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Wal-Mart: world's largest company

Chain's low-price, low-wage ascent is triumph of post-industrial economy

By Staff writer of The Christian Science Monitor / February 19, 2002


The world's new No. 1 company boasts no factories or smokestacks. It has no signature product. Instead, Wal-Mart Stores has reached the top by selling other people's goods more cheaply than anyone else.

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When the Arkansas-based corporation releases its 2001 fiscal year revenue figures today, it's expected to breeze by oil giant Exxon Mobil to become the world's largest corporation, with sales of $218 billion.

Wal-Mart's ascent signals many things: the power of ideas, the importance of corporate values, and the triumph of the post-industrial economy. For the first time since the Industrial Revolution took hold in the United States, a nonindustrial, service business has risen to the top of the corporate rankings.

But the epic transformation of a single five-and-dime into a world-beating corporation has its downside. It has sucked the life out of small-town business districts. Its low-price success is spawns low-pay jobs. Its spread has helped pave over America's geographical diversity with cookie-cutter stores that detractors find numbingly similar.

If the "Wal-Martization" of America - and increasingly, the world - stands for anything, it's this: Good ideas backed with hard work can reach unimaginable heights. But success often has unintended consequences.

These two faces of success follow Wal-Mart wherever it locates. Here in Rogers, Ark., they stare each other down and provide a preview into where the Wal-Mart phenomenon may lead America.

A sleepy, rural town when Sam Walton opened his first Wal-Mart here 40 years ago, Rogers now pulses like a boomtown. The region, including nearby Bentonville and Fayetteville, represents the sixth-fastest growing US metro area. Most locals seem to enjoy the heady times. But the more Wal-Mart grows, the louder its critics get. "It does have an effect on [what] I think [is] something more important than shopping," says Al Norman, head of Sprawl-Busters and one of the corporation's most vocal detractors. "Every little town starts to resemble every other town. And people who gather in these enormous warehouses frequently never see anyone familiar from visit to visit."

All this seems a world away from 1962 when Woolco, Target, Kmart and Wal-Mart were launched.

Walton's first store in Rogers was an inauspicious beginning. An investor in local five-and-dimes, Walton had none of the corporate backing or experience of the other three. He did have "a searing insight ... that small towns could support big stores," says Harvard business professor Richard Tedlow.

While Walton's competitors conquered the cities and suburbs, he aimed at rural America. It turned out to be brilliant strategy. By not competing directly with the large chains, he could experiment and build his empire without attracting much attention. As a result, he offered rural America a broader range of goods at cheaper prices than ever before. In the process, he decimated mom-and-pop merchants.

While other retailers also pioneered new techniques, Walton excelled in implementing them. He readily borrowed ideas from Kmart founder Harry Cunningham. He listened to his own associates - an employee in Lousiana inspired the idea of front-door greeters.

His improvements reached into virtually every avenue of retail. He early on realized the power of the bar-code scanner to automate inventory control. His company streamlined shipping. Wal-Mart quickly adopted wireless networking and now boasts the world's largest private computer network.

Today, Woolco is gone; Kmart last month filed for bankruptcy; and Target, while profitable, remains a much smaller chain than Wal-Mart.

Perhaps his greatest achievement was stamping his down-home values on the company's culture. He focused intensely on the consumer. He instituted a 10-foot rule where employees were supposed to greet customers whenever they got within 10 feet of them. Incredibly frugal, he passed on his parsimony to his employees. Even today, a decade after his passing, Wal-Mart's main offices in Bentonville look more like a really old mall than the headquarters of the world's largest company. Employees still take out their own trash.

When marketing Professor Jay Handelman at Alberta's University of Lethbridge began surveying Wal-Mart's impact on Canadians, he found customers didn't get what they wanted, they wanted what they got.

Before a Wal-Mart arrived in a community, for example, local consumers would tell Mr. Handelman that they wanted a new store to offer such things as special sales and a good location. But months after the arrival of Wal-Mart, which downplays sales in favor of everyday low prices, consumers had changed their preferences to everyday low prices. And location mattered hardly at all.

"Even though they're this huge multinational, they're able to portray themselves as the local community store," he says.