efficient
operations, who had taken on lots of debt and were living high and not taking
care of their associates, who weren`t scrambling around to get the best deals on
merchandise and passing those deals on to their customers, these guys got into
trouble. When we saw Kmart headed right after us in 1976 and 1977, we decided we
could pick up some speed in our expansion efforts by acquiring some struggling
discounters.
Because Wal-Mart had always been such a homegrown operation,
this whole period sparked a lot of philosophical debate around our offices, and,
frankly, I changed sides so often that I drove everybody involved pretty crazy.
I didn`t have many problems at all with our first real acquisition, which came
in 1977. My brother Bud and David Glass negotiated a deal to buy a small chain
called Mohr Value discount stores up in Illinois. Their stores had been
averaging $3 million to $5 million a year per store, and it seemed like a good
way to put a beachhead into some new territory. We closed five stores and
converted the remaining sixteen to Wai-Marts, and it wasn`t much of a shock to
our system.
It sure didn`t slow us down any because two years later, in
1979, with about 230 stores on the street, we hit a billion dollars in sales for
the first time. Of all the milestones we ever reached, that one probably
impressed me the most. I have to admit, I was amazed that Wal-Mart had turned
into a billion-dollar company. But I couldn`t see any logic to stopping there,
and right about then another acquisition opportunity came our way.
This one was a good bit more disruptive, but it helped us make
a geographic leap that was very impor-
meeting the competition 251
tant to our expansion. A lot of people back East who don`t
know much about Wal-Mart still think of us today as a "Southern" discount
operator. Maybe it`s because we`re in Arkansas, which most people think of as a
Southern state, even though where we are is really more Midwestern. Or maybe
it`s because of our downhome image. But the truth is that until 1981, we had
almost no stores east of the Mississippi. We were big in Arkansas, Louisiana,
Mississippi, and Texas, but had nothing in Tennessee, Alabama, Georgia, or the
Carolinas. We weren`t much of a competitor in the South at all.
On the other hand, Kuhn`s Big K stores had become a good-sized
player in the South. Based in Nashville, Tennessee, Kuhn`s had started as a
single variety store back sometime before 1920. Jack Kuhn and his brother Gus
had converted the company into a discounter, made an acquisition or two, and
grown it into a chain of 112 stores, concentrated in Tennessee, but also
doing business in Kentucky, Alabama, Georgia, and South Carolina—all states
where we thought we could do well. We were a good bit bigger than they •a ere,
but the two of us had been watching each other pretty closely. It was sort of
like the old variety store days when one chain, like TG&Y, wouldn`t go into
the territory of another chain, like Hested`s. We knew that one way or another
we had to head on into the South, and I guess we stirred them up by crossing the
Mississippi and opening a store in Jackson, Tennessee. They retaliated by
opening stores in West Helena and Blytheville, Arkansas. The truth is, we were
closing in on Kuhn`s and really doing a better job than they were. In fact, they
were beginning to falter. They had taken
252 sam walton: made in america
on some debt and built a fancy headquarters building. And they were showing
some losses.
I had a heck of a time making up my mind what to do. I wanted
to get into that territory before Kmart or somebody else woke up and stole our
thunder there. It seemed like a great competitive move to make. But we`d never
bitten off anything close to this size before, and we didn`t know what it would
be like trying to digest it. We went round and round on it. We were on again,
off again for probably two years. Finally, the Executive Committee sat down to
vote on it one morning, and it came out split right down the middle, fifty-fifh.
It was just as well because it gave me the opportunity to take the ultimate
responsibility for the decision. The whole thing had been really cloudy all
along, with a lot of arguing. Finally, I voted to do it. We didn`t knov how to
go about folding Kuhn`s into Wal-Mart, but we put Paul Carter in charge and he
commuted back and forth between Nashville and Bentonville for quite a
while.
PAUL CARTER, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
WAL`MART:
"It was one of the few times we ever saw the chairman use his
prerogative and say, `We are going to do this.` It was a new land of proposition
for Wal-Mart. At first we thought we were going to run everything from
Nashville, as a separate division. Then we changed our minds and decided to
close all their offices down and bring everytl over here. It was the furthest
out we`d ever been geographically, and, looking back, I guess the decision to
run it from here had a big influence on
meeting the competition 253
how we`ve run the company ever since, with all the regional managers based in
Bentonville.
"I went over there to Big K weighing 190 pounds and came back at 165. It was
a struggle for all of us involved, and a stretch for the whole company. But I`m
not sure that`s not good for every organization at some point. Jack Shewmaker
took the situation as an opportunity to learn and implement a lot about
communications in a spread-out situation. Hard as it was, the Big K thing was
really good for this company. It was like a caterpillar that turns into a
butterfly. As a company, we were really ready to fly after we emerged from that
one."
We closed down some of Kuhn`s money-losing stores, and for the first time we
tried to supply our stores using an outside company, a third-party distributor,
which didn`t work at all. But once we figured out how to handle it, the
acquisition put us in a great position for growth. We exploded from that point
on, almost always opening 100 new stores a year, and more than 150 in some
years. I think the Kuhn`s deal gave us a new confidence that we could conquer
anything.
I don`t know how the folks around our executive offices see me, and I know
they get frustrated with theway I make everybody go back and forth on so many
issues that come up. But I see myself as being a little more inclined than most
of them are to take chances. On something like the Kuhn`s decision, I try to
play a "what-if" game with the numbers—but it`s generally my gut that
makes the final decision. If it feels right, I tend to go for it, and if it
doesn`t, I back off.
Sometimes, of course, that leads me into mistakes.
254 sam walton: made in america
Back in the early eighties, for example, I traveled all over
the world looking at global competition in retailing. I went to Germany, France,
Italy, South Africa. Great Britain, Australia, and South America, and saw
several concepts which interested me. I was impressed with the giant Carrefours
stores in Brazil, which got me started on a campaign to bring home a concept
called Hypermart—giant stores with groceries and general merchandise under one
roof. I checked them out in Europe and came back pushing the concept hard. I
argued that everybody except the U.S. was successful with this concept and we
should get in on the ground floor with it. I was certain this was where the next
competitive battlefield would be.
Eventually, we opened two Hypermarts in the Dallas-Fort Worth
area, one in Topeka, and one in Kansas City. By now we had gotten enough respect
in the business so that Kmart jumped right in behind us with their own Hypermart
concept called American Fare. Our Hypermarts weren`t disasters, but they were
disappointments. They were marginally profitable stores, and they taught us what
our next step should be in combining grocery and general merchandising—a smaller
concept called the Supercenter. But I was mistaken in my vision of the potential
the Hypermart held in this country.
We conducted other similar, but less publicized, experiments
that didn`t work out so well either. Our dot Discount Drug concept grew to
twenty-five stores before we decided it wasn`t going to be profitable enough.
And we tried one home improvement center called Save Mor in the building which
had housed the original Wal-Mart in Rogers, which was also not a
sue-
meeting the competition 255
cess. As David Glass says about me, once I decide I`m
"*Tong, I`m ready to move on to something else.
But when one of our experiments works, watch out. Take Sam`s
Clubs, for example. It was an experiment when we started it up in 1983, and now
nine years later it`s a $10 billion business with more than 217 stores and
terrific growth potential. Sam`s are big stores in warehouse-type buildings
aimed at small-business owners and other customers who buy merchandise in bulk.
A membership fee entitles a customer to shop at Sam`s, which charges wholesale
prices for name-brand, often high-end merchandise—everything from tires to
cameras to watches to office supplies to cocktail sausages and soft drinks. If
you`ve never been in one, they`re a lot of fun to shop, and the people who work
there are a little crazy. Like the old days at Wal-Mart, they`re liable to do
anything on a moment`s notice to move the merchandise.
Just like discounting, I`m sorry to say we can`t take any of
the credit for inventing the wholesale club concept. Put yourself in our
position for a moment, though, and you can see why we had to steal the idea from
those who did roll it out. It was the early eighties, and we`d been in the
discount business for around twenty years. Only the efficient operators were
still in business, because prices, and margins, had been falling steadily the
whole time. Suddenly, we noticed a whole new class of sub-discounter
undercutting our prices, wholesalers with very low overhead who were selling at
margins way below the 22 percent in the discount business—5 to 7 percent. Since
"Low Prices Every Day" had brought us this far, we had to explore the business.
Especially since we knew that Sol Price—one
256 sam walton: made in america
of the original discount pioneers—was behind this idea. He had
started his Price Club stores in 1976.
So one day in 1983 I went to see Sol in San Diego. I had met
him earlier when my son Rob and I called on him. This time, though, Helen and I
were out on the West Coast already for a meeting of the mass merchandisers, so
we dropped down to have dinner with Sol and his wife Helen at Lubock`s. And I
admit it. I didn`t tell him at the time that I was going to copy his program,
but that`s what I did.
I came home and went over to Oklahoma City. where we rented an
old building for about ninety cents a square foot, or maybe even seventy-five
cents. We remodeled it and, to manage it, put together a pickup crew of
mavericks who were sort of underappreciated at Wal-Mart. We had two or three
buyers. We whipped up a program and a design, and put the whole thing in motion.
We opened our first club in 1983. It had that same feel of chaos and excitement
as the early days at Wal-Mart. And we went out of our way from the very
beginning to separate the Sam`s Club culture from the Wal-Mart culture. One of
the guys I picked was Rob Voss. He was not really looked on as a top management
talent at Wal-Mart because he was always swimming against the current more than
he was going with it. He was a little bit of an agitator.
rob voss, first general merchandise manager,
sam`s club:
"I told Sam up front that he had a lot of egos around this
company, and that they needed to understand we were going to be doing our own
merchandising. So he got up at a Saturday morning meeting and told
everybody—this is a direct
meeting the competition 257
quote—`The Sam`s Club operation will be doing their own
merchandising. If any of you buyers out here with Wal-Mart take exception to
that, and feel that because you`re the buyer of a category you should be buying
it for the entire company, I suggest you come and visit with me in my office on
a one-on-one basis, and then I`ll explain it to you in a little more detail.`
From that day on, we never had a problem."
We quickly went on to open Sam`s in Kansas City and Dallas and
then two units in Houston. It was a lot like Wal-Mart. Once we had those five
units up and soing, I knew we could run with it, and we did. I hate to say it,
but I guess it was almost what you`d call a second childhood for me—a second
challenge anyway. I had a chance to build a company all over again, and I tried
to be as hands-on as I could, although David Glass was heavily involved with
Sam`s from early on too.
ron loveless, retired senior vice president, -mart:
"I came over from Wal-Mart to help set up Sam`s. Since we were
patterned after Price Clubs, sometimes we copied them without exactly knowing
what we were doing. We were bringing a West Coast idea to the Midwest, and we
didn`t know how it would be received. I remember one idea that didn`t transfer
too well. Price Club had a huge stack of wine in the front of its stores. We
bought the same amount for our stores in the Midwest, and we learned the hard
way that Midwest-erners aren`t exactly wine drinkers."
258 sam walton: made in america
tom coughlin, senior vice president,
sam`s clubs:
"This business is fim. It really is. It`s so basic. So
straightforward. We do no advertising, but our whole business is based on
selling the concept. We sell small business operators on the idea that for $25 a
year they can have a just-in-time warehouse with all the same price advantages
for goods that large companies get. And just like Wal-Mart, our customers get to
know and love our culture. They know there are no frills whatsoever in those
warehouses. They know our management people are likely to be the ones to grab
the forklift and pull the goods down for them, and they come to expect it. And
like it."
The competition in the club business can get pretty spirited
sometimes. Once I was in the big Price Club on Marino Avenue in San Diego, and I
had my little tape recorder with me—like I always do—and I was making notes to
myself about prices and merchandising ideas. This guy, a big guy, comes up to me
and says, "I`m sorry but I`ll have to take your tape recorder and erase the
material you`ve got on it. We have a policy against people using them in the
stores." Well, we have the same policy, and I knew I was caught. So I said, "I
respect that. But I`ve got things on here from other stores that I don`t want to
lose, so let me write a note to Robert Price"—that`s Sol`s son. So I wrote:
"Robert, your guy is just too good. I was trying to get some infolTnation on
this recorder about some of the items you were carrying and some of my
impressions of your store, and he caught me. So here`s the tape. If you want to
listen to it, you certainly have that privilege.
meeting the competition 259
but I have some other material on here I would like very much
to have back." So in about four days I got a nice note back from Robert, with
the tape, and none of it had been blurred or scratched out. He probably treated
me better than I deserved.
The Sam`s launch reflects another part of my management style
that applies not only to the competition, but to our own people as well. I like
to keep everybody guessing. I don`t want our competitors getting too comfortable
with feeling like they can predict what we`re going to do. And I don`t want our
own executives feeling that way either. It`s part of my strong feeling for the
necessity of constant change, for keeping people a little off balance.
A lot of folks in my position would have been perfectly content
with the situation as it stood in 1984. Our 640 Wai-Marts were earning almost
$200 million a year on sales of more than $4.5 billion, we were still growing
like wildfire, and we were underway with Sam`s. But I felt like we had to make a
change. So I called in Jack Shewmaker, by now our president and chief operating
officer, and asked him if he would mind swapping jobs with David Glass, our
chief financial officer. Not your everyday request from the chairman in most
companies, I guess. I valued the talents of both of these guys enormously, but I
had my own reasons for wanting to see how the switch might work out. Jack is so
smart and aggressive and sure of himself that sometimes he could be a little
rough on folks, and I wanted to see how somebody with David`s smoother manner
would handle the job.
Jack said he already knew he didn`t want to stay at Wal-Mart
until he was an old man, so after some discussion, we agreed on the switch.
David took the presi-
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dent`s job, and Jack stayed on for three more years as chief
financial officer, and he did a great job. Today, he does international
consulting work, and he remains a valuable Wal-Mart board member. David, of
course, turned into a fantastic president, and about five years ago I
relinquished my CEO title to him. At that time. Jack retired.
As well as all that worked out for everyone—and it really did—I
won`t pretend there wasn`t tension surrounding that period in our history. This
is a highly competitive business, and an even more competitive company. It
naturally attracts a lot of ambitious people, sometimes with egos to match. Ever
since my peewee football days, I`ve believed almost any kind of competition is
great. I expect our folks to compete with one another and as I have said, what I
hate is to see a rivalry become a personal thing, where the folks don`t support
one another.
Competition is actually the reason I love retailing so much.
The Wal-Mart story is just another chapter in that history of competition—a
great chapter, mind you —but it`s all part of the evolution of the industry.
There`s always a challenger coming along. There may be one on the street right
now formulating a plan to get to the top. To stay ahead of those challengers, we
have to keep changing and looking back over our shoulder and planning ahead.
That`s one reason we bought the McLane company a few years ago. It`s a big
distributor to grocery stores, and it should be a great base for us to push on
into that market, where we feel customers are ready for our way of doing
business.
Right now, I see a lot of new challengers coming from offshore
with some very sophisticated programs. Some of the emerging competitors in this
country who
meeting the competition 261
have come from Holland, Germany, and France bear dose watching.
And it won`t be long before we have a wave of Japanese retail concepts arriving.
I don`t know if Wal-Mart can truly maintain our leadership position by just
staying in this country. I think we`re going to have to become a more
international company in the Dot-too-distant future. We`ve created an
international division in the company, and we have a joint venture with a
Mexican company called CIFRA for the development of Club Aurrera, a wholesale
club concept. We`ve opened two with plans for more soon. Absorbing people from
other cultures quickly and smoothly into the company will present a real
challenge to Wal-Mart in the near future—but our folks are up to it.
On the domestic front, competition in the discount business has
improved tremendously in the last few years. Our competitors are doing a better
job of serving their customers, of getting them through the checkout lines.
They`re running cleaner stores with better merchandise presentations. They`re
making our job a lot harder. But so far, none of our competitors has yet been
able to operate on the volume that we do as efficiently as we do. They haven`t
been able to get their expense structure as low as ours, and they haven`t been
able to get their associates to do all those extra things for their customers
that ours do routinely: greeting them, smiling at them, helping them, thanking
them. And they haven`t been able to move their merchandise as efficiently, or
keep it in stock as efficiently, as we do.
If anyone is ever able to top us in any of those areas, we will
have real concern. At this point, no one has been able to do it.
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