Wal-Mart Stores

Published on .

Sam Walton started Wal-Mart Stores in 1962 with a 16,000-square-foot outlet in Rogers, Ark.-a humble beginning for a company that by the end of the 20th century was the largest and most powerful retailer in the U.S., with almost 2,000 Wal-Mart stores, close to 500 supercenters, 450 Sam's Club stores and yearly sales exceeding $165 billion.

Although some retailers had reservations about his early stores, Mr. Walton pressed on, keeping costs low and his enthusiasm for the business high. By early 1969, he had opened 13 Wal-Mart stores and was planning a 70,000-square-foot warehouse and headquarters. Stores were expanded in size to add such new merchandise as men's and women's apparel and by year-end, Wal-Mart mushroomed to 31 stores. One year later, Wal-Mart completed a public offering. That was the start of a rapid growth period that propelled Wal-Mart to the forefront of U.S. retailing.

Until 1974, Wal-Mart handled advertising in-house. While most major mass merchants typically put 52 circulars into the hands of customers each year, Wal-Mart published 11. Instead of touting sales on certain items, its advertising was institutional to convey the retailer's "always low price" strategy, a philosophy that remained in place at the beginning of the 21st century.

Wal-Mart also built a reputation for customer service through such features as a greeter who welcomes customers as they enter the store and directs them to what they need.

First agency

In 1974, Wal-Mart hired Kansas City, Mo.-based Bernstein-Rein to handle its advertising. Bernstein-Rein created advertising to educate shoppers about Wal-Mart's "everyday low pricing" strategy. The agency remained part of Wal-Mart's advertising strategy into the 21st century.

One notable campaign, tagged "Watch for falling prices," introduced around 1993, showed price signs crashing to the ground and revealing lower prices to the tune of Patsy Cline's "I Fall to Pieces." That effort led to further campaigns featuring a price-rollback theme. Bernstein-Rein also handled some category advertising, such as photo and paint, and produced spots highlighting Wal-Mart's corporate charitable missions.

By the end of 1979, Wal-Mart had grown to 276 stores with sales of $1.25 billion and earnings of $41.2 million. As the 1980s unfolded, Wal-Mart's reputation grew. It added food to its retail mix and expanded into international markets.

There were concerns, however. The ability of Wal-Mart's regional, homegrown philosophy to work on a larger scale was questioned, as well as whether a succession plan could be instituted to keep management as fresh as it had been under Mr. Walton.

In 1980, Wal-Mart was one of the first chains to test universal price code scanners. From fiscal year 1980 to fiscal 1990, Wal-Mart soared from sales of $1.25 billion and 276 stores to 1,500 stores with sales of $25.8 billion.

The 1980s also saw Wal-Mart delve into other retailing formats. In 1983, Wal-Mart opened its first Sam's Club, a wholesale club, and in the mid-1980s, the retailer unsuccessfully tried out a hypermarket format.

In 1988, Wal-Mart added more layers to its advertising, hiring San Antonio-based GSD&M, which helped it grow from a regional power to a national presence. The agency continued creating advertisements centered on the retailer's price image while establishing Wal-Mart's reputation for offering brands consumers trust.

Largest U.S. discount retailer

In the 1990s, Wal-Mart reached the $100 billion sales mark and surpassed Kmart Corp. as the nation's largest discount retailer. In 1990, it acquired McLane Co., a wholesale distributor familiar with the food distribution business that Wal-Mart needed for its superstores. Wal-Mart also began expanding into Puerto Rico in 1990.

Sam Walton died in April 1992, and was succeeded by his son, Rob Walton, as chairman of the company. The "post-Sam" era has been highlighted by international growth as well as by such new strategies as a small-store format that can fit into established neighborhoods.

In the mid-1990s, Wal-Mart initiated its "Always" campaign, emphasizing that its prices were always low. At the end of 1993, Wal-Mart recorded measured media spending of $104.2 million.

In the late 1990s, Bernstein-Rein introduced a smiley face in its advertising to represent Wal-Mart's strategy of rolling back prices. Despite its "everyday-low-price" strategy, Wal-Mart found the rollback theme more successful in drawing customers. The ubiquitous smiley face was repeated in its monthly circulars and in-store signage.

Wal-Mart's pricing strategy has not been without some problems. A predatory pricing lawsuit in Arkansas resulted in Wal-Mart's admitting that it sold merchandise below cost; however, it did not admit to predatory pricing practices. Shortly after the case, Wal-Mart changed its slogan from "Always the low price" to "Always low prices."

Wal-Mart also experienced trouble with a "Buy American" advertising program. The chain was faulted for saying that it bought mostly U.S.-based products, when many items on its shelves were imported. Subsequently, the "Buy American" statement was dropped from promotional materials.

In 1998, Wal-Mart entered the U.K. market with the purchase of Asda, that country's No. 3 supermarket chain. As Wal-Mart continued to expand abroad, the company hired local agencies to handle its brand.

Growth and problems

In the U.S., Wal-Mart launched its Neighborhood Stores, combining a discount store and a drug chain. In 2003, Wal-Mart posted sales of $259 billion, and many of its competitors and suppliers expected it to be the first company to cross the trillion-dollar sales threshold. Asked when Wal-Mart sales will hit $1 trillion, 65% of the roughly 400 executives gathered at an International Mass Retail Association convention in Orlando, Fla., in September 2003 said within 10 years. Only 8% said "never." Wal-Mart itself isn’t making any trillion-dollar projections. But after becoming the first company to employ 1 million people in 2003, it expects to employ 2.2 million by 2008.

But Wal-Mart’s rise also began to encounter unprecedented friction in 2003, with major magazine cover stories, newspaper accounts and TV reports questioning whether it had become too big and too powerful. Municipalities in California enacted laws to keep Wal-Mart Supercenters out, and Wal-Mart was rebuffed in one electoral challenge to those laws, despite spending $1 million. The retail giant’s expansion to Germany and Japan met with more resistance and less success than its expansion to the U.K. or Latin America.

In 2003, Wal-Mart spent $677.9 million on U.S. advertising, a 9.7% increase over 2002, and ranked No. 49 among all U.S. advertisers, according to Advertising Age.

Most Popular
In this article: