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Kerrissa L. Pole MIS 340 Professor Anderson WAL-MART The value system driven corporate behavior is exemplified by Wal-mart’s Sam Walton whose own simple living was reflected by his company’s commitment to offering good products at low prices. Description Wal-Mart is an irresistible and unavoidable retail force that has yet to meet any immovable objects. It is the largest of the six in its industry. Wal-Mart ranks number one in retail compared to the top three major competitors: Sears, Kmart, and J. C. Penney combined. Thus, not hard to believe that it ranks number one in retailing, in its market. Most of its stores are in the US, where it upgrades operations primarily by converting older Wal-Mart outlets into Supercenters. Wal-Mart also has operations in Canada, South America, Asia, and Europe. Sam's Club is the number two U.S. chain of warehouse clubs. Wal-Mart owns and operates discount department stores, while offering a wide variety of merchandise. This merchandise includes apparel for women, girls, men, boys and infants. As well as curtains, fabrics, shoes, houseware, hardware, electronics, home furnishings, small appliances, automotive accessories, garden equipment and supplies, sporting goods, toys, cameras and supplies, health and beauty aids, pharmaceuticals and jewelries. Wal-Mart distributes wholesale merchandise to convenient stores and a variety of other retailers. Wal-Mart offers commercial and personal finance and credit card programs. It not only offers and distributes merchandise, but it operates restaurants as well. History At a time when discounting was emerging as a merchandising concept, Sam Walton opened his first Wal-Mart in 1962 in Rogers, Arkansas. When Sam Walton opened the first Wal-Mart store, it was the beginning of an American success story that no one could have predicted. Walton was a small-town merchant who had operated variety stores in Arkansas and Missouri. Walton was convinced that consumers would flock to a discount store with a wide array of merchandise and friendly service. He was definitely accurate, because Wal-Mart is leading the retail industry. Critical Success Factors The company Sam built has become the world's number one retailer. Diversification into grocery (Wal-Mart Supercenters), international operations, membership warehouse clubs (SAM'S Clubs), and deep discount warehouse outlets (Bud's Discount City) has created greater opportunities for growth. But unlike some corporations, whose financial growth does not translate into more jobs, Wal-Mart's phenomenal growth has been an engine for making jobs. In 1995, the company created 85,000 new Wal-Mart jobs and supported thousands of U.S. manufacturing jobs. More than 600,000 Americans work at Wal-Mart. Core Competencies A key to Wal-Mart's popularity with consumers is its hometown identity. The hospitality represented by the personal welcome at the entrance by People Greeters. The bond with the merchandise since it is locally made, frequently and proudly displayed. The fact that in its industry Wal-Mart stores have the most efficient and sophisticated distribution system. As well the unique system allows each store to customize the merchandise assortment to match the community's needs. The input of the associates and how they determine where charitable funds are donated. Also, how each store promotes education by honoring a graduating high school senior with a college scholarship. A common sight are the bake sales which benefit a local charity. At its core, Wal-Mart is a place where prices are low while value and customer service is high - every day. Financial Analysis Wal-Mart carefully controls expenses to maintain its low price structure. Thus, customers do not have to wait for a sale to realize savings Company Profile Annual Finanacials WAL MART STORES INC ANNUAL ASSETS (000$) FISCAL YEAR ENDING 01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91 01/31/90 01/31/89 CASH 1,447,000 883,000 83,000 45,000 20,000 12,363 30,649 13,014 12,790 12,553 MRKTABLE SECURITIES NA NA NA NA NA NA NA NA NA NA RECEIVABLES 976,000 845,000 853,000 700,000 690,000 524,555 418,867 305,070 155,811 126,638 INVENTORIES 16,497,000 15,897,000 15,989,000 14,064,000 11,014,000 9,268,309 7,384,299 5,808,416 4,428,073 3,351,367 RAW MATERIALS NA NA NA NA NA NA NA NA NA NA WORK IN PROGRESS NA NA NA NA NA NA NA NA NA NA FINISHED GOODS NA NA NA NA NA NA NA NA NA NA NOTES RECEIVABLE NA NA NA NA NA NA NA NA NA NA OTHER CURRENT ASSETS 432,000 368,000 406,000 529,000 390,000 392,363 741,608 288,275 115,942 140,429 TOTAL CURRENT ASSETS 19,352,000 17,993,000 17,331,000 15,338,000 12,114,000 10,197,590 8,575,423 6,414,775 4,712,616 3,630,987 PROP, PLANT & EQUIP 30,416,000 25,964,000 23,326,000 19,237,000 15,859,000 11,848,004 8,140,848 5,996,664 4,401,765 3,391,418 ACCUMULATED DEP 6,810,000 5,640,000 4,432,000 3,363,000 2,683,000 2,055,123 1,707,047 1,284,625 971,706 729,464 NET PROP & EQUIP 23,606,000 20,324,000 18,894,000 15,874,000 13,176,000 9,792,881 6,433,801 4,712,039 3,430,059 2,661,954 INVEST & ADV TO SUBS NA NA NA NA NA NA NA NA NA NA OTHER NON-CUR ASSETS NA NA NA NA NA NA NA NA NA NA DEFERRED CHARGES NA NA NA NA NA NA NA NA NA NA INTANGIBLES NA NA NA NA NA NA NA NA NA 41,036 DEPOSITS & OTH ASSET 2,426,000 1,287,000 1,316,000 1,607,000 1,151,000 574,616 434,165 262,101 55,809 25,691 TOTAL ASSETS 45,384,000 39,604,000 37,541,000 15,443,389 11,388,915 8,198,484 6,359,668 32,819,000 26,441,000 20,565,087 ANNUAL LIABILITIES (000$) FISCAL YEAR ENDING 01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91 01/31/90 01/31/89 NOTES PAYABLE NA NA 2,458,000 1,795,000 1,575,000 1,588,825 453,964 395,179 184,774 19,000 ACCOUNTS PAYABLE 9,126,000 7,628,000 6,442,000 5,907,000 4,104,000 3,873,331 3,453,529 2,651,315 1,826,720 1,389,730 CUR LONG TERM DEBT 1,039,000 523,000 271,000 23,000 20,000 13,849 5,156 6,394 1,581 1,690 CUR PORT CAP LEASES 102,000 95,000 69,000 64,000 51,000 45,553 34,917 24,459 22,298 19,659 ACCRUED EXPENSES 3,628,000 2,413,000 2,091,000 1,819,000 1,473,000 1,042,108 1,056,209 728,555 630,893 514,672 INCOME TAXES 565,000 298,000 123,000 365,000 183,000 190,620 NA 184,512 179,049 121,158 OTHER CURRENT LIAB NA NA NA NA NA NA NA NA NA NA TOTAL CURRENT LIAB 14,460,000 10,957,000 11,454,000 9,973,000 7,406,000 6,754,286 5,003,775 3,990,414 2,845,315 2,065,909 MORTGAGES NA NA NA NA NA NA NA NA NA NA DEFERRED CHARGES/INC 809,000 463,000 400,000 411,000 322,000 206,634 172,007 134,102 115,053 92,365 CONVERTIBLE DEBT NA NA NA NA NA NA NA NA NA NA LONG TERM DEBT 7,191,000 7,709,000 8,508,000 7,871,000 6,156,000 3,072,835 1,722,022 740,254 185,152 184,439 NON-CUR CAP LEASES 2,483,000 2,307,000 2,092,000 1,838,000 1,804,000 1,772,152 1,555,875 1,158,621 1,087,403 1,009,046 OTHER LONG TERM LIAB NA NA NA NA NA NA NA NA NA NA TOTAL LIABILITIES 24,943,000 21,436,000 22,454,000 20,093,000 15,688,000 11,805,907 8,453,679 6,023,391 4,232,923 3,351,759 MINORITY INT (LIAB) 1,938,000 1,025,000 331,000 NA NA NA NA NA NA NA PREFERRED STOCK NA NA NA NA NA NA NA NA NA NA COMMON STOCK NET 224,000 228,000 229,000 230,000 230,000 229,964 114,903 114,228 56,614 56,559 CAPITAL SURPLUS 585,000 547,000 545,000 539,000 536,000 526,647 625,669 415,586 180,465 174,277 RETAINED EARNINGS 18,167,000 16,768,000 14,394,000 12,213,000 9,987,000 8,002,569 6,249,138 4,835,710 3,728,482 2,777,073 TREASURY STOCK NA NA NA NA NA NA NA NA NA NA OTHER EQUITIES -473,000 -400,000 -412,000 -256,000 NA NA NA NA NA NA SHAREHOLDER EQUITY 18,503,000 17,143,000 14,756,000 12,726,000 10,753,000 8,759,180 6,989,710 5,365,524 3,965,561 3,007,909 TOT LIAB & NET WORTH 45,384,000 39,604,000 37,541,000 32,819,000 26,441,000 20,565,087 15,443,389 11,388,915 8,198,484 6,359,668 ANNUAL INCOME (000$) FISCAL YEAR ENDING 01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91 01/31/90 01/31/89 NET SALES 117,958,000 104,859,000 93,627,000 82,494,000 67,344,000 55,484,000 43,886,902 32,601,594 25,810,656 20,649,001 COST OF GOODS 93,438,000 83,510,000 74,564,000 65,586,000 53,444,000 44,175,000 34,786,119 25,499,834 20,070,034 16,056,856 GROSS PROFIT 24,520,000 21,349,000 19,063,000 16,908,000 13,900,000 11,309,000 9,100,783 7,101,760 5,740,622 4,592,145 R & D EXPENDITURES NA NA NA NA NA NA NA NA NA NA SELL GEN & ADMIN EXP 19,358,000 16,946,000 14,951,000 12,858,000 10,333,000 8,321,000 6,684,304 5,152,178 4,069,695 3,267,864 INC BEF DEP & AMORT 5,162,000 4,403,000 4,112,000 4,050,000 3,567,000 2,988,000 2,416,479 1,949,582 1,670,927 1,324,281 DEPRECIATION & AMORT NA NA NA NA NA NA NA NA NA NA NON-OPERATING INC 1,341,000 1,319,000 1,122,000 918,000 641,000 501,000 402,521 261,814 174,644 136,867 INTEREST EXPENSE 784,000 845,000 888,000 706,000 517,000 323,000 265,863 168,636 138,071 135,681 INCOME BEFORE TAX 5,719,000 4,877,000 4,346,000 4,262,000 3,691,000 3,166,000 2,553,137 2,042,760 1,707,500 1,325,467 PROV FOR INC TAXES 2,115,000 1,794,000 1,606,000 1,581,000 1,358,000 1,171,000 944,661 751,736 631,600 488,246 MINORITY INT (INC) 78,000 27,000 NA NA NA NA NA NA NA NA INVEST GAINS/LOSSES NA NA NA NA NA NA NA NA NA NA OTHER INCOME NA NA NA NA NA NA NA NA NA NA NET INC BEF EX ITEMS 3,526,000 3,056,000 2,740,000 2,681,000 2,333,000 1,995,000 1,608,476 1,291,024 1,075,900 837,221 EX ITEMS & DISC OPS NA NA NA NA NA NA NA NA NA NA NET INCOME 3,526,000 3,056,000 2,740,000 2,681,000 2,333,000 1,995,000 1,608,476 1,291,024 1,075,900 837,221 OUTSTANDING SHARES 2,241,000 2,285,000 2,293,000 2,297,000 2,299,000 2,300,000 1,149,154 NA 566,135 565,591 CASH FLOW PROVIDED BY OPERATING ACTIVITY ($000S) Fiscal Year Ending 01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91 01/31/90 01/31/89 Net Income (Loss) 3,526,000 3,056,000 2,740,000 2,681,000 2,333,000 1,995,000 1,608,476 1,291,024 1,075,900 NA Depreciation/Amortization 1,634,000 1,463,000 1,304,000 1,070,000 849,000 649,000 475,352 346,614 269,406 NA Net Incr (Decr) Assets/Liabs 1,934,000 1,679,000 -1,434,000 -727,000 -932,000 -1,394,000 -718,625 -345,131 -506,216 NA Cash Prov (Used) by Disc Oper NA NA NA NA NA NA NA NA NA NA Other Adjustments, Net 29,000 -268,000 -227,000 -118,000 -55,000 28,000 8,490 3,378 27,727 NA Net Cash Prov (Used) by Oper 7,123,000 5,930,000 2,383,000 2,906,000 2,195,000 1,278,000 1,356,713 1,295,885 866,817 NA - CASH FLOW PROVIDED BY INVESTING ACTIVITY ($000S) Fiscal Year Ending 01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91 01/31/90 01/31/89 (Incr) Decr in Prop, Plant -2,636,000 -2,179,000 -3,566,000 -3,734,000 -3,644,000 -3,756,000 -2,141,774 -1,533,192 -901,166 NA (Acq) Disp of Subs, Business -1,865,000 NA NA -352,000 -830,000 NA NA NA NA NA (Incr) Decr in Securities Inv NA NA NA 502,000 74,000 310,000 8,107 NA NA NA Other Cash Inflow (Outflow) 80,000 111,000 234,000 -208,000 -86,000 -60,000 NA 7,058 7,375 NA Net Cash Prov (Used) by Inv -4,421,000 -2,068,000 -3,332,000 -3,792,000 -4,486,000 3,506,000 -2,149,881 -1,526,134 -893,791 NA CASH FLOW PROVIDED BY FINANCING ACTIVITY ($000S) Fiscal Year Ending 01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91 01/31/90 01/31/89 Issue (Purchase) of Equity -1,569,000 -208,000 -105,000 -68,000 NA NA 12,556 -6,868 6,243 NA Issue (Repayment) of Debt 547,000 NA 1,004,000 1,250,000 3,108,000 1,367,000 NA NA NA NA Incr (Decr) In Borrowing -648,000 -3,073,000 453,000 113,000 -470,000 1,067,000 993,295 396,230 145,459 NA Dividends, Other Distribution -611,000 -481,000 -458,000 -391,000 -299,000 -241,000 -195,048 -158,889 -124,491 NA Other Cash Inflow (Outflow) 143,000 700,000 93,000 7,000 -40,000 16,000 NA NA NA NA Net Cash Prov (Used) by Finan -2,138,000 -3,062,000 987,000 911,000 2,299,000 2,209,000 810,803 230,473 27,211 NA Effect of Exchg Rate On Cash NA NA NA NA NA NA NA NA NA NA Net Change in Cash or Equiv 564,000 800,000 38,000 25,000 8,000 -19,000 17,635 224 237 NA Cash or Equiv at Year Start 883,000 83,000 45,000 20,000 12,000 31,000 13,014 12,790 12,553 NA Cash or Equiv at Year End 1,447,000 883,000 83,000 45,000 20,000 12,000 30,649 13,014 12,790 NA Price Structure Spreadsheet Analysis Stock Investment Outlook Risk Analysis Quantitative Assessment Industry Analysis Description Retailers play a critical role in the marketing process. Not only do they transfer goods from producers to consumers, but also they channel information back from consumers. Retailers are perhaps the most important type of intermediary, situated at the point of direct contact with customers. The importance of retailing is underlined by its immense size. In the U.S. alone it accounts for 30 % of gross domestic product. The retailing function adds value in a number of ways, most of which are difficult for manufacturers to replace. These include: breaking bulk (breaking caseloads into smaller quantities); providing an assortment of products so that customers can go onestop shopping; creating an inventory buffer between producers and consumers so that products are available when desired; and providing support services such as display, Over its long history, the retailing function has changed, often reacting to changes in consumption patterns. For example, the rise in the proportion of expenditure allocated to services. As well as the demographic shifts such as the migration from inner cities to suburbs. Thus, the retailing industry is an ever-changing industry that communicates to the supplier, and the consumer. Indications are that the retailing sector in most developed countries are overbuilt. In the U.S., the square footage devoted to retailing rose by 216% between 1966 and 1993 while sales rose by only 50%. At the same time, the amount of time spent shopping has been declining. It has been estimated that the average amount of time spent by a typical American in a shopping mall has declined from seven hours a month to about two and a half hours over the past 15 years. Time pressure, coupled with the general sameness of much retailing, has led to a change in people's perception of shopping: from something regarded as fun and entertaining to an activity that is now generally considered a tiresome burden to be dealt with as expeditiously as possible. As a result of these factors, the retailing sector is experiencing a shakeout. The number of bankruptcies has been rising, reaching approximately 13,000 a year in the U.S. This industry which appears stable is obvious otherwise. Therefore new entries are at a greater risk of success when compared to the store loyal customers. Financial Analysis In the U.S. alone it accounts for 30% of gross domestic product. The retailing sector, which represents over $2,200 billion a year in revenues, employs about 25 million people in the country. It accounts for an estimated $7,000 billion in worldwide annual revenues. If we look at the US retailing sectors from 1966 to 1993 we can see that it has been overexpanded. Its retail sales, in real terms, have increased by 50% while square footage for retailing ballooned by 21.6%. Stock Investment Outlook Potential for Growth Competitive Factors In this industry, there are a number of ways to maintain competitive leadership. At some point, a retailer relies on the weakness or downfall of another retailer. For instance, as the number of suppliers reduces, the share of business for each remaining supplier increases. So, rather than relying on new suppliers to increase variety, retailers encourage existing suppliers to add variety and offer a fuller line of products. This enables them to leverage existing logistical systems more effectively. This also allows them to gain greater market power, arising from retail concentration and intense customer loyalty. Successful retailers have to be treated by manufacturers as customers rather than intermediaries; without their support; the manufacturer is effectively barred from a sizeable portion of the market. Dramatic gains in distribution and marketing efficiency are realized when manufacturers and retailers work together. Partnering between these two groups is a major departure from their traditionally antagonistic relationship; it recognizes that both are part of a single process - which can be greatly streamlined and simplified - for distributing products to customers. These so-called "channel partnerships" have been adopted in such diverse categories as household goods, personal care products and home furnishings. Inventory is pulled through the system rather than pushed down, allowing companies to provide greater product availability for customers with lower average levels of inventory. Partnering thus provides the advantages of vertical integration without the attendant drawbacks. These systems improve efficiency and customer service primarily by replacing physical assets with information. They reduce the retailer's inventory while providing a supply of merchandise that closely matches consumers' actual buying patterns. That interprets as resources that were formerly tied up in inventory can be directed elsewhere - to increased advertising, or the bottom line, for example. The result is a win-win-win outcome. Consumers consistently find the merchandise they want (often at lower prices); suppliers increase sales, lower costs and cement ties with retailers; and retailers gain increased sales and inventory turns. As we enter a time where online shopping is more convenient, retailers need to stay a float with this change by adapting to the online “competition rules.” A very important “rule” is that the information is presented as clear as sales people convey it, and that the customer is offered as much information about the products. As well, it is very important that they have an adequate amount of products that can be efficiently distributed. Finally, it is important that an assortment of complementary merchandise be available to shoppers. Government Regulations The National Conference on Weights & Measures (NCWM) considered a proposal on retail price posting, which was considered by the Conference’s Laws and Regulations Committee. IMRA submitted comments to the Central Weights & Measures Association (CWMA) stating the concerns of the mass retail industry. The language of the proposal currently reads: “If a commodity is being sold at a discounted price, the exact amount of the discount shall be clearly and conspicuously posted or displayed by the retailer prior to the sale of the commodity.” IMRA pointed out in its comments that there are many terms in this proposal that are not defined, and which could pose a problem for retailers and consumers. If the term “exact amount” means the exact dollar amount, it is possible that this requirement would do away with retailers’ ability to advertise and to post via in-store signage many types of promotions and discounts. It could eliminate retailers’ ability to conduct percentage off sales by category by forcing them to individually label each sale item with the final price of the item as well as the dollar amount of the discount. Role of Research and Development Technological Investment and Analysis The technology in this industry is going through a round of changes, the scale and scope of, which are likely to exceed those that have come before. The new retailers have adopted a business philosophy and operating style that includes high levels of investments, which results in a more rational approach to pricing strategies. It uses high levels of investment in information technology (IT) and the establishment of close electronic links with upstream partners Rather than monitor the inventory of each item themselves. Retailers move much of the responsibility for ensuring product availability to suppliers. Thus, suppliers accomplish this by monitoring sales at the point of sale on a real-time basis through computerized links. Then they automatically replenish stock when inventory levels run low. The Payments are made through automated bank-to-bank transfers to suppliers, eliminating a lot of paperwork. The use of IT allows for a more rational approach to pricing and sales promotions. It emphasizes on "everyday fair pricing" instead of having large and predictable price variations. Retailers attempt to provide a "fair" price all the time. The objective is to assure buyers that they need not wait for a sale to get a reasonable price on the products they want to buy. Technology is also affecting retailing through the substitution of electronic shopping for store-based retailing. For many time-pressured customers, shopping online or via a catalogue for next-day delivery provides greater time value than a trip to the mall. U.S. consumers spend $3billon n a year on items from TV shopping networks, $10billion a year shopping over the Internet and $60billion a year on purchases from mail order companies. While this still represents a very small portion of the retailing sector, recent growth trends indicate that electronic retailing is poised to enter the mainstream. The World Wide Web, even in its current narrowband mode, shows the vast potential of technology. It is a well-established dictum of retailing that the "total shopping experience" must be considered in order to assess the strengths of different retail formats. Electronic shopping is typically more cost-effective than store-based retailing because it reduces cost by 25%. Recommendation for the future Market Analysis Distribution Channel Marketing and advertising has to be doing the world’s number one discount retailer justice. However, there must be a secret. There is no secret. The key is being the first to leap into the opportunities and resources that are available. As for Wal-Mart’s marketing techniques, it uses the resources that are beneficial to its profitability. WalMart uses the Internet, global entrance, and ventures with other companies to represent its name and products. The online service that Wal-Mart offers is different from its in store products. It has taken a new approach. Along with offering products that retailers provide, Wal-Mart has seafood on its World Wide Web site to obtain a different customer than its Wal-Mart Supercenters. This site offers Maine lobster, Alaskan halibut, mahimahi and Atlantic salmon and other meat items such as steak. The selection of products are generally more upscale than a Wal-Mart Supercenter’s seafood department would typically merchandise. The seafood selections appear as attractively plated with a variety of vegetable side dishes. The items are displayed with the same species-specific recipes that come on recipe cards with the seafood when it is delivered. With this online shopping Wal-mart promises from, “Shore to Door within twenty-four.” Therefore, you have your product as well as the convenience of delivery. The strategy is to offer one stop shopping to accommodate, help and service more customers than in the past. This new aim is targeted towards computer-literate, websurfing customers. Most of the on-line purchasers have an income of at least $50,000 to $55,000 a year on average or more which paints a lucrative portrait of the market segment that Wal-Mart on-line is after. As for global entrance, Wal-Mart has expanded its global market to Latin America and Asia. Therefore, the $120 billion retail colossus is on track to open the 30 to 35 new offshore stores it has planned this year. This increases the number of international units to 207. The largest concentration is in Canada where Wal-Mart operates 136 discount stores, followed by Mexico where it has 21 supercenters and 28 Sam's Clubs. Wal-Mart's smallest presence is in China, where there is one supercenter and one Sam's Club. Flourishing populations of young, undeserved consumers in Latin America and Asia, as well as economies that are for the most part gaining steam, are keeping the near-term global growth of the discount giant focused on these regions. Wal-Mart's profitable international markets are its most mature ones: Canada, Mexico and Puerto Rico. In South America and Asia, Wal-Mart is seeing traffic and sales volumes build, but profitability has yet to be reached. For the first quarter, which ended April 30, Wal-Mart's international unit notched operating profits of $6 million, versus a year-ago loss of $16 million. The move into profitability strengthened a trend begun in 1996 when its international business achieved a full-year operating profit of $24 million against a prior-year operating loss of $16 million. Wal-Mart attributes the strength of Sam's Club in China to strong demand for the food and liquor sold there, as well as for durable appliances like washing machines. The importance of status symbols in Chinese culture suggests that Sam's status as a membership club could appeal to some Chinese consumers as a result. Potential for Growth Role of Research and Development Technological Story Technological Investment and Analysis Wal-Mart has devised an operating methodology and business philosophy that involves investing heavily in information technology, shifting inventory replacement responsibilities to suppliers, pricing and promoting more reasonably, reducing the number of suppliers, and concentrating on market power and technological forces. Wal-Mart, the world’s largest retailer, is not using technology for this period, but for the years to come. The way it plans to use technology may eliminate web entrepreneurs. It is using the web and online resources to get another leap in front of its competitors. The big idea is Wal-Mart has chosen to expand its online store. The plan is to sell more products in cyberspace than physical stock in stores. There is a great chance that existing web stores will be deceased with this plan. Thus, Wal-Mart will not only have taken over the retail in physical stores, but in cyberspace as well. Wal-Mart is going to use the same strategies in cyberspace as it has used in the physical stores. As they can today, customers will be able to order with their credit cards and receive delivery within 48 hours. When completed, the new super-site may raise the barriers to entry so high that small entrepreneurs will not be able to get started on the Web. Wal-Mart offers services that others will not, due to the power it has. Because of WalMart’s use of technology they are able to pass orders directly to manufacturers. WalMart also has the economic muscle to demand that manufacturers ship products straight to customers. Therefore, Wal-Mart never receives, stock, store, retrieve, pack or ship physical inventory. Online retailing is relatively small and will remain so for years. Yet, someday, online retailing will become important. When it does, Wal-Mart may have the prime real estate locked up. The beauty of the Web was the way it opened up entrepreneurial opportunities. It lowered the barriers for small businesses who did not have the money to get started in the physical world. Wal-Mart has just put its heel on the neck of others with its use of technology. Over the next few years, it will keep pushing until it hears a snapping sound. Online shopping sales for 1996 where $518 million. By the year 2000, that figure is expected to rise to $6.6 billion. Thus, Wal-Mart is using its technological resources to gain control of cyber shopping. Wal-Mart is not only using technology in the cyber world, but to satisfy customer needs as well. As Wal-Mart expanded into new markets, meeting increasingly divergent customer needs became difficult. A changed needed to occur in order to manage each Wal-Mart’ store to uniquely better meet the needs of its customers. So Wal-Mart went riding the technology wave once again, Wal-Mart replaced its point-to-point information transfers with a software delivery system that distributes large media files to its nearly 2,000 stores around the world. The existing systems, which only provided summary and average data about the business, did not support its changing needs. Wal-Mart had to merchandise locally, and that drove a need for information in store-level detail. Wal-Mart took a different approach than the competitor and chose a very detailed, “I-want-to-know-everything-that's-occurring-in-a-store type approach." Wal-Mart's initial 700 gigabyte data warehouse was stocked with point of sale and shipment data. The system has grown to 7.5 terabytes as new types of data such as inventory, forecast, demographic, modular, markdowns, returns, and market basket have been added. The warehouse, which is stocked with 65 weeks of data kept by item, by store, by day, runs on a 32 node database. This allows Wal-Mart's buyers, merchandisers, logistics, and forecasting associates, as well as 3,500 of Wal-Mart's vendor partners, to have direct access to the data warehouse. This way users can ask virtually any question with the 30 applications running on the system. This system can handled as many as 35,000 queries in one week. The data warehouse enables Wal-Mart to better focus on replenishment at the store level and provide precise information to its buyers and suppliers. Thus, moving closer to the goal of getting the right products to each store at the right time. This helps contribute to Wal-Mart's success at providing everyday low prices and superior customer satisfaction. Through this system, buyers and vendors query information and analyze sales trends by item and by store to make informed decisions on replenishment, look at customer buying trends, analyze seasonal buying trends, make mark-down decisions, and react to merchandise volume and movement at any time. Since implementing warehouse and store-level replenishment process, Wal-Mart has improved its in-stock percentage by 10 points, to 96%, one of the highest rates in the industry. This is the best win for Wal-Mart. The customization of a unique program that nobody else in the country has. This allows them to take a product, run very hard with it and sell a lot of units, meet the needs of its customers and hit its objectives. Sharing this information with its vendor partners has benefited Wal-Mart in a number of ways. Since this change, Wal-Mart has seen a sharp rise in vendor responsiveness; product costs have decreased; and, forecasting has improved significantly. Wal-Mart's data warehouse, now the world's largest commercial warehouse has expanded as rapidly as the retailer has it. Wal-Mart's goal is to grow the system to 10 terabytes. Recommendations for the Future
