1

WAL-MART RETAIL MANAGEMENT

A PROJECT REPORT

MASTER OF BUISNESS ADMINISTRATION

Project Report on RETAIL MANAGEMENT OF WAL-MART

Introduction of Retail Management System

The word retail is derived from the French word retailer, meaning cut a piece off or to break bulk. In simple terms, it implies a first-hand transition with the customer. Retailing is the sale of goods and services to the ultimate consumer for personal, family or household use. A Retail Strategy can be defined as a specific plan or framework of action that direct a retailer to achieve its goals. A Strategic Retail Planning is the total planning of company's overall resources for the achievement of objective. It describes how retailers select target market segment, determine the appropriate retail format, and build a sustainable competitive advantage

According to Kotler: Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use

Benefit or Features of Strategic Retail Planning

Strategic Retail Planning Provides thorough analysis of the requirements for doing business for different types of retailers Strategic Retail Planning Outlines retailer goals Strategic Retail Planning determine how to differentiate itself from competitors Strategic Retail Planning Allows an analysis of the legal, economic, and competitive environment Strategic Retail Planning Encourages anticipation and avoidance of crises.

Planning and forecasting in Retailing:

Retail Planning and Forecasting allows retailer to create, modify and track their financial, assortment and promotional plans for each channel and communicate changes to the marketplace. Planning and Forecasting include everything a retailer need to predict and respond to changes: Demand Forecasting: Keep it simple and accurate. Predict demand at any combination of product and location nodes. Multi-Channel Planning: Integrate planning for your web, catalog and store channels to reduce redundancy and increase efficiency. Financial Planning:Plan top-down or bottom-up with an easy to use, but powerful solution that manages multiple versions of plans across categories, channels and time periods. Assortment Planning: Planning of assortments by customer. See buyers' changes immediately so you can reach your financial goals with the right mix of products. Promotion Planning: Coordinate all aspects of your promotions from one solution. Create, forecast and track events and feed anticipated lift to replenishment to avoid stock-outs on featured products. Visual Merchandise Planning: Visual Merchandising is largely associated with creating the look of the store. Visual Merchandising involve the total merchandise or service presentation, the over all business image, and also for the building and placement of design elements Store Operations Plannin: Integration of Front end and back end operation is important efficient store operation and profit.

Key Reasons for slow growth in Retail in India Reasons for slow growth in retail: 1. Retail not being recognized as an industry in India - Hampering the availability of finance to existing and new players - Hence affecting growth and expansion plans 2. High costs of real estate - Lease or rent of property is major area of expenditure - This eats into the profitability of a project 3. Lack of adequate infrastructure

- Poor roads, lack of cold chain infrastructure - Existing supermarkets and food retailers have to invest substantially in building cold chain infrastructure 4. Multiple and complex taxation system - Sales tax rates vary from State to State - Organized players have to face multiple point control and tax system - Tax evasion by small stores - Hence it becomes expensive to transfer goods from one store to another 5. Foreign direct investment - FDI in pure retailing is now permitted - One of the prime reason for slow growth of retail in India - Global retailer can enter only by way of a franchise with Indian partner or through technological alliances Key Reasons for Retail Change in India : There are some fundamental factors that have brought the major change in retailing industry today:
1. Changing Income Profiles: Steady economic growth fuelled the increase in disposable

income in India.
2. Changes in Consumption patterns: Occupational changes and expansion of media have

caused a significant change in the way the consumer lives and spends his money.The changes in income brought about changes in the aspirations and the spending patterns of the consumers.
3. The emergence of a young Earning India : Nearly 70% of the Indian population is

below the age of 34. taking advantages of employment opportunity in the booming service sector these young Indians are redefining service and consumption patterns
4. Emerging Rural Market: The Rural market is beginning to emerge as an important

consumption area, it has increased the demand.

5. Introduction of the private label : Retailers now decide on products and brands they

want to stock. Some have even developed their own in store brands/products that cater to the needs of target customers.

6 6. Technology : Increasing use of technology, use of bar code provides wealth of

information to retailer. Consumer profile, products purchased, price ranges, promotional offers, customer cards, internet etc.

Roles of Retailer or Utility provided by Retailer: From an economic viewpoint, the role of a retailer is to provide value or utility to the customer. This comes 5 different perspectives:
1.

Form: First is utility regarding the form of a product that is acceptable to the

customer. The retailer does not supply raw material, but rather offers finished goods and services in a form that the customers want.
2.

Task: The retailer accomplishes the task of storing the goods, and provide an

assortment of products in various categories

3.

Time: He cerates Time utility by keeping the store open when the consumers

prefer to shop by providing preferable shopping hours.

4.

Place: Retailer ensures to create place utility being available at a convenient

location.
5.

Ownership: Eventually, when the product is sold, ownership utility is created

Important Functions of Retailer: From the customer point of view, the retailer serves him by providing the goods that he needs in the required assortment, at the required place and time.
1. Arranging Assortment: manufacturers usually make one or a variety of products and

would like to sell their entire inventory to few buyers to reduce costs. Final consumers, in contrast prefer a large variety of goods and services to choose from and usually buy them in small units.
2. Breaking Bulk: to reduce transportation costs, manufacturer and wholesalers typically

ship large cartons of the products, which are then tailored by the retailers into smaller quantities to meet individual consumption needs

7 3. Holding stock: Retailers maintain an inventory that allows for instant availability of the

product to the consumers. It helps to keep prices stable and enables the manufacture to regulate production.
4. Promotional support: small manufacturers can use retailers to provide assistance with

transport, storage, advertising, and pre- payment of merchandise.

The Retailer also serves the manufacturers by 1. Accomplishing the function of distributing the goods to the end users 2. Creating and Managing a channel of information from manufacturer to the consumer 3. Act as a final link in the distribution chain 4. Recommending products where brand loyalty is not strong or for unbranded products.

BASIC FACTS

Walmart logo, used since June 30, 2008 Type Traded as Public NYSE: WMT Dow Jones Industrial Average Component S&P 500 Component Retailing 1962 Sam Walton

Industry Founded Founder(s)

Headquarters Bentonville, Arkansas, U.S.

Number of locations Area served Key people

8,970 (2011)

Worldwide S. Robson Walton (Chairman) Mike Duke (President & CEO) Apparel/footwear specialty, cash & carry/warehouse club, discount department store, discount store,hypermarket/Supercenter/superstore,supermarket US$ 446.950 billion (2012) US$ 26.558 billion (2012)

Products

Revenue Operating income

Net income Total assets Total equity Owner(s) Employees Divisions Subsidiaries Web site

US$ 15.699 billion (2012) US$ 193.406 billion (2012) US$ 71.315 billion (2012) Walton family 2.2 million (2012) Walmart Canada Asda, Sam's Club, Seiyu Group,Walmex Wal-Mart Stores.com Walmart.com

Wal-Mart Stores, Inc. (branded as Walmart) is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and listed on the New York Stock Exchange in 1972. WalMart is the largest private employer[5] and the largest grocery retailer in the United States. It also owns and operates the Sam's Club retail warehouses in North America.

10

Walmart operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price. It has wholly-owned operations in Argentina, Brazil, Canada, and Puerto Rico. Wal-Mart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful. HOW IT BEGAN Sam Walton, a businessman from Arkansas, began his retail career when he started work on June 3, 1940, at a J.C. Penney store in Des Moines, Iowa where he remained for 18 months. In 1945, he met Butler Brothers, a regional retailer that owned a chain of variety stores called Ben Franklin and that offered him one in Newport, Arkansas. Walton was extremely successful in running the store in Newport, far exceeding expectations. However, when the lease came up for renewal, Walton could neither come to agreement on the existing store's lease renewal nor find a new location in Newport. Instead, he opened a new Ben Franklin franchise in Bentonville, Arkansas, but called it "Walton's Five and Dime." There, he achieved higher sales volume by marking up slightly less than most competitors. On July 2, 1962, Walton opened the first Wal-Mart Discount City store located at 719 Walnut Ave. in Rogers, Arkansas. The building is now occupied by a hardware store and a pawn shop. Within five years, the company expanded to 24 stores across Arkansas and reached $12.6 million in sales. In 1968, it opened its first stores outside Arkansas, in Sikeston, Missouri and Claremore, Oklahoma.

Incorporation and growth The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened its home office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a publicly held company on October 1, 1970, and was soon listed on the New York Stock Exchange. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating

11

in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340.3 million.

In the 1980s, Walmart continued to grow rapidly, and by its 25th anniversary in 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates. This year also marked the completion of the company's satellite network, a $24 million investment linking all operating units of the company with its Bentonville office via two-way voice and data transmission and one-way video communication. At the time, it was the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate to stores. In 1988, Sam Walton stepped down as CEO and was replaced by David Glass. Walton remained as Chairman of the Board, and the company also rearranged other people in senior positions. In 1988, the first Walmart Supercenter opened in Washington, Missouri. Thanks to its superstores, it surpassed Toys "R" Us in toy sales in the late 1990s. The company also opened overseas stores, entering South America in 1995 with stores in Argentina and Brazil; and Europe in 1999, buying Asda in the UK for $10 billion. In 1998, Walmart introduced the "Neighborhood Market" concept with three stores in Arkansas. By 2005, estimates indicate that the company controlled about 20% of the retail grocery and consumables business. In 2000, H. Lee Scott became President and CEO, and Walmart's sales increased to $165 billion. In 2002, it was listed for the first time as America's largest corporation on the Fortune 500 list, with revenues of $219.8 billion and profits of $6.7 billion. It has remained there every year, except for 2006. In 2005, Walmart had $312.4 billion in sales, more than 6,200 facilities around the world including 3,800 stores in the United States and 2,800 elsewhere, employing more than 1.6 million "associates" worldwide. Its U.S. presence grew so rapidly that only small pockets of the country remained further than 60 miles (100 km) from the nearest Wal-Mart. As Walmart grew rapidly into the world's largest corporation, many critics worried about the effect of its stores on local communities, particularly small towns with many "mom and pop" stores. There have been several studies on the economic impact of Walmart on small towns and local businesses, jobs, and taxpayers. In one, Kenneth Stone, a Professor of Economics at Iowa State University, found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening. However, in another study, he compared the changes to what small town shops had faced in the past including the development of the railroads, the advent of the Sears Roebuck catalog, as well as the arrival of shopping malls and concluded that shop owners who adapt to changes in the retail market can thrive after Wal-Mart arrives. A later study

12

in collaboration with Mississippi State University showed that there are "both positive and negative impacts on existing stores in the area where the new supercenter locates." In the aftermath of Hurricane Katrina in September 2005, Walmart was able to use its logistical efficiency in organizing a rapid response to the disaster, donating $20 million in cash, 1,500 truckloads of free merchandise, food for 100,000 meals, as well as the promise of a job for every one of its displaced workers. An independent study by Steven Horwitz of St. Lawrence University found that Walmart, Home Depot and Lowe's made use of their local knowledge about supply chains, infrastructure, decision makers and other resources to provide emergency supplies and reopen stores well before FEMA began its response. While the company was overall lauded for its quick response amidst the criticisms of the Federal Emergency Management Agency several critics were nonetheless quick to point out that there still remain issues with the company's labor relations issues. In October 2005, Wal-Mart announced it would implement several environmental measures to increase energy efficiency. The primary goals included spending $500 million a year to increase fuel efficiency in Wal-Marts truck fleet by 25% over three years and double it within ten, reduce greenhouse gas emissions by 20% in seven years, reduce energy use at stores by 30%, and cut solid waste from U.S. stores and Sams Clubs by 25% in three years. CEO Lee Scott said that Wal-Mart's goal was to be a "good steward for the environment" and ultimately use only renewable energy sources and produce zero waste. The company also designed three new experimental stores in McKinney, Texas, Aurora, Colorado, and Las Vegas, Nevada. with wind turbines, photovoltaic solar panels, biofuel-capable boilers, water-cooled refrigerators, and xeriscape gardens. Despite much criticism of its environmental record, Wal-Mart took a few steps in what is viewed as a positive direction, which included becoming the biggest seller of organic milk and the biggest buyer of organic cotton in the world, as well as reducing packaging and energy costs. Wal-Mart also spent nearly a year working with outside consultants to discover the company's total environmental impact and find where they could improve. They discovered, for example, that by eliminating excess packaging on their toy line Kid Connection, they could not only save $2.4 million a year in shipping costs but also 3,800 trees and a million barrels of oil. Walmart has also recently created its own electric company in Texas, Texas Retail Energy, and plans to supply its stores with cheap power purchased at wholesale prices. Through this new venture, the company expects to save $15 million annually and also lays the groundwork and infrastructure to sell electricity to Texas consumers in the future. In March 2006, Walmart sought to appeal to a more affluent demographic. The company launched a new Supercenter concept in Plano, Texas, intended to compete against stores seen as more upscale and appealing, such as Target. The new store has wood floors, wider aisles, a sushi bar, a coffee/sandwich shop with free Wi-Fi Internet access, and more expensive beers, wines, electronics, and other goods. The exterior has a hunter green background behind the Wal-Mart letters, similar to Wal-Mart Neighborhood Markets, instead of the blue previously used at its supercenters.

13

On September 12, 2007, Walmart introduced new advertising with the slogan, "Save Money Live Better," replacing the "Always Low Prices, Always" slogan, which it had used for the previous 19 years. Global Insight, which conducted the research that supported the ads, found that Walmart's price level reduction resulted in savings for consumers of $287 billion in 2006, which equated to $957 per person or $2,500 per household (up 7.3% from the 2004 savings estimate of $2,329). On June 30, 2008, Walmart unveiled a new company logo, featuring the non-hyphenated name "Walmart" followed by a stylized spark, as it is referred to on store advertisements. The new logo received mixed reviews from some design critics, who question whether the new logo is as bold as competitors such as the Target bullseye or as instantly recognizable as the former company logo, which was used for 18 years. The new logo made its debut on the company's walmart.com website on July 1, 2008. The new logo will eventually replace store logos at the company's US locations throughout the year[clarification needed which year]. Wal-Mart Canada started to adopt the logo for its stores in early 2009. On March 20, 2009, Wal-Mart announced that it is paying a combined $933.6 million in bonuses to every full and part time hourly worker of the company. An additional $788.8 million in profit sharing, 401(k) contributions, and hundreds of millions of dollars in merchandise discounts and contributions to the employees' stock purchase plan is also included in this plan. While the economy at large was in an ongoing recession, the largest retailer in the U.S. reported solid financial figures for the most recent fiscal year (ending January 31, 2009), with $401.2 billion in net sales, a gain of 7.2% from the prior year. Income from continuing operations increased 3% to $13.3 billion, and earnings per share rose 6% to $3.35. On July 16, 2009, Wal-Mart announced plans to develop a worldwide sustainable product index.

Wal-Mart International A typical Wal-Mart store in Moncton, New Brunswick Wal-Mart's international operations currently comprise 2,980 stores in 14 countries outside the United States. According to Wal-Mart's 2006 Annual Report, the International division accounted for about 20.1% of sales. There are wholly owned operations in Argentina, Brazil, Canada, Puerto Rico (although PR is part of the US, the company's operations there are managed through

14

its international division), and the UK. With 1.8 million employees worldwide, the company is the largest private employer in the US and Mexico, and one of the largest in Canada. Wal-Mart has operated in Canada since its acquisition of 122 stores comprising the Woolco division of Woolworth Canada, Inc in 1994. As of October 31, 2008, it operates 310 locations, employing 77,500 Canadians, with a local home office in Mississauga, Ontario.[55] Wal-Mart Canada's first three Supercentres (spelled as in Canadian English) opened on November 8, 2006, in Hamilton, London, and Aurora, Ontario. As of October 31, 2008, there are 39 Wal-Mart Supercentres in Canada. Sales in 2006 for Wal-Mart's UK subsidiary, Asda (which retains the name it had before acquisition by Wal-Mart), accounted for 42.7% of sales of Wal-Mart's international division. In contrast to Wal-Mart's US operations, Asda was originally and still remains primarily a grocery chain, but with a stronger focus on non-food items than most UK supermarket chains other than Tesco. At the end of 2007, Asda had 340 stores, some of which are branded Asda Wal-Mart Supercentres, as well as Asda Supermarkets, Asda Living, George High Street and Asda Essentials stores. In addition to its wholly-owned international operations, Wal-Mart has joint ventures in China and several majority-owned subsidiaries. Wal-Mart's majority-owned subsidiary in Mexico is Walmex. In Japan, Wal-Mart owns about 53% of Seiyu. Additionally, Wal-Mart owns 51% of the Central American Retail Holding Company (CARHCO), consisting of more than 360 supermarkets and other stores in Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica. In 2004, Wal-Mart bought the 116 stores in the Bompreo supermarket chain in northeastern Brazil. In late 2005, it took control of the Brazilian operations of Sonae Distribution Group through its new subsidiary, WMS Supermercados do Brasil, thus acquiring control of the Nacional and Mercadorama supermarket chains, the leaders in the Rio Grande do Sul and Paran states, respectively. None of these was rebranded. As of August 2006, Wal-Mart operates 71 Bompreo stores, 27 Hiper-Bompreo stores, 15 Balaio stores, and three Hiper-Magazines (all originally parts of Bompreo). It also runs 19 Wal-Mart Supercenters, 13 Sam's Club stores, and two Todo Dia stores. With the acquisition of Bompreo and Sonae, Wal-Mart is currently the third largest supermarket chain in Brazil, behind Carrefour and Po de Acar. In June 2006, Wal-Mart was excluded from the investment portfolio of The Government Pension Fund of Norway, which held stock values of about US$ 430 million in the company, due to a social audit into alleged labor rights violations in the company's operations in the US and worldwide. Although Wal-Mart did not respond to questions from the fund's auditors, the company later claimed the decision "don't appear to be based on complete information". In July 2006, Wal-Mart announced its withdrawal from Germany due to sustained losses in a highly competitive market. The stores were sold to the German company Metro during WalMart's fiscal third quarter.

15

In November 2006, Wal-Mart announced a joint venture with Bharti Enterprises to open retail stores in India. As foreign corporations are not allowed to directly enter the retail sector in India, Wal-Mart will operate through franchises and handle the wholesale end. The partnership will involve two joint ventures; Bharti will manage the front end involving opening of retail outlets, while Wal-Mart will take care of the back end, such as cold chains and logistics. In 2008, Wal-Mart named German retailing veteran Stephan Fanderl as the president of WalMart Emerging Markets-East in an effort to, "explore retail business opportunities in Russia and neighboring markets." The market is estimated to be worth more than $140 billion per year in food sales alone. In January 2000, the company acquired a controlling interest in the largest grocer in Chile, Distribucion y Servicio D&S SA.

WAL-MART INTERNATIONAL OPERATIONS Wal-Mart became an international company in 1991 when a SAM'S CLUB opened near Mexico City. Just two years later, the Wal-Mart International Division was created to oversee growing opportunities worldwide. Today, customers at more than 1,300 units in nine countries prove that Wal-Mart's Every Day Low Price promise is a message clearly understood in any language. The division currently operates stores and clubs employing more than 300,000 associates in the following countries:

DEVELOPMENT OPPORTUNITIES. Wal-Mart has experienced success internationally because of its ability to transport the company's unique culture and effective retailing concepts to each new country. Associates get involved in the local communities and adapt to local cultures. They respond to customer needs, merchandise preferences and local suppliers. By serving each hometown in its own unique way, Wal-Mart International has realized significant growth with potential for much greater development worldwide.

Wal-Mart International has achieved global expansion through a combination of new store construction and acquisitions. This strategy has given the company excellent market penetration and positioned it for future development. The company sees its development throughout North America, Latin America, Asia and Europe as a good beginning with many promising areas for further expansion.

16

This year, Wal-Mart International plans to open 120 to 130 units in existing markets. The announced units include two restaurant formats, specialty apparel retail stores and supermarkets in Mexico.

WAL-MART ARGENTINA Started its operations in August 1995 with the opening of a SAM'S CLUB in Avellaneda, in the greater Buenos Aires area. Today, Wal-Mart operates 11 Supercenters and one distribution center in the provinces of Buenos Aires, Cordoba, Entre Rios, Santa Fe, Mendoza and Neuquen. The company employs over 4,000 associates in Argentina.

WAL-MART BRAZIL Began operations in May 1995 when a SAM'S CLUB opened in So Caetano do Sul, metropolitan area of So Paulo. In the past seven years, Wal-Mart Brazil has opened 13 Wal-Mart Supercenters, 10 SAM'S CLUB and 2 Todo Dia. Wal-Mart Brazil also employs around 7,000 associates and does business with approximately 5,000 suppliers. Today Wal-Mart Brazil is present in four states - So Paulo, Minas Gerais, Rio de Janeiro and Paran.

In March 2004, Wal-Mart Brazil announced the acquisition of Bompreco, a retail chain in northeastern Brazil with 118 units. Bompreco is the leading supermarket and hypermarket chain in Brazil's northeast region, present in nine states across the region. Bompreco operates a number of different formats including Hiper Bompreco hypermarkets ranging in size between 4,000 and 12,500 square meters and offering 45,000 lines and Bompreco supermarkets, with a sales area of up to 3,200 square meters and offering around 10,000 lines. Bompreco also operates minimarkets and Balaio discount stores, as well as a small number of 'Hiper Magazine' stores.

17

WAL-MART CANADA

Wal-mart entered in 1994 with the acquisition of 122 Woolco stores. The company currently operates 231 discount department stores and 5 SAM'S CLUBS and employs more than 62,000 associates across Canada. Each discount store houses more than 70,000 products and a wide range of specialty services. The first SAM'S CLUBS opened in October 2003.

WAL-MART CHINA

Wal-Mart first entered China in August 1996 with the opening of its first Supercenter and SAM'S CLUB in Shenzhen. As a harbinger of China economic reform and the fastest growing coastal city in China, Shenzhen proved to be the best location for Wal-Mart investment. Seven years later, Wal-Mart now has 34 stores employing more than 18,000 associates.

WAL-MART GERMANY

18

In January 1998, Wal-Mart acquired 21 Wertkauf hypermarkets in Germany. Later that same year, the company acquired 74 units of the Interspar hypermarket chain. Wal-Mart has since invested in the remodeling of these stores and today operates 92 Supercenters in Germany. Wal-Mart Germany employs more than 14,000 associates across the country.

WAL-MART JAPAN

In 2002, Wal-Mart purchased a minority interest in The Seiyu, Ltd. a leading Japanese retailer. Today, Wal-Mart holds a 37.8% stake in the company. Seiyu operates over 400 supermarkets in Japan and employs 30,000 associates.

WAL-MART KOREA

19

Wal-Mart entered Korea in July 1998 through its acquisition and conversion of four Makro stores. Today, Wal-Mart Korea employs more than 3,000 associates and operates 15 Supercenters located in Anyang, Buchon, Busan, Daegu(3), Daejeon, Hwajung, Ilsan, Inchon(2), Masan, Seoul, Ulsan and Yongin. The Kangnam store in Seoul, which opened in July 1999, was the company's first new construction project.

WAL-MART MEXICO

In 1991, Wal-Mart entered into a joint venture with Cifra with the opening of a SAM'S CLUB in Mexico City, and Mexico became the first country in the International division. In 1997, Wal-Mart acquired a majority position in Cifra and in February 2000 the name changed to Wal-Mart de Mexico, S.A. de C.V. The company's ticker symbol changed from CIFRA to WALMEX. Currently, Wal-Mart operates 640 units in 31 states with annual sales of US$10.6 billion. The company employs more than 100,000 associates across the country.

WAL-MART PUERTO RICO

Wal-Mart started operations in Puerto Rico in June of 1992 with the opening of a Wal-Mart store in Fajardo. Since then, the company has successfully opened 9 WalMart stores, 9 SAM'S CLUBS and 3 Supercenters. In 2002, Wal-Mart acquired Supermercados Amigo, a local supermarket chain with 32 stores. Wal-Mart employs approximately 12,500 associates and does business with more than 300 local suppliers on the island.

20

WAL-MART UNITED KINGDOM

ASDA, Britain's best value food and clothing superstore, became part of the WalMart family on July 26, 1999. The company was formed in 1965 by a group of farmers from Yorkshire, and now has 251 ASDA stores and 21 depots across the UK, employing around 125,000 colleagues. The Wal-Mart name appeared on a UK store for the first time in 2000, when the first ASDA-Wal-Mart Super centre opened in Bristol, bringing a unique shopping experience to British customers with the best of both organizations' products on offer. Today, the company operates 14 ASDA-Wal-Mart Supercentres throughout the UK.

United States

Walmart Stores U.S. - 3,898 total units as of May 31, 2012 o Walmart Discount Stores (614) o Walmart Supercenters (3,060) o Supermarkets (209) - includes Neighborhood Market, Amigo and Supermercado stores o Small Format Stores (15) - includes Walmart Express, Walmart on Campus and Super Ahorros stores o Walmart.com Sam's Club (612) Logistics o Walmart Transportation LLC o Distribution Centers/Transportation Offices (130) Walmart Realty Walmart Vacations (no longer available) Claims Management, Inc.

21

Walmart Portrait Studios was rebranded as PictureMe! Portrait Studios in late 2006. The Portrait Studios are operated by CPI Corp, Inc. under an agreement with Walmart. Space is leased and they are independently owned and operated and only pay rent to Walmart and a license fee to use the Walmart brand. Also, most Doctors of Optometry are independent contractors and are not employees of Wal-Mart Stores, Inc. but instead pay rent to use space in Walmart and Sam's Club Vision Centers. The Walmart Money Center (Formerly Wal-Mart Financial Services Network) is a tradename for financial services provided in their stores, including the Walmart Money Card, Money Transfers, Bill Payments, Money Orders, Check Cashing and Check Printing.

International
Walmart International - 5,733 total units as of May 31, 2012 Note: Some international unit totals include distribution centers which are not listed here. Walmart Stores Inc no longer lists units in Puerto Rico as international, Puerto Rico's numbers are included in the US totals.

Walmart Argentina S.R.L. Argentina Entered August 1995 (88)

o o o o o

Changoms (supermarket) Changoms Express Mi Changoms Supercenter Walmart Supermercado

22 Massmart Holding Ltd Botswana Entered June 2011 (12)

o o

Game CBW

o Builders Warehouse Walmart Brazil o o o o o o o o o o

Brazil Entered May 1995 (532)

BIG (Sonae) HyperMarket (Bompreo) Magazine (Bompreo) Maxxi Atacado (Sonae) Mercadorama (Sonae) Nacional (Sonae) Sam's Club SuperMarket (Bompreo) TodoDia

Walmart Supercenter Walmart Canada Corp. Canada Entered November 1994 (333)
o o o

Walmart Discount Store Walmart Supercentre

Sam's Club (all closed on March 1, 2009 due to recession and competition with Costco) Walmart Chile
o o o o o

Chile Entered January 2009 (325)

Acuenta Ekono El Buen Corte Lider Express Lider Hiper

o Revive Walmart China o o o o o o

China Entered August 1996 (374)

Discount Compact Hyper Neighborhood Market Sams Club Smart Choice Supercenter

Costa Rica Entered September 2005

Trust-Mart Hypermarket - Walmart has a 35% interest in Trust-Mart Walmart de Mxico y Centroamrica

23

(201)

o o o o

Ms X Menos Maxi Pali Pal

Walmart Supercenter Walmart de Mxico y Centroamrica El Salvador Entered September 2005 (79) Germany Entered January 1998 Ghana Entered June 2011 (1)
o o o

Despensa Familiar La Despensa de Don Juan Walmart Supercenter

Walmart Supercenter; disposal announced July 2006. Massmart Holding Ltd

o

Game

Walmart de Mxico y Centroamrica Guatemala Entered September 2005 (200)

o o o o

Club Co Despensa Familiar Maxi Despensa Paiz

o Walmart Supercenter Walmart de Mxico y Centroamrica

Honduras Entered September 2005 (69)

o o o o

Despensa Familiar Maxi Despensa Paz

India Entered May 2009 (17)

Walmart Supercenter Bharti Walmart Private Limited (Bharti and Walmart hold a 50:50 stake) Best Price Modern Wholesale Seiyu Group
o o o o

Japan Entered March 2002 (426)

Seiyu GM Seiyu Hypermarket (operational names: Seiyu, Livin or Sunny) Seiyu Supermarkets (operational names: Seiyu, Livin or Sunny)

Korea, South

Wakana (Restaurants) Walmart Supercenter - sold May 2006

o

24 Entered July 1998 Lesotho Entered June 2011 (2) Malawi Entered June 2011 (2) Mauritius Entered June 2011 Massmart Holding Ltd
o

CBW

Massmart Holding Ltd

o

Game

Massmart Holding Ltd Game (closed January 2012) Walmart de Mxico y Centroamrica
o o o o o o o o o o

Mexico Entered November 1991 (2,147)

Bodega Aurrera Bodega Aurrera Express Medimart Mi Bodega Aurrera Sams Club Suburbia Superama VIPS Restaurants

Walmart Supercenter Massmart Holding Ltd Mozambique Entered June 2011 (17)
o o

Game CBW

Namibia Entered June 2011 (3)

o Kangela/Kawena Massmart Holding Ltd o

Game

o CBW Walmart de Mxico y Centroamrica

Nicaragua Entered September 2005 (74) Nigeria Entered June 2011 (2) South Africa

o o o

La Unin Maxi Pali Pal

Massmart Holding Ltd

o

Game

Massmart Holding Ltd

25

o o o o o o o o o o

Entered June 2011 (309)

Game (general merchandise discount store) Game Foodco (supercenter) DionWired (consumer electronics) Makro Builders Warehouse Builders Trade Depot Builders Express CBW (supermarkets) Jumbo Cambridge (supermarket)

Swaziland Entered June 2011 (1) Tanzania Entered June 2011 (1) Uganda Entered June 2011 (1)

Massmart Holding Ltd

o

CBW

Massmart Holding Ltd

o

Game

Massmart Holding Ltd

o

Game

Asda United Kingdom Entered July 1995 (544)

o o o o

Asda Living Asda Supercentre Asda Supermarket Asda Superstore

Zambia Entered June 2011 (1)

Massmart Holding Ltd

o

Game

26

WAL-MART BUSINESS CATEGORIES There are four Business Categories of Wal-Mart:

WAL-MART SUPER CENTER SAM'S CLUB WAL-MART STORES WAL-MART NEIGHBORHOOD MARKET

Now there are two categories of Wal-Mart in China: Wal-Mart Super center & SAM'S CLUB. WAL-MART SUPER CENTER

The growing demand for one-stop shopping led to Wal-Mart's decision to build full-line grocery department into many of its new stores. Referred to as Supercenters, Wal-Mart stores with grocery departments offer the ultimate in convenience - grocery shopping and 36 departments of discount general merchandise under one roof.

27

28

The Wal-Mart Supercenter provides one-stop family shopping convenience. The store combines a full-line of groceries and general merchandise department under one roof. The first Wal-Mart Supercenter opened in Washington, Missouri, on March 1, 1988.

Wal-Mart Supercenters are designed to save customers time and money, while providing a unique shopping experience. Through efficient operations and high-volume sales, the Wal-Mart Supercenter offers Every Day Low Prices on top-quality, name-brand merchandise.

The first Wal-Mart Supercenter opened on March 1, 1988 in Washington, Missouri. One decade later, Wal-Mart Supercenters are a Consumer hit, driving the continued growth of Wal-Mart and currently numbering over 1,000 stores worldwide.

Wal-Mart designed the Supercenter concept to save customers time and money, and also offer a unique shopping experience based on the Wal-Mart philosophy of "Every Day Low Prices". Supercenters feature the traditional 36 general merchandise departments found in Wal-Mart Discount Stores. Additionally the grocery area offers a bakery, delicatessen, frozen food section, meat and dairy as well as fresh produce departments. Through high volume sales, Supercenter customers find Wal-Mart's Every Day Low Prices on everything from produce to washing powder.

SAM'S CLUB SAM'S CLUB is a low-cost members-only warehouse club named after the founder of Wal-Mart Stores, Inc. - Sam Walton. The first SAM'S CLUB was founded in 1983. Acting like a purchasing agent for its members, SAM'S CLUB offers exceptional value on famous-brand merchandise at "member only" prices for both business and personal use.

SAM'S CLUB operates by selling high volumes of merchandise at very low profit margins which are passed along to members in the form of low, warehouse prices. In addition to its brand-name, low-cost merchandise mix, SAM'S CLUB offers a

29

variety of food items including fresh seafood, produce and baked goods, and other food and nonfood categories. Additional member benefits also include discounts at local restaurants, and recreational facilities. Everything we do is to save you money!

WAL-MART STORES Our Wal-Mart stores are the flagship retail division of Wal-Mart Stores, Inc. We are a national discount retailer offering a wide variety of general merchandise. Wal-Mart stores offer pleasant and convenient shopping in 36 departments including family apparel, health & beauty aids, household needs, electronics, toys, fabrics & crafts, lawn & garden, jewelry and shoes. In addition, some Wal-Mart stores offer a Pharmacy Department, Tire & Lube Express, garden center, snack bar or restaurant, Vision Center and One-Hour Photo Processing for customer convenience.

Wal-Mart stores operate on an "Every Day Low Price" philosophy and are able to maintain their low price structure through conscientious expense control. While other major competitors typically run 50 to 100 advertised circulars per year, Wal-Mart produces only 12-13 major annual circulars. The cost savings associated with fewer circulars are passed on to the customer through lower shelf prices every day.

Wal-Mart Associates strive to provide exceptional customer service, a characteristic unique to our chain. Everything possible is done to make shopping at Wal-Mart a friendly experience.

WAL-MART NEIGHBORHOOD MARKET Wal-Mart Neighborhood Markets -- Neighborhood Markets offer a convenient shopping experience for customers who need groceries, pharmaceuticals and general merchandise. Generally, they are located in markets with Wal-Mart Supercenters, supplementing a strong food distribution network and providing added convenience while maintaining Wal-Mart's Every Day Low Prices.

First opened in 1998, Neighborhood Markets range from 42,000 to 55,000 square feet and feature a wide variety of products, including fresh produce, deli foods, fresh meat and dairy items, health and beauty aids, one-hour photo and traditional photo developing services, drive-through

30

pharmacies, stationery and paper goods, pet supplies, and household chemicals. Neighborhood Markets employ 80-100 associates and offer about 28,000 items.

WAL-MART SPECIALITY CATEGORIES WAL- MART has five major specialty categories which are as follows:

WAL-MART TIRE AND LUBE EXPRESS TLE is one of the fastest growing divisions within Wal-Mart. In the last 10 years, it has grown more than 300% - and still growing! The Tire & Lube Express Division (TLE) prides itself on providing superior customer service and offers fast, accurate and dependable tire and lube service. It operates in an extremely fastpaced, competitive and rapidly expanding environment.

Currently, wal-mart has more than 1,700 locations in more than 45 states, meaning there are many career opportunities for both hourly and management candidates. If you are interested in an hourly position with TLE, your career will begin at your local Wal-Mart store.

WAL-MART OPTICAL The Wal-Mart Optical Department is one of the fastest growing areas in the company and provides customers with superior goods and services at low prices you can afford. They have always prided ourselves on 100 percent customer satisfaction. We'll work tirelessly to continue meeting your needs by providing Superior Vision with Outstanding Values for your entire family.

Today, they have many qualified Opticians and Professionals working in Wal-Mart and in SAM'S CLUB Optical with a wide range of advancement opportunities across the country. Eye exams are available by an Independent Doctor of Optometry, located next to or inside Wal-Mart Vision Centers and SAM'S CLUB Optical. The Wal-Mart Optical Department - seeing into the future with you in mind.

WAL-MART VACATIONS

31

Wal-Mart Vacations offers "Always Low Prices" on cruises, vacation packages, car rental and hotel discounts, this is another important category of wal-mart specialty division.

WAL-MART PHARMACY The Wal-Mart Pharmacy is a logical extension of the cherished company philosophy: customers deserve superior goods and services at fair and honest prices. Today, more than 720,000 associates across the nation, including more than 6,500 Pharmacists, proudly call Wal-Mart home and work hard to make our vision reality.

Our pharmacies are not just limited to Wal-Mart Stores now. We've opened pharmacy clinics in medical facilities, in SAM'S Clubs and even provide a drive-through window at our new Neighborhood Market grocery stores. We believe in giving our Pharmacists the opportunity to grow and develop in a multitude of ways during the course of their careers. We have wideranging career paths that might be of interest to you.

WAL-MART BELIEFS Sam Walton's 3 Basic Beliefs the company was built on. Sam Walton built Wal-Mart on the revolutionary philosophies of excellence in the workplace, customer service and always having the lowest prices. We have always stayed true to the Three Basic Beliefs Mr. Sam established in 1962: 1. Respect for the individual 2. Service to our customers 3. Strive for excellence

Respect the individual:

Every associate's opinion is respected. Managers are considered "servant leaders" who help new associates realize their potential through training, praise and constructive feedback. An "open door" management philosophy encourages associates to raise questions and concerns in an open atmosphere.

32

Our people make the difference' is not a meaningless slogan - it's a reality at Wal-Mart. We are a group of dedicated, hardworking, ordinary people who have teamed together to accomplish extraordinary things. We have very different backgrounds, different colors and different beliefs, but we do believe that every individual deserves to be treated with respect and dignity." Don Soderquist, Senior Vice Chairman of Wal-Mart Stores, Inc. (Retired)
Service to our customers:

The customer is the boss. Everything possible is done to make shopping at Wal-Mart and SAM'S CLUB a friendly, pleasant experience. The "Ten-Foot Attitude" means that associates are to greet each person they see. The "Satisfaction Guaranteed" refund and exchange policy allows customers to be fully confident of Wal-Mart and SAM'S Clubs merchandise and quality. We want our customers to trust in our pricing philosophy and to always be able to find the lowest prices with the best possible service. We're nothing without our customers. "Wal-Mart's culture has always stressed the importance of Customer Service. Our Associate base across the country is as diverse as the communities in which we have Wal-Mart stores. This allows us to provide the Customer Service expected from each individual customer that walks into our stores." Tom Coughlin, Vice Chairman, Wal-Mart Stores, Inc.
Strive for excellence:

Wal-Mart and SAM'S CLUB associates share an exceptional commitment to customer satisfaction. At the start of each day, store associates gather for the Wal-Mart or SAM'S CLUB cheer and review sales from the previous day, as well as discuss their daily goals. "The Sundown Rule" requires a continual sense of urgency, with questions asked in the morning answered before the end of the day.

33

New ideas and goals make us reach further than ever before. We try to find new and innovative ways to push our boundaries and constantly improve. "Sam was never satisfied that prices were as low as they needed to be or that our product's quality was as high a they deserved - he believed in the concept of striving for excellence before it became a fashionable concept."

STRATEGY AND BUSINESS MODEL Wal-Mart's business model is based on selling a wide variety of general merchandise at "always low prices." The company refers to its employees as "associates". All Wal-Mart stores in the US and Canada also have designated "greeters", who welcome shoppers at the store entrance. In June, 2007. Wal-Mart announced it was retiring the blue vest its 1.5 million associates wear, and replacing it with khakis and polos. The replacement was to help Wal-Mart increase sales. Unlike many other retailers, Wal-Mart does not charge a slotting fee to suppliers for their products to appear in the store. Instead, it focuses on selling more popular products and often pressures store managers to drop unpopular products, as well as asking manufacturers to supply more popular products. On September 14, 2006, the company announced that it would phase out its layaway program, citing declining use and increased costs. Layaway ceased to be offered on November 19, 2006, and required merchandise pickup by December 8, 2006. Wal-Mart now focuses on other payment options, such as increased use of six- and twelve-month, zero-interest financing. The layaway location in most stores is now used for Wal-Mart's Site-To-Store program, which was introduced in March 2007. This enables walmart.com customers to buy goods online with a free shipping option, and have goods shipped to the nearest store for pickup. Financial For the fiscal year ending January 31, 2009, Wal-Mart reported a net income of $13.6 billion on $404 billion of revenue (3.4% profit margin). For the fiscal year ending January 31, 2006, WalMart's international operations accounted for about 20.1% of total sales.[38] Governance Wal-Mart is governed by a fifteen-member Board of Directors, which is elected annually by shareholders. Robson Walton, the eldest son of founder Sam Walton, serves as Chairman of the Board. Michael T. Duke serves as Chief Executive Officer (CEO), and Lee Scott, formerly CEO, serves as Chairman of the Executive Committee of the Board. Other members of the board include Ada lvarez, Jim Breyer, M. Michele Burns, James Cash, Roger Corbett, Douglas Daft,

34

David Glass, Gregory B. Penner, Allen Questrom, Arne M. Sorenson, Jim Walton, Christopher J. Williams, and Linda S. Wolf. Notable former members of the board include Hillary Clinton (19851992) and Tom Coughlin (20032004), the latter having served as Vice Chairman. Clinton left the board before the 1992 U.S. Presidential Election, and Coughlin left in December 2005 after pleading guilty to wire fraud and tax evasion for stealing hundreds of thousands of dollars from Wal-Mart. On August 11, 2006, he was sentenced to 27 months of home confinement, five years of probation, and ordered to pay $411,000 in restitution.

Competition In North America, Wal-Mart's primary competition includes department stores like Kmart, Target, ShopKo and Meijer, Canada's Zellers, The Real Canadian Superstore and Giant Tiger, and Mexico's Comercial Mexicana and Soriana. Competitors of Wal-Mart's Sam's Club division are Costco, and the smaller BJ's Wholesale Club chain operating mainly in the eastern US. WalMart's move into the grocery business in the late 1990s also set it against major supermarket chains in both the United States and Canada. Several smaller retailers, primarily dollar stores, such as Family Dollar and Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales. In 2004, Wal-Mart responded by testing its own dollar store concept, a subsection of some stores called "Pennies-n-Cents." Wal-Mart also had to face fierce competition in some foreign markets. For example, in Germany it had captured just 2% of German food market following its entry into the market in 1997 and remained "a secondary player" behind Aldi with a 19% share. In July 2006, Wal-Mart announced its withdrawal from Germany. Its stores were sold to German company Metro. Wal-Mart continues to do well in the UK, and its Asda subsidiary is the second largest chain after Tesco. In May 2006, after entering the South Korean market in 1998, Wal-Mart withdrew and sold all 16 of its South Korean outlets to Shinsegae, a local retailer, for $882 million. Shinsegae re-branded the Wal-Marts as E-mart stores. Wal-Mart struggled to export its brand elsewhere as it rigidly tried to reproduce its model overseas. In China, Wal-Mart hopes to succeed by adapting and doing things preferable to Chinese citizens. For example, it found that Chinese consumers preferred to select their own live fish and seafood; stores began displaying the meat uncovered and installed fish tanks, leading to higher sales. In addition, under heavy pressure from the Chinese government, Wal-Mart accepted a form of organized labor in China. Chinese labor unions do not negotiate contracts but simply pay dues to

35

the government, "to secure the social order." However, Chinese consumers may be more open to Americana than shoppers in Europe. Customer base Each week, about 100 million customers, nearly one-third of the U.S. population, visit WalMart's U.S. stores. Wal-Mart customers give low prices as the most important reason for shopping there, reflecting the "Low prices, always" advertising slogan that Wal-Mart used from 1962 until 2006. The average US Wal-Mart customer's income is below the national average, and analysts recently estimated that more than one-fifth of them lack a bank account, twice the national rate. A Wal-Mart financial report in 2006 also indicated that Wal-Mart customers are sensitive to higher utility costs and gas prices. A poll indicated that after 2004 US Presidential Election 76% of voters who shopped at Wal-Mart once a week voted for George W. Bush, while only 23% supported senator John Kerry.[88] When measured against other similar retailers in the U.S., frequent Wal-Mart shoppers were rated the most politically conservative. In 2006, Wal-Mart took steps to expand its US customer base, announcing a modification in its US stores from a "one-size-fits-all" merchandising strategy to one designed to "reflect each of six demographic groups African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents." Around six months later, it unveiled a new slogan: "Saving people money so they can live better lives". This reflects the three main groups into which Wal-Mart categorizes its 200 million customers: "brand aspirationals" (people with low incomes who are obsessed with names like KitchenAid), "price-sensitive affluents" (wealthier shoppers who love deals), and "value-price shoppers" (people who like low prices and cannot afford much more). Wal-Mart has also made steps to appeal to more liberal customers, for example, by rejecting the American Family Association's recommendations and carrying the DVD Brokeback Mountain, a love story between two gay cowboys in Wyoming. Economic impact Wal-Mart is one of the largest corporations in the world. Studies have found both positive and negative effects on local businesses, jobs and taxpayers. Kenneth Stone, Professor of Economics at Iowa State University, in a paper published in Farm Foundation in 1997, found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening. However, he compared the changes to previous competitors small town shops have faced in the pastfrom the development of the railroads and the Sears Roebuck catalog to shopping malls. He concludes that shop owners who adapt to the ever changing retail market can thrive after Wal-Mart comes to their community. A subsequent study in collaboration with Mississippi State University indicated that there are "both positive and negative impacts on existing stores in the area where the new supercenter locates."

36

A June 2006 article published by the libertarian Ludwig von Mises Institute suggested that WalMart has a positive impact on small business. It argued that while Wal-Mart's low prices caused some existing businesses to close, the chain also created new opportunities for other small business, and so "the process of creative destruction unleashed by Wal-Mart has no statistically significant impact on the overall size of the small business sector in the United States." A Loyola University Chicago study which suggested that impact a Wal-Mart store has on a local business is correlated to its distance from that store. The leader of that study admits that this factor is stronger in smaller towns and doesn't apply to more urban areas saying "It'd be so tough to nail down what's up with Wal-Mart". For the concern of jobs, a study commissioned by Wal-Mart with consulting firm Global Insight, found that its stores' presence saves working families more than US$2,500 per year, while creating more than 210,000 jobs in the U.S. Alternately the Economic Policy Institute estimates that 196,000 jobs were lost between 2001-2006, and 68% of jobs lost were manufacturing jobs. Another study by Global Insight has found that Wal-Mart's growth between 1985 and 2004 resulted in food-at-home prices that were 9.1% lower and overall prices (as measured by the Consumer Price Index) that were 3.1% lower than they would otherwise have been. Another study at the University of Missouri found that a new store increases net retail employment in the county by 100 jobs in the short term, half of which disappear over five years as other retail establishments close. Studies of Wal-Mart show consumers benefit from lower costs. A 2005 Washington Post story reported that "Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion per year." A study in 2005 at Massachusetts Institute of Technology measured the effect on consumer welfare and found that the poorest segment of the population benefits the most from the existence of discount retailers. A 2004 paper by two professors at Pennsylvania State University found that U.S. counties with Wal-Mart stores suffered increased poverty compared with counties without Wal-Marts. They hypothesized, to explain their results: This could be due to the displacement of workers from higher-paid jobs in the retailers customers no longer choose to patronize, Wal-Mart providing less local charity than the replaced businesses, or a shrinking pool of local leadership and reduced social capital due to a reduced number of local independent businesses. Dr Raj Patel, author of Stuffed and Starved: Markets, Power and the Hidden Battle for the World Food System, said in a lecture at the University of Melbourne on 18 September 2007, that a study in Nebraska looked at two different Wal-Marts, the first of which had just arrived and was in the process of driving everyone else out of business but, to do that, they cut their prices to the bone, very, very low prices. In the other WalMart, they had successfully destroyed the local economy, there was a sort of economic crater with Wal-Mart in the middle; and, in that community, the prices were 17 per cent higher

37

Walmart serves customers and members more than 200 million times per week at more than 8,692 retail units under 55 different banners in 15 countries. With fiscal year 2010 sales of $405 billion, Walmart employs 2.1 million associates worldwide. A leader in sustainability, corporate philanthropy and employment opportunity, Walmart ranked first among retailers in Fortune Magazines 2010 Most Admired Companies survey.

Wal-Mart History -Walmart was founded in 1962, with the opening of the first Walmart discount store in Rogers, Ark. The company incorporated as Wal-Mart Stores, Inc., on Oct. 31, 1969. The company's

38

shares began trading on OTC markets in 1970 and were listed on the New York Stock Exchange two years later. The company grew to 276 stores in 11 states by the end of the decade. In 1983, the company opened its first Sams Club membership warehouse and in 1988 opened the first supercenter -now the companys dominant format -- featuring a complete grocery in addition to general merchandise. Walmart became an international company in 1991 when it opened its first Sam's Club near Mexico City.

Wal-Mart Time Line:

1960s 1962: On July 2, Sam Walton opens his first Walmart in Rogers, Ark. 1967: The Waltons now own 24 stores, ringing up $12.7 million in sales. 1969: The company officially incorporates as Wal-Mart Stores, Inc.

1970s 1970: Walmart becomes a publicly traded company on October 1. 1971: The companys first distribution center is opened in Bentonville, Ark. 1972: Walmart is listed on the New York Stock Exchange (ticker: WMT). Now with 51 stores, Walmart records sales of $78 million. 1975: Inspired by a visit to a Korean manufacturing facility, Sam Walton introduces the Walmart cheer. 1976: David Glass joins the company as EVP of finance. 1979: The Walmart Foundation is established.

1980s

39

1980: Walmart reaches $1 billion in annual sales, faster than any other company at that time. 1983: The first Sams Club opens in Midwest City, Okla. Walmart replaces cash registers with computerized point-of-sale systems, enabling fast and accurate checkout. 1987: The company installs the largest private satellite communica-tion system in the U.S., linking the companys operations through voice, data and video communication. 1988: The first supercenter opens, in Washington, Mo, combining general merchandise and a full-scale supermarket to provide a one-stop shopping convenience.

1990s 1991: Through a joint venture with Cifra, Walmart expands internationally, opening a Sams Club in Mexico City. 1992: While receiving the Medal of Freedom, Sam Walton articulates the company mission of saving people money so they can live better, shortly before passing away at 74. Rob Walton becomes chairman of the board. 1993: Walmart celebrates its first $1 billion sales week. 1994: Walmart expands into Canada with the purchase of 122 Woolco stores. 1996: Walmart opens its first stores in China. 1999: Walmart enters the United Kingdom with the acquisition of ASDA.

2000 and till now: 2000: H. Lee Scott, Jr. succeeds David Glass as CEO. 2002: For the first time, Walmart tops the Fortune 500 ranking of Americas largest companies. Walmart enters the Japanese market through its investment in Seiyu. 2005: Walmart takes a leading role in disaster relief, contributing $18 million and 2,450 truckloads of supplies to victims of hurricanes Katrina and Rita.

40

Walmart intensifies its sustainability commitment, announcing goals to create zero waste, use only sustain-able energy and sell products that sustain the environment. 2006: Walmart U.S. introduces its $4 generic drug prescription program. 2009: Walmart enters Chile with the acquisition of a majority stake in D&S S.A. Mike Duke succeeds Lee Scott as CEO. For the first time, Walmart exceeds $400 billion in sales. 2010: Walmart commits $2 billion to help end hunger in the United States and launches a global commitment to sustainable agriculture. Bharti Walmart, a joint venture, opens its first store in India. 2011: With the acquisition of MassMart, Walmart surpasses 10,000 retail units around the world. 2012: Walmart celebrates 50 years of helping customers save money and live better.

Wal-Mart Logo Timeline:

1962 1964
41

Sam Walton names his new stores WALMART.

The Walmart name was presented in just about any font/style available to the printer.

1964 1981 Also known as the "Frontier Font Logo," this was the first official and consistently used logo.

1968-1981 The Discount City mark was used in print advertising, on the uniforms/smocks, in-store signing, and other things. However, it was never used as building signage or in an annual report.

1981 - 1992 The logo was updated again in 1981.

1992 - 2008 The star was adopted as an update to the existing logo in early 1992.

2008 New logo adopted by Walmart Stores

42

50 years of performance

Earnings :
1962 -$30,000 2012-$15.8 billion

Net sales: Since 1962, -Walmart returned-$101 billion

to shareholders through dividends and share repurchases.

2012 2002 1992 1982 1972 1962

$443.9 billion $201.2 billion $43.9 billion $2.4 billion $78.0 million $250,000

Currently Wal-Mart:
We are a global retailer committed to growing our company by improving the standard of living for our customers and serving communities around the world. We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at every day low prices while fostering a culture that rewards and embraces mutual respect, integrity and diversity.

Today, WalMart Stores, Inc. is the worlds largest retailer with more than 1.8 million associates worldwide and nearly 6,500 stores and wholesale clubs across 15 countries. The "most admired retailer" according to FORTUNE magazine has just completed one of the best years in its history: Walmart generated more than $312.4 billion in global revenue in the fiscal year ended January 31,

43

2006, establishing a new record and an increase of 9.5 percent. The company earned almost $11.2 billion in net income in fiscal 2005. Guided by founder Sam Waltons passion for customer satisfaction and Every Day Low Prices, Wal-Marts four retail divisions offer a wide variety of quality merchandise to consumers around the world.

Walmart International Strategy: Meeting local needs and leveraging global resources International
Vision Statement: Saving people money to help them live better Purpose. . . Sam Walton said it best, If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life.

Walmart Purpose Saving people money to help them live better was the goal that Sam Walton envisioned when he opened the doors to the first Walmart more than 40 years ago. Today, this mission is more important than ever to our customers and members around the world. We work hard every day in all our markets to deliver on this promise. We operate with the same level of integrity and respect that Mr. Sam put in place. It is because of these values and culture that Walmart continues to make a difference in the lives of our customers, members and associates.. Ed. Note: Wal-Mart Stores, Inc. (NYSE: WMT) is the legal name of the corporation. The name "Walmart," expressed as one word and without punctuation, is a trademark of the company and is used analogously to describe the company and its stores. Use the legal name when it is necessary

44

to identify the legal entity, such as when reporting financial results, SEC filings, litigation or governance matters. Wal-Mart in India-In most countries, supermarket chains create and manage well-oiled supply chains to offer consumers lower prices and dampen inflationary trends. Inflation in India is touching decadehighs. But then its a fallacy that in India it is always about low price. Companies like Tata, Birla and Reliance have all attempted to enter food-and-grocery retailing in India with mixed success. Will Wal-Marts supply chain work in India?

Wal-Marts first store in India In December 2006, Wal-Mart Inc. believed that by the year 2015, 35% of Indias retail sales could be from chain stores . This was a radical increase from the prevailing 2%. In May 2009, Wal-Mart was ready to open its first store in India. The reason for Wal-Marts entry in India was clear The Indian middle class . The worlds biggest retailer had been silently working on its strategy for India for around two years. Mom-and-pop stores and traditional distribution networks dominated the $375 billion Indian retail market. Wal-Marts first outlet was set to launch in the city of Amritsar, Punjab in North India. The first store air-conditioned and built over 50,000 sq. ft. was on the outskirts of the city, Amritsar. The store employed 200 locals and was likely create 500 indirect jobs. In the first few weeks itself, the company had managed to sign on close to 35,000 members. However, the debut outlet was not to carry the familiar Wal-Mart brand. Did this mean Indian consumers could not benefit from Wal-Marts everyday low prices?

How Wal-Mart Works

Wal-Mart is more than just the world's largest retailer. It is an economic force, a cultural phenomenon and a lightning rod for controversy. It all started with a simple philosophy from founder Sam Walton: Offer shoppers lower prices than they get anywhere else. That basic strategy has shaped Wal-Mart's culture and driven the company's growth.

Corporation Image Gallery

45

Now that Wal-Mart is so huge, it has unprecedented power to shape labor markets globally and change the way entire industries operate. In this article, you will learn the key reasons that WalMart has been able to keep its prices low -- cutting-edge technology, a frugal corporate culture and a push to make suppliers sell merchandise at cheaper and cheaper prices. We'll also take a look at the scope of Wal-Mart's impact on the economy and the controversies surrounding Wal-Mart, as well as the future of the company. First, let's start with a little history. Sam Walton opened his first five-and-dime in 1950. His vision was to keep prices as low as possible. Even if his margins weren't as fat as competitors, he figured he could make up for that in volume. He was right. Sam Walton described WalMart's beginnings in his

In the early 1960s, Walton opened his first Wal-Mart in Rogers, autobiography. Arkansas. The company continued to grow, going public in 1970 and adding more stores every year. In 1990, Wal-Mart surpassed key rival Kmart in size. Two years later, it surpassed Sears. Walton continued to drive an old pickup truck and share budget-hotel rooms with colleagues on business trips, even after Wal-Mart made him very rich. He demanded that his employees also keep expenses to a bare minimum -- a mentality that is still at the heart of Wal-Mart culture more

46

than a decade after Walton's death. The company has continued to grow rapidly after his death in 1992 and now operates four retail divisions -- Wal-Mart Supercenters, Wal-Mart discount stores, Neighborhood Market stores and Sam's Club warehouses.

Image 2006 Walmartfacts.com A Wal-Mart Neighborhood Market To get a sense of just how big Wal-Mart is today, consider these facts:

Wal-Mart employs 1.6 million people. To give you an idea of just how many people that is, Idaho, the 39th most populous state, is home to 1.4 million people. Wal-Mart had sales of $312.43 billion in its most recent fiscal year, which ended January 31, 2006. By comparison, the second-largest retailer in the country, Home Depot, posted sales of $81.5 billion.

Wal-Mart has 6,200 retail outlets. In contrast, Home Depot has 2,040.

What made Wal-Mart so big, powerful and successful? Let's look at some of its strategies, including its sophisticated use of technology, its corporate culture of watching every expense, and above all else, its mission to keep prices low.

Basic Beliefs & Values

Three simple things that make us great:

47

Our unique culture has helped make Walmart one of the worlds most admired companies. Since Sam Walton opened the first Walmart in 1962, our culture has rested on three basic beliefs. We live out these beliefs every day in the way we serve our customers and each other. 1. Respect for the Individual Were hardworking, ordinary people whove teamed up to accomplish extraordinary things. While our backgrounds and personal beliefs are very different, we never take each other for granted. We encourage those around us to express their thoughts and ideas. We treat each other with dignity. This is the most basic way we show respect. 2. Service to our Customers Our customers are the reason were in business, so we should treat them that way. We offer quality merchandise at the lowest prices, and we do it with the best customer service possible. We look for every opportunity where we can exceed our customers expectations. Thats when were at our very best. 3. Striving for Excellence Were proud of our accomplishments but never satisfied. We constantly reach further to bring new ideas and goals to life. We model ourselves after Sam Walton, who was never satisfied until prices were as low as they could be. Or that a products quality was as high as customers deserved and expected. We always ask: Is this the best I can do? This demonstrates the passion we have for our business, for our customers, and for our communities.

Sundown Rule
Our founder Sam Walton created the Sundown Rule.

48

Its really just a twist on why put off until tomorrow what you can do today? Observing the Sundown Rule is very simple. Whether it's a request from a store across the country or a call from an associate down the hall, we do our very best to give our customers, and each other, same-day service. We take the Sundown Rule seriously. Its one of the many ways we provide superior customer service. When we show a sense of urgency, we show people we know their time is valuable. We care about their needs, and we want to help them quickly. When we observe the Sundown Rule with other associates (employees), it shows we respect each other. And were proud to be part of a team working together to get things done. The Sundown Rule in action: Jeff, a pharmacist at a Walmart store in Harrison, Arkansas, got a call at home one Sunday morning. He learned one of his diabetic customers had accidentally dropped her insulin down her garbage disposal. Knowing that she could be in grave danger without insulin, Jeff immediately rushed to the store, opened the pharmacy, and filled her prescription. This is just one of the many ways our associates honor the Sundown Rule every day.

10-Foot Rule
The 10-foot Rule is one of our secrets to customer service. During his many store visits, Sam Walton encouraged associates to take this pledge with him: "I promise that whenever I come within 10 feet of a customer, I will look him in the eye, greet him, and ask if I can help him."

49

The 10-foot Rule was something Sam practiced his entire life. "I learned early on that one of the secrets to campus leadership was the simplest thing of all: Speak to people coming down the sidewalk before they speak to you, Sam once said. I would always look ahead and speak to the person coming toward me. If I knew them, I would call them by name, but even if I didn't, I would still speak to them. Before long, I probably knew more students than anybody in the university, and they recognized me and considered me their friend. I ran for every office that came along." Weve kept Sams promise. Not only was Sam elected to nearly all of those offices at the University of Missouri in Columbia, but the 10-foot Rule helped Sam build a successful business, too. Today, in stores around the world, associates put Sams rule into practice every day. From the greeters at the front doors, to associates throughout the store, and the friendly smile at the checkout lane, The 10-foot Rule is one of the things that makes Wal-Mart great.

Open Door
The door is always open.At Wal-Mart, our management believes open communication is critical to understanding and meeting our associates and our customers needs. Through our open door policy, associates (employees) are free to share suggestions, ideas, and voice concerns. Whether its help with a problem, guidance or direction, or simply getting an answer to a question. Associates can trust and rely on the open door.

50

This means that managers will treat all discussions fairly, with an open mind, and without bias. Theyll maintain complete confidentially, whenever its possible. Theyll work with you to mutually resolve any issues or problems you may have. Its one of the most important parts of our culture. Were all part of the same family the Walmart family. And like family, we care. The open door has helped solve some of our biggest problems, and its generated some of our greatest ideas.

Servant Leadership
Effective leaders dont lead from behind a desk. It's more important than ever that we develop leaders who are servants, who listen to their partners their associates in a way that creates wonderful morale to help the whole team accomplish an overall goal, Sam Walton, our founder said that. Sam believed in servant leadership, and so do we to this day. Echoing Sams leadership philosophy, our leaders are out on the floor with their associates. Whether in a Wal-Mart store, Sams Club, Distribution Center, the Home Office, or at any other facility around the world, our teams can expect their managers to be there, serving right alongside them. Its what makes us great. Its what makes us a team

Teamwork
Sam Walton believed its our teamwork that makes us special.

51

"What makes ordinary people do extraordinary things?Sam Walton, our founder once asked. Aren't we a group of ordinary folks? We really are. And I think we, together as a team, have done extraordinary things. We've all grown, we've all accomplished much more than any of us ever thought that we could." We believe in the power of teamwork, too. As our business grows and the pace of modern life quickens, Sams philosophy of teamwork has become even more important. Our ability to work together affects the quality of service our customers receive. To give the very best service to our customers, and to each other, we rely on guidelines that made our culture great. And make us proud to be a member of the Wal-Mart family:

Guiding Principles:

Always act with integrity. Lead with integrity, and expect others to work with integrity. Follow the law at all times. Be honest and fair. Respect and encourage diversity, and never discriminate against anyone. Work, actions, and relationships outside of your position with the company should be free of any conflicts of interest.

Ask your manager or the Global Ethics office for help if you have any questions about our Statement of Ethics, or if you face an ethical problem.

52

Inform the Global Ethics office about any suspected violations of our Statement of Ethics. Reveal and report all information truthfully, without manipulation or misrepresentation. Cooperate with and maintain the private nature of any investigation of a possible ethics violation.

When involved in an ethics investigation, you should reveal and report all information truthfully. You should present all the facts you are aware of without personal opinion, bias, or judgment.

Sam Waltons Wal-Mart Philosophy

Sam Walton built Americas vast chain of Wal-Mart stores on the philosophies of excellence in the workplace, customer services, and always having the lowest prices. Walton, affectionately known to his staff as Mr. Sam, was a true entrepreneur. He established Wal-Mart in 1962 at the age of 44. He died in 1992, having seen his company become Americas biggest retailer. Walton believed that each Wal-Mart store should reflect the values of its customers and support the vision they held for their community. Today, Wal-Marts Community Outreach Programmes underwrite college scholarships, raise funds for local childrens hospitals, provide money and

53

manpower for fund raisers, and help educate the public about recycling and saving the environment. Wal-Mart even helps American towns and cities build up their local industries by providing industrial development grants. What was Sam Waltons secret to success?

Rule 1: Commit to your business Believe in it more than anybody else. I think I overcame every single one of my personal shortcomings by the sheer passion i brought to my work. I dont know if youre born with this kind of passion, or if you can learn it. But I do know you need it. If you love your work, you will be out there every day trying to it the best you possibly can, and pretty soon everybody around you will catch the passion from you - like a fever.

Rule 2: Share your profits with all your associates Treat them as partners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations. Remain a corporation and retain control if you like, but behave as a servant leader in a partnership. Encourage your associates to hold a stake in the company. Offer discounted stock, and grant them stock for their retirement. Its the single best thing we ever did.

Rule 3: Motivate your partners Money and ownership alone are not enough. Constantly, day by day, think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition, and then keep score. Make bets with outrageous payoffs. If things get stale, cross-pollinate; have

54

managers switch jobs with one another to stay challenged. Keep everybody guessing as to what your next trick is going to be. Dont become too predictable.

Rule 4: Communicate everything you possibly can to your partners The more they know, the more they will understand. The more they understand, the more they will care. Once they care, there is no stopping them. If you dont trust your associates to know what is going on, they will know you dont really consider them partners. Information is power, and the gain you get from empowering your associates more than offsets the risk of information your competitors.

Rule 5: Appreciate everything your associates do for the business A paycheck and a stock option will buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do for them. We like to hear it often, and especially when we have done something we are really proud of. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They are absolutely free - and worth a fortune.

Rule 6: Celebrate your successes Find some humor in your failures. Dont take yourself so seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm - always. When all else fails, put on a costume and sing a silly song. Then make everybody sing with you. Dont do a hula on Wall Street. Its been done. Think up your own stunt. All of this is more important, and more fun, than you think, and it really fools the competition. Why should we take those cornballs at WalMart seriously?

55

Rule 7: Listen to everyone in your company Figure out ways to get them talking. The folks on the front lines - the ones who actually talk to the customer - are the only ones who really know what is going on out there. You did better find out what they know. This really is what total quality is all about. To push responsibility down in your organization, and to force good ideas to bubble up within it, you must listen to what your associates are trying to tell you.

Rule 8: Exceed your customers expectations If you do, they will come back over and over. Give them what they want - and a little more. Let them know you appreciate them. Make good on all your mistakes, and dont make excuses apologies. Stand behind everything you do. The two most important words I ever wrote were on that first Wal-Mart sign, Satisfaction Guaranteed. They are still up there, and they have made all the difference.

Rule 9: Control your expenses better than your competition This is where you can always find the competitive advantage. For 25 years running - long before Wal-Mart was known as the nations largest retailer - we ranked number one in our industry for the lowest ratio of expenses to sales. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you are too difficult.

Rule 10: Swim upstream Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there is a good chance you can find your niche by going in exactly the opposite direction. But be

56

prepared for a lot of folks to wave you down and tell you you are headed the wrong way. I guess in all my years, what I heard more often than anything else was: a town of less than 50,000 population cannot support a discount store for very long.

Wal-Mart Strategy-Let's start with technology. Wal-Mart pushed the retail industry to establish the universal bar code, which forced manufacturers to adopt common labeling. The bar allowed retailers to generate all kinds of information -- creating a subtle shift of power from manufacturers to retailers. Wal-Mart became especially good at exploiting the information behind the bar code and is considered a pioneer in developing sophisticated technology to track its inventory and cut the fat out of its supply chain. Recently, Wal-Mart became the first major retailer to demand manufacturers use radio frequency identification technology (RFID). The technology uses radio frequencies to transmit data stored on small tags attached to pallets or individual products. RFID tags hold significantly more data than bar codes. During the first eight months of 2005, Wal-Mart experienced a 16 percent drop in out-of-stock merchandise at its RFID-equipped stores, according to a University of Arkansas study (as reported in Fortune Small Business magazine).

57

The frugal culture, established by Walton, also plays into WalMart's success. The company has been criticized for the relatively meager wages and health care plans that it offers to rank-and-file employees. It has also been accused of demanding that hourly workers put in overtime without pay. Store managers often work more than 70 hours per week. They are are expected to pinch pennies wherever they can, even on things like the heating and cooling of the stores. In the winter, stores are kept at 70 degrees Fahrenheit, and in the summer, they stay at 73. Image 2006 Walmartfacts.com This culture is also present at the company's headquarters. Wal- Wal-Mart's headquarters in Mart is headquartered in Bentonville, Arkansas, instead of an Bentonville, AR expensive city like New York. The building is drab and dull. You won't catch executives in limousines and you won't see them dragging into work at 9:30 a.m. Executives fly coach and often share hotel rooms with colleagues. They work long hours, typically arriving at work before 6:30 a.m. and working half-days on Saturdays. The central goal of Wal-Mart is to keep retail prices low -- and the company has been very successful at this. Experts estimate that Wal-Mart saves shoppers at least 15 percent on a typical cart of groceries. Everything -- including the technology and corporate culture -- feeds into that ultimate goal of delivering the lowest prices possible. Wal-Mart also pushes its suppliers, some say relentlessly, to cut prices. In "The Wal-Mart Effect," author Charles Fishman discusses how the price of a four-pack of GE light bulbs decreased from $2.19 to 88 cents during a five-year period. In a 2003 Los Angeles Times article (part of a Pulitzer Prize-winning series about Wal-Mart, tells of a Wal-Mart buyer named Celia Clancy, who was in charge of clothing and demanded that each supplier either lower the price or increase the quality every year on every item. This philosophy is known as "plus one."

Point of sale--

58

Point of sale (POS) or checkout is the location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt

Web based POS (post 2000s) Web based POS software can be run on any computer with an Internet connection and supported browser, without additional software. The POS software is hosted on secure servers in multiple data centers with real-time backups The retailing industry is one of the predominant users of POS terminals. A Retail Point of Sales system typically includes a computer, monitor, cash drawer, receipt printer, customer display and a barcode scanner. It can also include a weight scale, integrated credit card processing system, a signature capture device and a customer pin pad device. More and more POS monitors use touch-screen technology for ease of use and a computer is built in to the monitor chassis for what is referred to as an all-in-one unit. All-in-one POS units save valuable counter space for the retailer. The POS system software can typically handle a myriad of customer based functions such as sales, returns, exchanges, layaways, gift cards, gift registries, customer loyalty programs, BOGO (buy one get one), quantity discounts and much more. POS software can also allow for functions such as pre-planned promotional sales, manufacturer coupon validation, foreign currency handling and multiple payment types. The POS unit handles the sales to the consumer but it is only one part of the entire POS system used in a retail business. Back-office computers typically handle other functions of the POS system such as inventory control, purchasing, receiving and transferring of products to and from other locations. Other typical functions of a POS system are to store sales information for reporting purposes, sales trends and cost/price/profit analysis. Customer information may be stored for receivables management, marketing purposes and specific buying analysis. Many retail

59

POS systems include an accounting interface that feeds sales and cost of goods information to independent accounting applications. Supply chain management of Wal-MartSupply Chain Management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain). Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."

60

61

The supply chain management practices at Wal-Mart, the leading retailer in the world. The case explains in detail how Wal-Mart managed various components of the supply chain including procurement, distribution, logistics and inventory management. It covers how the use of innovative IT tools has helped the company in improving the efficiency of supply chain. The case concludes with a discussion on the benefits reaped by Wal-Mart due to its efficient and effective supply chain management system.

The Retail Supply Chain Network of the FutureMulti-Channel World Means Retail Supply Chains Must Rapidly Evolve to Optimize Inventories and Support Complex Logistics Flows In the first part of this series, we looked at how high-performance retailers are unifying operations and collaborating internally across functional silos to speed trend-right merchandise to market. In part 2 of this four-part series, we expand on that concept by examining the Supply Chain Network of the future. The life of a Supply Chain professional was so much easier a generation ago when everyone shopped at the mall. You knew where you had to go to get what you wanted, and there was only one place to go to get it. Al Gore hadnt invented the Internet and Wal-Mart wasnt WAL-MART, so your competition was generally well-known and predictable. No surprise then that the supply chains of the past were constructed to service the predictability of one-channel operations. Butthe shopper of the 21st Century demands more. If her local retailer doesnt have the item she wants, she'll drive to a nearby competitor, or call one of the dozens of catalog retailers. Even easier, shell go online while sitting by the fire in the comfort of her home. If it doesnt fit, no worries. The online retailer offers free shipping and no hassle returns. In response, retailers became multi-channel, creating work-arounds to handle the new demands. While this was workable initially, problems ensued as volumes grew.

62

Retailers began to feel like George Jetson on his automatic dog walker screaming, Stop this crazy thing! With networks out of balance, shipments were often late, orders were missed, customer complaints grew and costs steadily rose.

Lead With Inventory Strategy Retailers face a daunting challenge in retooling their supply chains to successfully service complex, multi-channel operations featuring increasingly localized store assortments. Tackling this challenge requires a bit of backwards thinking. Retailers must first determine the optimal inventory strategy for each item in their assortment and only then configure network infrastructure to support these complex flows. If not well orchestrated, independent actions taken by people in different departments can combine to create a perfect storm - where inventory spirals out of control, choking the network and impacting service and bottom line performance. In many cases, its very hard to see the incremental inventory creep until its too late to react - forcing business unit managers to ask, "How did we get this bad?" The supply chain of the future is designed on the foundation of a comprehensive, enterprise-wide inventory strategy in which representatives of key functional areas come together to critically evaluate all factors impacting inventory performance. In developing this inventory strategy, a number of questions are answered related to how the intersection of demand variability and volume relate to optimal flow path. For example, in the diagram below, companies will probably want a different inventory strategy for an item in the upper left quadrant as opposed to those in the lower right quadrant.

63

The answers to these questions will require a great deal of interaction across departments. Issues related to source of supply, transportation pipeline, product packaging, service strategy and other factors are evaluated by a team including Merchandising, Product Development and Sourcing, Distribution and Transportation, Store Operations and IT. Using the diagram above as the basis for discussion, for example, an inventory strategy might be for items in the upper left to be replenished as full cases directly from the vendor due to the high volumes and consistent demand, while a better option for an item in the lower right may be an assortment picked specifically for that store based on sales. The resulting inventory strategy paves the way for the tactical development and execution of an inventory optimization plan incorporating a number of key elements, as shown in the chart below.

64

6 Areas Impacting Executing Inventory Optimization-

Implementing the Right Supply Chain Network As recently as the early 90s, most retail DCs received bulk merchandise from vendors and did all the store break-down and processing in cavernous, labor-filled facilities that delayed store shipment and added significant cost. Those days are over, with retailers driving vendors to ship floor ready merchandise that is predominantly cross-docked through more mechanized and efficient retail DCs. But even as the retailers DC has become more efficient, it has stayed focused predominantly on optimizing the single flow from vendor through DC to store. The next horizon in supply chain network design will require retailers to rethink infrastructure that is capable of supporting a combination of flows required to best support a comprehensive, enterprise-wide inventory strategy. These flows include:

DC Bypass Vendor shipment directly to customer (store or individual) Cross Dock - Dock-to-dock handling of pre-allocated floor ready receipts DC Hold & Flow Initial store set is cross docked with replenishment held at DC Replenishment All merchandise is received and held in the DC for pull-based store replenishment.

65

These are just the most obvious flows. Including the decisions a retailer must make about inhouse vs. outsourced operations for each channel, you begin to see the complexity of designing a supply chain network in todays environment. To illustrate the impact of re-evaluating inventory strategy, KSA's work with one retailer resulted in replacing a traditional DC process with DC Bypass for a critical category of merchandise. This retailer cut its source-to-store time by more than 50% by implementing a new flow allowing merchandise to travel from a vendors overseas plant, directly to the retailers store. This pipeline reduction drove significant inventory savings while allowing the merchant additional time to ensure that product being designed and manufactured represents the best fit with current customer demands.

Merchandising of Wal-MartMerchandising is the methods, practices, and operations used to promote and sustain certain categories of commercial activity. In the broadest sense, merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase.

Promotional merchandising In retail commerce, visual display merchandising means maximizing merchandise sales using product design, selection, packaging, pricing, and display that stimulates consumers to spend more. This includes disciplines in pricing and discounting, physical presentation of products and displays, and the decisions about which products should be presented to which customers at what time.This annual cycle of merchandising differs between countries and even within them, particularly relating to cultural customs like holidays, and seasonal issues like climate and local sporting and recreation. In the United States for example, the basic retail cycle begins in early January with merchandise for Valentine's Day, which is not until mid-February. Following this,

66

Easter is the major holiday, while springtime clothing and garden-related merchandise is already arriving at stores, often as early as mid-winter (toward the beginning of this section, St. Patrick's Day merchandise, including green items and products pertaining to Irish culture, is also promoted). Mothers Day and Fathers Day are next, with graduation gifts (typically small consumer electronics like digital cameras) often being marketed as "dads and grads" in June (though most college semesters end in May; the grads portion usually refers to high school graduation, which ends one to two weeks after Father's Day in many U.S. states). Summer merchandise is next, including patriotic-themed products with the American flag, out by Memorial Day in preparation for Independence Day (with Flag Day in between). By July, backto-school is on the shelves and autumn merchandise is already arriving, and at some arts and crafts stores, Christmas decorations. (Often, a Christmas in July celebration is held around this time.) The back-to-school market is promoted heavily in August, a time when there are no holidays to promote. By September, particularly after Labor Day, the summer merchandise is on final closeout and overstock of school supplies is marked-down some as well, and Halloween (and often even more of the Christmas) merchandise is appearing. As the Halloween decorations and costumes dwindle in October, Christmas is already being pushed on consumers, and by the day after Halloween retailers are going full-force with advertising, even though the "official" season doesn't start until the day after Thanksgiving. Christmas clearance sales now begin even before Christmas at most retailers, though they usually begin on the day after Christmas and continue on at least until New Year's Day but sometimes as far out as February. Merchandising also varies within retail chains, where stores in places like Buffalo might carry snowblowers, while stores in Florida and southern California might instead carry beach clothing and barbecue grills all year. Coastal-area stores might carry water skiing equipment, while ones near mountain ranges would likely have snow skiing and snowboarding gear if there are ski areas nearby. Does keeping your finger on the pulse of a global operation sound enticing? Do you like to keep up on the newest products and trends? Do you want a career in which you make recommendations that may have a ripple effect across the globe? Then Walmarts merchandising department is the place to make it happen.

67

Our customers expect the best value for their money, and our merchandising group delivers. Walmart buyers attend merchandise shows, research markets and shop the competition to find out what customers want and need from their local Walmart stores, while always keeping in mind our Every Day Low Pricing philosophy. In a career with Walmart merchandising, you will work with a variety of departments and develop a true understanding of the Walmart business. You will also partner with suppliers, drawing on your own negotiation skills while learning about the ever-changing retail market.

Walmart Marketing Strategies-Wal-Marts marketing strategies are based upon a set of two main objectives that have guided the firm through their growth years. The customer is featured in the first objective; Customers would be provided what they want, when they want it, all at a value. Team spirit was emphasized in the second objective, Treating each other as we would hope to be treated acknowledging our total dependency on our associate partners to sustain our success. I agree with Wal-Marts two main objectives. The customer objective includes giving the customer what they want at a reasonable value. The second objective covers the foundation of the company; its employees. Employees are the basis for success of the company and drive the day-to-day operations. Wal-Marts employees, feeling like associate partners, gives them a feeling of empowerment and pride that drives the companys culture. Wal-Mart has launched successful marketing strategies that considered factors like social and environmental causes. American companies were soon to follow suit with superstores opening on every corner. By the early 1990"tms, the discount department store industry had changed a number of times and was thought to have reached its maturity. In 1995, Wal-Mart management felt the high consumer debt caused shoppers to reduce or defer their spending. By 1998, the country had returned to prosperity, unemployment was low, total income was relatively high and interest rates were stable. There were many changes to the external environment of Wal-Mart in the 1980"tms and 1990"tms. Wal-Mart was faced with many of its competitors restructuring. Sears was going to focus on 5 areas; appliances, home fashions, tools, kids and electronics. When you look at the continuous increasing financial summary of Wal-Mart, I can only see continuous profits for the

68

firm. Wal-Mart seemed to make all the right moves in the decade of economic uncertainty. If Wal-Mart continues to be aware of its internal and external environments, the financial success of the company will continue to grow. By 2000, the United States had experienced one of the longest periods of economic expansion. After a review of Wal-Mart"tms financial performance in the 1990"tms, I can only say "Wow". Other firms began carrying more fashionable merchandise and more attractive facilities. The products were better in 3 respects; use, manufacturing and disposal.

Walmart Online Shopping Use our Best Online Shopping Websites to do your Wal Mart online shopping. Here you can do your shopping at our Online Shopping Directory. Visit Amazon. com.html, find online shops and enjoy shopping without ever leaving home. Our discount shopping sites give you easy access to the most popular online shopping websites, and make APO and FPO military web shopping (and shipping) easy. Our Online Shopping Website site has become one of the fastest growing websites on the internet today. Millions of people now use an online shopping directory regularly, and most retailers from Wal-mart to Ace Hardware have websites where you can do your online shopping and purchase their products. While there are a lot of sites to choose from, Amazon.com.html and Walmart.com.html have become two of the most popular internet shopping sites. Why has online shopping become so popular? The most important reason is that internet security has improved tremendously. You can do your shopping online today and feel secure enough to use your credit card without fear of having your personal information stolen. Security may be the main reason that computer shopping is popular today, but there are many other reasons to shop online. You can purchase clothes, tonights dinner, household appliances, the family car, or a trip to Europe, all from the convenience of your home or office. You can easily do your comparison shopping at our best online shopping websites without ever leaving home, and you can save money at online shopping sites because they offer many online only specials.

69

Once you begin shopping online you will wonder how you ever managed before. You can do comparison pricing to find the best buys online, place your order, and usually have it shipped overnight, all in a matter of minutes. Not only have you saved a trip to the store, but you will have saved money on your purchases. Most sites are nothing more than online catalogs. You browse for your merchandise, or you can use the search feature to find specific items. Once you find your item, simply add it to your shopping cart and continue on. When youre done, you check out just as if you were in your favorite store. While every site is a little bit different, you will find most are similar. They will email you a confirmation of your order, approximate delivery time, and a tracking number instantly. Since online shopping has become so popular, you will find that most online stores place a great deal of emphasis on customer service. They want you to enjoy your experience, and come back again.

Walmart Forges Partnerships With Indian Manufacturers -Its been an eventful year for Raj Jain, president of Walmart India. When the American retail giant Walmart decided to enter India, some feared that farmers and small businesses would be hit hard. Over the past year, Jain has worked to change that perception and is now looking forward to expanding India operations. In an exclusive interview with Desi Talk, Jain, who was in New York recently, speaks about a year of transformation and future plans for Walmart India. Excerpts: Q: How did you address Indian concerns about Walmarts impact on small stores and farmers? My own view is all the apprehensions were based on lack of information and understanding of what Walmart does and what modern wholesaling and retailing can do for India. So, the first year we spent a lot of time explaining to people what is our business model, what we intend to do and,

70

contrary to hurt, actually benefit the three constituents: the small farmer, the small and medium manufacturers and the small kirana stores. We would procure directly from small farmers fruits, vegetables, food grains, etc., at a price equal to or better than the mandi price. So we give a quality incentive to our farmers, which gives them a remuneration which is better, we pick up the produce from their farm gate, we wait in front of them and we pay them the same day. So if you put all that together, they are getting a much better deal than they were getting in the marketplace. And we are working with more than 600 farmers in Punjab. We work with almost 500 small and medium manufacturers. They make private label products for us and also they make their own branded products and supply to us. We helped some of these people to get distribution within Punjab where we have stores. We are now going outside Punjab, we are going to open a store in Kota in Rajasthan and we have taken some of their products to those places. We helped them in the area of technology in improving food hygiene and so on so that the products come up to international standards. And very recently we showcased 30-odd suppliers to Walmart buyers across the world of Indian ethnic food. You know, the chutneys, pickles, and so on and so forth to enable them to get access to the global markets. You know, we have almost 1 lakh (100,000) members now, kirana stores, listed with us in our four stores, and they are buying everyday from us and from the feedback we get from them, they are seeing our prices are lower, our availability is better, our quality is better and they get very fair transparent treatment. So our initial feedback from our customers has been very positive.

Inventory Management ReviewWal-Mart Increases its Supplier's Inventory Levels

71

With all the Just-In-Time talk and knowledge regarding better management and understanding of inventory, you'd think that average levels would be decreasing. Well, I still think that at a wellmanaged company, they should be, but Susan K. Lacefield, accociate editor of Logistics Management, wrote a pretty interesting article that found otherwise. In a poll of her magazine's internet readers, she found that over 60% of companies expect to see inventory levels rising over the next year. The specifics regarding why are some pretty interesting reasons. Most notably, Wal-Mart's JIT efforts are leaving their suppliers with more inventory. If you think about this, it makes a lot of sense. Wal-Mart does not want to hold inventory. At the same time, they do not want backorders. The only way to do this is to be able to replenish their stock at a moment's notice. So what does this do to their suppliers? According to Logistics Management, it shoots supplier's inventories straight up. The demands that Wal-Mart places on its suppliers are incredible because of the power Wal-Mart places on its suppliers. Personally, I'm waiting for the day when Wal-Mart's suppliers form a massive supplier's union (sounds like collusion to me), but until then, good for Wal-Mart for leveraging what it can out of its suppliers. Also in the mean time, suppliers are forced to hold incredible safety stocks to make sure they can satisfy Wal- Mart's demands. Basically, the suppliers don't have a choice in the matter. Wal-Mart's business, even with the demands on service, is too good to pass up. But, Wal-Mart is not about to have a stockout due to some supplier's inability to provide a 99% service level. Wal-Mart, like many huge companies, will not wait. Many companies are: requiring shorter lead times even as more companies implement 'zero tolerance' policies for late shipments. Zero tolerance is a hell of a statement from a company that knows service level. To provide even a 97% service level compared to a 95% service can result in a huge increase in inventory. Zerotolerance is wild. In fact it is actually impossible. No matter what a company holds in inventory,

72

there is always the possibility that Wal-Mart could order one more than that. Couple this with a shorter lead time to Wal-Mart and inventories are stagerring. Not only does Wal-Mart demand what they want when they want it, but also, as one Logtistics Management survey respondant said regarding why he has to hold more inventory:

Wal-Mart is ordering fewer cases more frequentlyFor a company, this means that they can either produce smaller batches, or hold onto more inventory. Because if a company cannot produce less and faster, than they have to produce a large amount and then, instead of producing a large amount and getting rid of it all at once, they have to get rid of it slowly over time, which increases average inventory. While Wal-Mart may be getting the good end of the deal, one thing is for sure, there's a reason suppiers put up with these demands, and it's not because the business with Wal-Mart is bad. If you would like more informatin regarding this article, Shippers are seeing inventory rising, it can found in the October 2005 Logistics Management Vol. 44, No. 10 issue. Additionally, feel free to leave comments with a question and your email address.

Wal-Mart's Representation Without Taxation The Wall Street Journal reports that Wal-Mart had asked the Ernst and Young consulting firm to help organize their real estate holdings to minimize property taxes where they do business. This approach has worked pretty well for some years, but Googling "wal-mart real estate tax" brings up a number of lawsuits and lesser disputes between Wal-Mart and state authorities. It probably costs less initially for Wal-Mart to hire a consulting firm to take advantage of existing law than to bribe--, oops, make campaign contributions, to persuade politicians to change the law in its favor. Now that a number of states have noticed that a number of noisy voters don't like Wal-Mart, their political leaders are filing suit to get Wal-Mart to pay more taxes.

73

Wal-Mart doesn't like paying taxes any more than you or I do, but, unlike us, Wal-Mart has the money to do something about it. Will making generous campaign contributions to state politicians work for Wal-Mart? Do politicians want to get reelected? To ask the question is to answer it. The original definition of an "honest politician" is a politician who stays bribed. Wal-Mart's money will work to Wal-Mart's advantage, just as rich people's contributions to the Ways and Means Committee of the US Congress have worked to their advantage since the committee was formed. Paying politicians to cut their taxes gives Wal-Mart representation without taxation. Government never takes a pay cut; they'll get more money from you and me by raising our taxes. Wal-Mart pays for representation without taxation; the rest of us -- who can't pay -- get taxation without representation. Many articles make it sound like Wal-Mart conspires against us taxpayers, but don't forget that Wal-Mart doesn't pay real estate taxes, we customers pay Wal-Mart's real estate taxes. Wal-Mart is profitable, it takes in more money than it pays out. The money Wal-Mart gets from we the people who buy from them pays not only the cost of the goods we buy; it pays their electric bill, their wage bill, their property tax bill, their health-care bill and every other bill they pay, including campaign contributions and lawyer's fees. If taxes, legal fees, consulting fees, or campaign contributions go up, they'll raise prices to match. It's we who pay Wal-Mart's taxes, not Wal-Mart. While we're thinking about who really pays Wal-Mart's bills, think about Wal-bangers who say that the government subsidizes Wal-Mart because a lot of Wal-Mart employees get government health benefits. Most low-level Wal-Mart employees have limited skills, skilled, smart ones move up as Wal-Mart grows. If they didn't work at Wal-Mart, a lot of Wal-Mart employees would get welfare and food stamps in addition to health care. The truth is, Wal-Mart subsidizes the government because their employees don't collect welfare or unemployment, which is what they would otherwise be doing. Nobody takes an entry-level job at Wal-Mart if they can find anything else; the only other recourse for most of them is not to work at all.

74

Wal-bangers who want Wal-Mart to pay their employees more in either higher wages or more expensive health care benefits are really saying that you and I should pay more when we shop at Wal-Mart. Wal-bangers know that won't sell so they lie to us and say that better health benefits won't cost us anything. Have we forgotten that the cost of health care would have sunk GM, Ford, and Chrysler if they hadn't shifted the costs to the union? Wal-Mart's low prices save us a lot of money, do we really want Wal-Mart going the way of Detroit? Loyalty program of Wal-Mart Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior behavior which is potentially of benefit to the firm.

Various loyalty cards In marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card or debit card, that identifies the card holder as a member in a loyalty program. Loyalty cards are a system of the loyalty business model. In the United Kingdom it is typically called a loyalty card, in Canada a rewards card or a points card, and in the United States either a discount card, a club card or a rewards card. Cards typically have a barcode or magstripe that can be easily scanned,

75

and some are even chip cards. Small keyring cards (also known as keytags) which serve as key fobs are often used for convenience in carrying and ease of access. A retail establishment or a retail group may issue a loyalty card to a consumer who can then use it as a form of identification when dealing with that retailer. By presenting the card, the purchaser is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases. Hence, the card is the visible means of implementing a type of what economists call a two-part tariff. The card issuer requests or requires customers seeking the issuance of a loyalty card to provide a usually minimal amount of identifying or demographic data, such as name and address. Application forms usually entail agreements by the store concerning customer privacy, typically non-disclosure (by the store) of non-aggregate data about customers. The store one might expect uses aggregate data internally (and sometimes externally) as part of its marketing research. These cards can be used to determine, for example, a given customer's favorite brand of beer, or whether she is a vegetarian. Where a customer has provided sufficient identifying information, the loyalty card may also be used to access such information to expedite verification during receipt of cheques or dispensing of medical prescription preparations, or for other membership privileges (e.g., access to a club lounge in airports, using a frequent flyer card).

What Wal-Mart Knows About Customers' HabitsPlenty of retailers collect data about their stores and their shoppers, and many use the information to try to improve sales. Target Stores, for example, introduced a branded Visa card in 2001 and has used it, along with an arsenal of gadgetry, to gather data ever since. But Wal-Mart amasses more data about the products it sells and its shoppers' buying habits than anyone else, so much so that some privacy advocates worry about potential for abuse.

76

With 3,600 stores in the United States and roughly 100 million customers walking through the doors each week, Wal-Mart has access to information about a broad slice of America - from individual Social Security and driver's license numbers to geographic proclivities for Mallomars, or lipsticks, or jugs of antifreeze. The data are gathered item by item at the checkout aisle, then recorded, mapped and updated by store, by state, by region. By its own count, Wal-Mart has 460 terabytes of data stored on Teradata mainframes, made by NCR, at its Bentonville headquarters. To put that in perspective, the Internet has less than half as much data, according to experts. Information about products, and often about customers, is most often obtained at checkout scanners. Wireless hand-held units, operated by clerks and managers, gather more inventory data. In most cases, such detail is stored for indefinite lengths of time. Sometimes it is divided into categories or mapped across computer models, and it is increasingly being used to answer discount retailing's rabbinical questions, like how many cashiers are needed during certain hours at a particular store. All of the data are precious to Wal-Mart. The information forms the basis of the sales meetings the company holds every Saturday, and it is shot across desktops throughout its headquarters and into the places where it does business around the world. Wal-Mart shares some information with its suppliers - a company like Kraft, for example, can tap into a private extranet, called Retail Link, to see how well its products are selling. But for the most part, Wal-Mart hoards its information obsessively. It also takes pains to keep the information secret. Some of the systems it uses are custom-built and designed by its own employees, the better to keep competitors off the trail. Companies that sell equipment and software to Wal-Mart are bound by nondisclosure agreements. Three years ago, Wal-Mart summarily announced that it would no longer share its sales data with outside companies, like Information Resources Inc. and ACNielsen, which had paid Wal-Mart for the information and then sold it to other retailers.

77

"When you look at their behavior, you can tell that Wal-Mart considers data to be a top priority," said Christine Overby, a senior analyst for consumer markets at Forrester Research. Over the years, she said, Wal-Mart executives have spent handsomely for their systems, paying $4 billion in 1991 to create Retail Link and signing onto innovations like bar codes and electronic data interchange, a forerunner of the Internet, well ahead of the pack. Wal-Mart is also driving manufacturers to invest in radio frequency identification. By next October, the company will require its biggest suppliers to tag shipments to some of its distribution centers with tiny transmitters that would eventually let Wal-Mart track every item that it sells. With so much data at Wal-Mart's corporate fingertips, what are the risks to consumers? Most have no clue that their habits are monitored to such an extent. There are no signs - like the ones for Wal-Mart's anti-shoplifting cameras - advising customers that information is being collected and stored. And there is no giveback: Wal-Mart doesn't use loyalty cards and rarely offers promotions based on past purchases. It is aware, however, that shoppers are concerned about privacy. On its Web site, Wal-Mart posts a privacy policy that states, in part: "We take reasonable steps to protect your personal information. We maintain reasonable physical, technical and procedural measures to limit access to personal information to authorized individuals with appropriate purposes." NOT everyone agrees. "People don't know that Wal-Mart is capturing information about who they are and what they bought, but they are also capable of capturing a huge amount of outside information about them that has nothing to do with their grocery purchases," said Katherine Albright, the founder and director of Caspian, a consumer advocacy group concerned with privacy issues. "They can find out your mortgage amounts, your court dates, your driving record, your creditworthiness." One source of information can be a credit card or a debit card, Ms. Albright said. Wal-Mart shoppers increasingly use the cards to pay for purchases, particularly in the better-heeled neighborhoods where the company has been building stores recently.

78

Some companies specialize in what is known as data enhancement, in which a customer's name and address, or a telephone number, can open the door to additional information. "If Wal-Mart had a customer database and wanted to start e-mailing their customers, we could append their email addresses," said Sarah Stansberry, director of marketing for AccuData America, a company based in Fort Myers, Fla., that specializes in such services but does not use credit card records. With e-mail addresses, AccuData can track names and home addresses, she added. Other information follows: "We can access what they paid for their house, and their mortgage," though not driving records. The company has not done any work for Wal-Mart, she said. Ms. Dillman said that she did not think Wal-Mart had ever tried to squeeze data from credit cards to learn more about customers' buying habits. Indeed, she said, it wouldn't be necessary. "We can do that without the credit card information," she said. "We can look at what's happening in the market, and look at what's happening in other markets that are similar." WAL-MART uses its mountain of data to push for greater efficiency at all levels of its operations, from the front of the store, where products are stocked based on expected demand, to the back, where details about a manufacturer's punctuality, for example, are recorded for future use. The purpose is to protect Wal-Mart from a retailer's twin nightmares: too much inventory, or not enough. "They recognize that technology is a critical tool for them to have an efficient supply chain," said Kathryn Cullen, a principal at Kurt Salmon Associates, a consulting firm, who said that she has not advised Wal-Mart. "They track the purchases and very quickly route that back to their suppliers so they can be replenished. They are very strict with their suppliers, but they give them the data that they need." Armed with sales results from past weeks and months, Wal-Mart meets with each of its suppliers to establish sales goals for the coming year. Suppliers are actively encouraged, so to speak, not to miss those goals. A manufacturer that fails to meet its sales target - or has data-documented problems with orders, delivery, restocking or returns - can expect even tougher negotiations in the future from Wal-Mart, which is renowned for its steeliness in such situations.

79

Still, achieving sleeker operations is not the whole story. In many ways, data are used to forecast and drive Wal-Mart's business. "We use it in real estate decisions, understanding what the draw is like and what the customers will be like," Ms. Dillman said, referring to the company's planning for new stores, including the number of shoppers it expects to attract to each. When it comes to Sam's Club, Wal-Mart's membership warehouse chain, "we know who every customer is," she added. So Wal-Mart does a kind of outreach, contacting nearby convenience store owners, for example, to let them know that "the items they buy, they could save money on by buying at Sam's." AT Wal-Mart, problems are referred to as "exceptions," and technology is essential for what Ms. Dillman calls "exception management." Within the company's empire, "we keep watching everything that just happened," she said. "We are pretty near real time. We can tell people that they need to go do something, and we are within hours, depending on the event." The "event" may be a truck's failure to drop off or pick up something, or the delivery of a load of shoes missing their mates. It could be the absence of an important product in a store's backroom, or in the distribution center that serves that store. Or it could be an act of nature like the hurricanes that descended, one after another, on Florida and other parts of the Southeast this year. Eventually, some experts say, Wal-Mart will use its technology to institute what is called scanbased trading, in which manufacturers own each product until it is sold. "Wal-Mart will never take those products onto its books," said Bruce Hudson, a retail analyst at the Meta Group, an information technology consulting firm in Stamford, Conn. "If you think of the impact of shedding $50 billion of inventory, that is huge." The impact will probably be felt by suppliers, he added, but none are likely to complain. "You can see the pattern of Wal-Mart's mandates, and as Wal-Mart grows in power, it is getting more dictatorial," he said. "The suppliers shake their heads and say, 'I don't want to go this way, but they are so big.' Wal-Mart lives in a world of supply and command, instead of a world of

80

supply and demand." Consumers willingly turn over plenty of information. For example, cashing a payroll check at Wal-Mart requires a two-step process, said an assistant manager in a Wal-Mart in Saddle Brook, N.J., who asked to be identified only by her first name, Mary. "First you enter your Social Security number into the system, twice," she said, pointing to the number pad hooked up to a register in the checkout lane. "The cashier can enter it, but some people don't like to share that information." Next a customer must enter his or her driver's license number, the assistant manager said. If payroll checks are cashed regularly at Wal-Mart, there is no need to keep punching in the Social Security number, only the driver's license number: "The system will recognize you the next time." All of that information winds up at the company's office in Bentonville, the assistant manager added. Ms. Dillman said it was "separated out, along with any personal identifiable information," and warehoused in a way that requires special permission to gain access. For check approval - when a customer writes a personal check to pay for something at a Wal-Mart, for example - "we don't keep it any longer than we need it for that transaction," she said. "All it's linked to is the checking account number, when we scan your check," she added. "We don't mine that data. We don't use it for anything other than the transaction." Historically, Wal-Mart's focus has been on the products it sells, not to whom it sells them. One of the most difficult pieces of information to harvest is which customer bought what. Such information is expensive, too. "When you are in the everyday-low-price market, you tend not to gather a lot of information about customers directly because you don't spend a lot of time with them gathering name, address, telephone numbers through a loyalty card," said Gene Alvarez, a vice president at the Meta Group. "That is the proper focus, because when you want to get customer-intimate, you have to offer a loyalty program, and there's the cost of that loyalty program."

81

Wal-Mart has discovered the potential of its own Web site in learning more about customers. Ms. Dillman said the site was beginning to allow users to buy a product online and have it delivered to a store near them, an option that Sears, Roebuck and other retailers have had for years. Naturally, some personal information would have to be submitted as part of the transaction. "You can do some association there, what products are of what interest," Mr. Alvarez said. But Wal-Mart executives tend to care more about how products sell as part of a larger basket. "Me knowing what you specifically buy is not necessarily going to help me get the right merchandise into the store," Ms. Dillman said. "Knowing collectively what goes into one shopping cart together tells us a lot more." Analyzing what ends up together in that cart drives Wal-Mart's pricing, other experts said. Shoppers might buy cold medicine along with chicken soup and orange juice during flu season, but not all of those products need to be priced at rock-bottom, said Ms. Overby, the Forrester analyst. "They might say, 'If we get really good at pricing the cold medicine and promoting it and letting people know that, hey, we have that product in stock and also at the best prices,' then they get people into the store," she said. "The other items in the basket might not be the lowest price in town, but the entire basket will be 10 to 20 percent less." STILL, as Wal-Mart recently discovered, there can be such a thing as too much information. Six women brought a sex-discrimination lawsuit against the company in 2001 that was broadened this year to a class of about 1.6 million current and former female employees. Lawyers for the women have said that Wal-Mart has the ability to use its human-resources database to calculate back pay for the plaintiffs as well as to determine whether women were fairly promoted and paid. The judge hearing the case, which is pending in a federal court in San Francisco, has agreed. The database is unusually detail-rich, said Joseph Sellers, a lawyer for the plaintiffs. "They've put into their work force database the information that bears on virtually every facet of compensation," he said. "They have performance reviews, along with seniority, the time spent with the company, which store they worked in. So you can compare people working in the same

82

store, to measure whether men and women are paid differently." If that comes to pass, it will be a rare moment indeed, with Wal-Mart's carefully assembled data being channeled for a purpose Wal-Mart did not desire. Wal-Mart's Cost Leadership Strategy For the financial year ending January 31, 2003, retailing giant Wal-Mart reported revenues of $244.5 billion, making it the world's largest company. The company topped Fortune's list of the world's largest companies for the second year in succession (Refer Exhibit I). Considering the modest beginning of this company four decades ago, nobody, including the company officials expected Wal-Mart to emerge such a dominant player in the retailing industry (Refer Exhibit II). Wal-Mart's success story is a classic example of a company, which became successful by rigorously pursuing its core philosophy of cost leadership, right from the day it began operations in 1962. Wal-Mart was founded by an ambitious entrepreneur, Sam Walton (Walton), who figured out early that retailing was a volumedriven business, and his company could achieve success by offering consumers better value for their money. Wal-Mart's growth during the first two decades was propelled primarily by following the strategy of establishing discount stores in smaller towns and capturing significant market share. The company was able to foster its growth in the 1980s by making heavy investments in information technology (IT) to manage its supply chain and by expanding business in bigger metropolitan cities. In the late 1980s, when Wal-Mart felt that the discount stores business was maturing, it ventured into food retailing by introducing Supercenters. In the late 1990s, Wal-Mart launched exclusive groceries/drug stores known as "neighborhood markets" in the US (Refer Exhibit III for the various types of Wal-Mart stores). Though WalMart had achieved huge success over the decades.

Wal-Mart's Aggressive Pricing-On July 2, 1962, Samuel Moore Walton (Walton), a merchant with over 15 years of experience in retailing, set up his first discount store in Rogers, a small town in the state of Arkansas, US. The

83

store offered a wide variety of branded merchandise at a competitive price. During the initial years, Walton focused on establishing new stores in small towns, with an average population of 5,000. These towns were largely neglected by leading retailers like Sears Roebuck & Company, K-Mart and Woolco, which concentrated more on larger towns and big cities. In his efforts to attract people from the rural areas to his stores, Walton introduced the concept of every day low prices (EDLP). EDLP promised Wal-Mart's customers a wide variety of high quality, branded and unbranded products at the lowest possible price, offering better value for their money. Wal-Mart's advertisement describing EDLP said, "Because you work hard for every dollar, you deserve the lowest price we can offer every time you make a purchase. You deserve our Every Day Low Price. It's not a sale; it's a great price you can count on every day to make your dollar go further at WalMart."4 From the very beginning, Walton made efforts to procure products at the lowest prices possible from manufacturers. It's not a sale; it's a great price you can count on every day to make your dollar go further at WalMart."From the very beginning, Walton made efforts to procure products at the lowest prices possible from manufacturers. He always shared these savings with customers by charging them lower prices, thus giving them the maximum value for their money. Wal-Mart's products were usually priced 20% lower than those of its competitors. Walton's pricing strategy led to increased loyalty from price-conscious rural customers. It helped the company to generate more profits due to larger volumes. Explaining his pricing strategy, Walton said, "By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume."EDLP was extremely attractive to rural customers and emerged as the key contributor to Wal-Mart's growth over the years...

84

Achieving Cost LeadershipOffering products at EDLP, especially during its early years, when Wal-Mart was not an established retail player, was quite difficult. The company aggressively followed a cost leadership strategy that involved developing economies of scale and making consistent efforts to reduce costs. The surplus generated was reinvested in building facilities of an efficient scale, purchasing modern business-related equipment and employing the latest technology. The reinvestments made by the company helped it to maintain its cost leadership position. From the start, Wal-Mart imposed a strict control on its overhead costs. The stores were set up in large buildings, while ensuring that the rent paid was minimal. The company imposed an upper limit for its rent payment at $1.00 per square foot during the late 1960s. Not much emphasis was laid on the interiors of the stores. The company did not invest on standardized ordering programs and on basic facilities to sort and replenish the stock...

Wal-Mart in the 1990s-In the early 1990s, Wal-Mart started focusing on its Supercenters and Sam's Clubs to fuel growth. Wal-Mart expanded its operations into the Northeast and West of the US by placing a lot of emphasis on the groceries business through its Supercenters. The modus operandi was to first establish discount stores, after which the best performing stores were to be converted into Supercenters. By 1991, Wal-Mart's mammoth retail network comprised of 1,355 discount stores, 120 Sam's Clubs and three Supercenters being served by 16 distribution centers. However, at this time, Wal-Mart had yet to enter as many as 23 states in the US.

85

In the early 1990s, it was estimated that the size of the groceries business in the US was three times that of the discount store business. So, Wal-Mart decided to focus on Super centers to propel its growth. Following Walton's death in 1992, David Glass (Glass) succeeded him as the CEO of Wal-Mart. Glass viewed food retailing as a key driver to increase revenue growth in the 1990s...

Global Supply Chain: Walmart to Centralize Global Sourcing, Reduce Use of Middlemen
Company Buys Less than 20% Direct Currently; Sees Savings Potential of 5-15%

SCDigest Editorial StaffWalmart this week announced a sweeping plan to consolidate its global procurement functions and reduce the use of intermediaries in its global sourcing processes, leading to savings of billions of dollars per year. It turns out that Walmart, the world's largest importer, still relies on the use of sourcing intermediaries for the bulk of its global sourcing initiatives, buying less than 20% of its goods directly from offshore suppliers. In addition, it often operates in a very decentralized mode, with each of the 15 countries where it operates buying goods from the same suppliers, esp. for its growing private label brands. Now, Eduardo Castro-Wright, Vice Chairman at Walmart, says the company's goal is to switch that ratio, so that within a few years it is buying direct from the manufacturer for 80% of its purchases. If it can do that and gain additional benefits from centralized purchasing, Castro-Wright estimates the potential cost reduction from taking out the middleman mark-up of 5-15%, depending on the category, leading to billions in savings. (Walmart's global sales are about

86

$400 billion.) The move to more direct procurement will be facilitated by greater centralization of its sourcing operations. Castro-Wright says Walmart has established four global merchandising centers for general goods and clothing, including an office in Mexico City focused on emerging markets. It is also planning to shift to direct purchasing of its fresh fruit and vegetables on a global basis, rather than working through import companies and agents.

Walmart Leverages Global Scale to Lower Costs of Goods, Accelerate Speed to Market, Improve Quality of Products-Today's announcements, according to Walmart vice chairman Eduardo Castro-Wright, are "important elements in the company's strategy to deliver even greater value to its customers and shareholders." Walmart first announced a consolidated global sourcing structure centered around new Global Merchandising Centers (GMCs) at its annual meeting for the investment community in October. This new structure is expected to leverage the company's global scale in both general merchandise categories and global food sourcing. "The newly-established Global Merchandising Centers represent the largest and most important element of our new sourcing strategy," Castro-Wright said. "These centers will create alignment between sourcing and merchandising and drive efficiencies across various merchandise categories."

87

The core of the company's overall global sourcing strategy will be to continue increasing direct sourcing for the company's private brands. Today, private brand merchandise represents more than $100 billion in purchasing annually. "Our new strategy and structure should drive significant savings across the supply chain," Castro-Wright said. Ed Kolodzieski, currently president and CEO of Walmart Japan Holdings G.K. and Seiyu, has been promoted to executive vice president and will lead Walmart's Global Sourcing. Kolodzieski will report to Castro-Wright. As part of this new strategy, Walmart also finalized a series of agreements with Li & Fung. The agreements are non-exclusive and do not include volume or shipment commitments. The strategic alliance between the two companies will allow Walmart to realize the benefits of consolidating a portion of its sourcing portfolio. Li & Fung, which is forming a new company to manage the Walmart account, is expected to build capacity that would enable it to act as a buying agent for goods valued around US$2 billion within the first year. "In sum, we are redefining how we source products that are imported into Walmart retail markets around the globe," Castro-Wright said. "By realigning our resources, leveraging our scale, and restructuring our relationship with suppliers, we will enable our businesses around the world to offer even more competitive pricing on merchandise and to provide our customers a clear and compelling assortment of better quality products at lower prices."

About Wal-Mart Stores, Inc.-Wal-Mart Stores, Inc. (NYSE: WMT), or "Walmart," serves customers and members more than 200 million times per week at more than 8,000 retail units under 53 different banners in 15 countries. With fiscal year 2009 sales of $401 billion, Walmart employs more than 2.1 million associates worldwide. A leader in sustainability, corporate philanthropy and employment opportunity, Walmart ranked first among retailers in Fortune Magazine's 2009 Most Admired Companies survey. Additional information about Walmart can be found by visiting

88

www.walmartstores.com. Online merchandise sales are available at www.walmart.com and www.samsclub.com. Investors of Wal-Mart--

89

Recent Financial News Nov 16, 2010 Nov 10, 2010 Oct 13, 2010 Walmart Announces Capital Strategy to Drive Global Growth; Next Year's Capital Spending to Increase Slower Than Sales Oct 11, 2010 Wal-Mart Stores, Inc. Webcast Agenda for the 17th Annual Meeting for the Investment Community Oct 01, 2010 Humana and Walmart Announce Innovative Medicare Part D Prescription Drug Plan Walmart reports third quarter EPS of $0.95; Company raises full-year EPS guidance Walmart Appoints Jeff Davis to Senior Vice President and Treasurer

90

Company Statements Aug 25, 2010 May 21, 2010 Corporate Statement Regarding the Settlement of Two Additional WageAnd- Hour Class Action Lawsuits U.S. Supreme Court Petition

May 12, 2010 May 03, 2010 Mar 01, 2010

Corporate Statement Regarding Recent Settlements of the Ballard WageAnd-Hour Class Action Lawsuit Walmart Settles Civil Case with State of California

Corporate Statement Regarding the Recent Settlement of an Employment Discrimination Lawsuit

Community & Giving At Walmart, we believe in a philosophy of operating globally and giving back locally. We know we can make the greatest impact on our communities by supporting causes that are important to our customers right in their own neighborhoods. Were proud to be a "store of the community" for all of the communities we serve by helping to provide financial and volunteer support to more than 100,000 charitable and community-focused organizations, and by using our locations to provide opportunities for our customers and associates to give back.

Hunger Relief Walmart and the Walmart Foundation have committed $2 billion cash and in-kind, stepping up efforts to help end hunger in America.

91

Every Day is Veterans Day

At Walmart, we are thankful for the service and sacrifices of our nations military men and women, veterans, and their families and we believe that every day is Veterans Day.

Chile Earthquake and Tsunami Relief

We're very concerned about conditions in Chile after the earthquake, and our thoughts are with everyone who has been impacted by the devastation.

Haiti Earthquake Relief

In response to the tragic earthquake in Haiti, our operations around the world, along with the Walmart Foundation, are responding. Recent Community & Giving News From the Press Room Section Nov. 15, 2010 Nov. 08, 2010 - Walmart Announces Holiday Campaign Focused on Fighting Hunger - Walmart Commits $10 Million to the Veteran Community

92

Aug. 31, 2010 Aug. 30, 2010

- Educators Awarded $4.5 Million through Walmart and Sam's Club Teacher Rewards Program - Ensure Your Kids Are Eating Nutritious Meals - Cook Together, According to Boys & Girls Clubs of America Survey

Jul. 22, 2010 Suppliers-

- Walmart Donates $1.5 Million To Help Share Our Strength Expand Family Nutrition Education Programs In The U.S.

At Walmart, we work hard to ensure that the products on our shelves meet the unique needs and wants of every community we serve. That means that we partner with thousands of suppliers in every merchandise category that range from one person shops, to multi-national corporations. Some sell products in just a few stores, others supply nationwide. Maintaining a diverse mix is the key to our success. Walmart Standards For Suppliers Supplier Diversity In 1994, we created a formal supplier diversity program designed to expand our base of minorityand women-owned suppliers. Currently, we do business with more than 2,500 Minority- and Women-Owned Business Enterprises (MWBE). The program has grown from an initial $2 million in 1994 to nearly $9.2 billion spent in 2009. Learn more about our program and find out how you can become a Walmart or Sams Club supplier. Past Events

93

5th Annual Sustainable Packaging Expo This expo provided resources and information to learn about making product packaging more sustainable, as well as understanding the ins and outs of Walmart's packaging scorecard. Supplier Sustainability Assessment Webinar Learn how best to complete the Supplier Sustainability Assessment and discover sustainability opportunities. Recent Suppliers News From the Press Room Section Jul. 23, 2010 - Made In Oklahoma Coalition: Walmart boosts Oklahoma food manufacturers Apr. 23, 2009 - Walmart Reports Record Increase in Business with Minorityand Women-Owned Suppliers Dec. 02, 2008 Oct. 23, 2008 Oct. 21, 2008 - Walmart Launches Green Jobs Council - Walmart sets new rules for suppliers, starting in China - Walmart Announces Global Responsible Sourcing Initiative at China Summit Health & Wellness Program of Wal MartAt Walmart, we have the opportunity to positively impact the lives of millions of people every day. Thats particularly true when it comes to helping our customers, our associates and the people in our surrounding communities live healthier lives.

Wal Mart Customers

Millions of people around the world are struggling with the costs of health care. To help ease the strain, we are using the strengths of our business to drive costs out of health care and bring our

94

customers the lowest prices on the products and services they need to stay healthy. We also work with several charitable organizations to ensure that communities in need receive critical health information and treatment.

Wal Mart Associates

As an employer, providing our associates and their families with health care coverage is a priority for Walmart. We are continually working to expand affordable access to care for our Walmart and Sams Club associates and their families.

Wal Mart Neighbors Finally, we see an opportunity to impact not only our customers and our associates but also to advocate for broader change. Thats why weve joined together with leaders in government, business and labor to call for reform in the American health care system, and why we are working closely with other business leaders and academics to advance health information technology. By combining the strengths of many, we can improve the quality of care available to all Americans. Recent Health & Wellness News
Nov. 15, 2010 Oct. 01, 2010 New Humana Walmart-Preferred Rx Plan (PDP) Has First In-Store Enrollee Humana and Walmart Announce Innovative Medicare Part D Prescription Drug Plan with Lowest National Monthly Premium Offered in all 50 States and D.C. 1 Sep. 01, 2010 Feb. 09, 2010 Walmart and Sam's Club to Offer Flu Shots in More Than 4,100 Stores and Clubs Across U.S. Walmart Supports "Let's Move" Initiative

95

Oct. 09, 2009

Walmart Pharmacists Prepare and Offer Tamiflu for Oral Suspension

Departments of Walmart1. Apparel, Shoes & Accessories 2. Craft & Party Supply 3. Jewelry 4. Health & Beauty 5. Photo Center 6. Electronics 7. Movies 8. Roll Back 9. Sports & Fitness 10. 11. 12. 13. 14. 15.
Diversity At Walmart, we believe that business wins when everyone matters, and that the true strength of diversity is unleashed Auto & Tires Furniture Toys Grocery Pharmacy Books

96

when each associate is encouraged to reach their full potential. Diversity then becomes the foundation for an inclusive, sustainable business that embraces and respects differences, develops our associates, serves our customers, partners with our communities, and builds upon an inclusive supplier base. We make diversity part of our business plan, ensuring we can continue to be a global leader in all aspects of Diversity and Inclusion. Dedication to Diversity and Inclusion touches every part of our business. Diversity and Inclusion are enduring values embedded into our culture. From our board of directors to our associates and customers, these values are fundamental to both our business and mission of saving people money so they can live better. Diversity and Inclusion Its part of our success. Our commitment to Diversity and Inclusion helps us serve our customers better. And, it helps us provide a positive work environment for our associates 2.1 million worldwide.

Recent Events A Year of Accomplishments The 2008 Diversity and Inclusion Year of Accomplishments Report highlights Walmarts commitment to associates, customers, communities and suppliers in the area of Diversity and Inclusion. With programs that touch recruiting, associate engagement, leadership training, supplier development, community outreach and community giving, Walmart received 37 separate awards and recognition in 2008 for its commitment to advancing Diversity and Inclusion at all levels of the company.