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Building a Frugal Fortune: The Growth of Wal-Mart

Article Overview: “There’s a lot more business out there in small town America than I ever dreamed of,” said Walton. The success of his first variety store took even Walton by surprise, leading in sales and profits in the six-state region in which the Butler Brothers operated. By consistently stocking his shelves with discounted products, keeping later hours than most others, and buying wholesale goods from the cheapest suppliers, Walton managed to significantly increase his sales volume.
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Building a Frugal Fortune: The Growth of Wal-Mart
“There’s a lot more business out there in small town America than I ever dreamed of,” said Walton. The success of his first variety store took even Walton by surprise, leading in sales and profits in the six-state region in which the Butler Brothers operated. By consistently stocking his shelves with discounted products, keeping later hours than most others, and buying wholesale goods from the cheapest suppliers, Walton managed to significantly increase his sales volume.
But, Walton’s success would not be allowed to go unchecked. When the landlord of the store realized his opportunity, he refused to renew Walton’s expired lease and instead gave the store to his own son. P.K.Holmes essentially forced Walton out of business and bought his inventory for $50,000, which at the time Walton called “ a fair price.”
Although he had lost his business, this setback would not deter Walton. He launched another Ben Franklin store in Bentonville, Arkansas and called it the Walton Five and Dime. Its success enabled him to open a second store in Fayetteville, Arkansas, which was not a Ben Franklin franchise, but was equally successful. He continued to expand and by 1962, Walton owned sixteen variety stores throughout Arkansas, Missouri and Kansas. It was also during this expansion period where Walton first began the practice of profit sharing, offering managers limited partnerships in order to create incentives and generate company loyalty.
In 1962, Walton opened the first official Wal-Mart in Rogers, Arkansas, with a mission to provide discounted goods to rural America. The chain of stores continued to spread across the U.S. and was formally incorporated as Wal-Mart Stores Inc. in 1969. Three years later, it became a publicly trade company.
In the early years, stores were intentionally setup within one-day driving distance from the company’s distribution centre so as to ensure immediate restocking. Between 1970-1980, Wal-Mart’s sales increased from $313 million to $1.2 billion with the number of stores increasing 8.5 fold. Walton financed his expansion through a combination of vendor’s money and bank debt, which he was largely able to pay off with the company’s profits from going public.
In 1983, Sam Walton decided to open another chain of stores. Sam’s Club became a members-only warehouse chain, which first opened in Midwest City, Oklahoma. Here, products were sold in bulk and arranged in a warehouse style. Sam’s Club found similar success to Wal-Mart and Walton was able to expand the chain throughout the U.S.
In 1990, Wal-Mart had become America’s number one retailer. But, Walton had even bigger dreams for his company; he wanted to go global. In 1991, Wal-Mart made its first presence on the international market by opening a store in Mexico City and from that point on there was no turning back. Wal-Mart continued to expand across the continental U.S. and in international markets.
Today, Wal-Mart is the largest grocery chain in the U.S., the largest private employer in all of the U.S., Mexico, and Canada, and earns revenues of over $300 billion. Similarly, Sam’s Clubs reports sales revenues of almost $40 billion and also continues to expand into international markets.
Article Tags: ben franklin store, bentonville arkansas, butler brothers, company loyalty, distribution centre, driving distance, expansion period, expired lease, fayetteville arkansas, five and dime, limited partnerships, rogers arkansas, sales volume, variety store, variety stores, wal mart, wal mart stores, wal mart stores inc, wal marts, wholesale goods
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