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- 💪 The Largest Company in the World
💪 The Largest Company in the World
Profit Snack
June 28, 2024
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💪 The Largest Company in the World
Did you know that Walmart generates over $600B in annual revenue, making it the largest company in the world by revenue?
And it’s not just a retail powerhouse. Walmart is also the largest private employer in the United States, with over 1.6M employees.
Since 1962, Walmart has completely changed the retail industry. How did they do it?
Here’s what we got for ya:
💼 The Origins of a Retail Giant
📈 From 0 to 10K Stores
🌍 The Walmart Effect
Read time: 4 min 50 sec
💼 The Origins of a Retail Giant
Walmart’s founder Sam Walton grew up in a poor family during the Great Depression.
He learned from a young age the value of hard work. At just 8 years old, he sold magazine subscriptions to help his family make ends meet.
Despite financial hardships, Sam showed an early interest in business, starting his own newspaper business in high school.
In 1940, after earning a degree in economics, Sam started working at J.C. Penny. He was one of the worst employees. His boss told him he was not cut out for retail work. Sam valued customer interactions over managing his books. Instead of waiting to be fired, Sam joined the military service during World War II.
After the war, with the help of a $20,000 loan from his father-in-law and $5,000 of his savings, Sam purchased a Ben Franklin store, a popular five-and-dime franchise.
The problem was that there was a competitor store across the street that was making significantly more money. So Sam Walton had to innovate to make his store more competitive.
He took discounting to the extreme, selling products at lower margins to drive higher volume sales. This strategy increased sales by 45% in his first year, and within five years, his store was the top-performing Ben Franklin franchise in the region.
However, the franchise had strict rules about where you can buy products. So to provide discount goods, Sam would drive outside of town to meet with low-cost wholesalers and buy whatever cheap products they would sell.
At first, because Sam was bringing in more revenue, Ben Franklin said nothing about Sam buying products from other places. Then, one year, they decided not to renew Sam’s lease.
Instead of giving up, Sam decided to start his own store called Walton’s Five and Dime.
At his new store, Sam continued to innovate.
His store was among the first to adopt a self-service model. Previously, employees would gather all the items for customers, but now shoppers could pick out their products. This allowed Sam to operate with fewer employees, enabling him to make prices even lower.
After success with Walton’s Five and Dime, Sam decided to start a chain. Little did he know he would create the biggest retail chain in the world…
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📈 From 0 to 10K Stores
The first Walmart opened in 1962 in Rogers, Arkansas.
Most retail stores avoided towns with populations under 50,000. But Sam Walton welcomed Rogers' small 5,000 population.
Sam wanted to open his chain of discount stores in rural areas so there was no competition. It’s either drive 30 minutes to the nearest town or shop at Walmart.
To fund his expansion, Sam took a risk and mortgaged his home. By 1971, he opened six new stores.
In 1972, Walmart went public on the New York Stock Exchange to provide even more capital for its growth.
Throughout the 70s and 80s, Walmart’s expansion was rapid and relentless.
Number of Walmart stores in the US
By 1980, Walmart operated 176 stores, and by 1990, the number skyrocketed to over 1,000.
Today, 90% of Americans live within 10 miles of a Walmart store.
How did Walmart grow to be so successful?
Sam Walton was constantly searching for ways to improve. He would go to other stores and study their displays and prices. He would bring his notepad and write down anything he thought might be useful.
Sam kept his stores open longer than competitors, used cheaper materials for shelving and light fixtures to help with prices, and was one of the first stores to offer free parking.
Walmart works hard to bring customers convenience and low costs. But sometimes there is a high cost for the community…
🌍 The Walmart Effect
The Walmart Effect is the economic impact on local businesses when a big company like Walmart comes into town.
The phenomenon is a double-edged sword. On one hand, small businesses often go out of business because they can’t compete with Walmart’s low prices. On the other hand, consumers benefit from a more affordable shopping experience.
Small businesses can’t match Walmart’s prices because Walmart buys in bulk, allowing them to negotiate lower prices. If small businesses were to drop to Walmart prices, they would lose money.
A price comparison found that Walmart was $7 cheaper on a basket of just seven grocery items compared to two Canadian grocery chains.
Imagine the savings for a family of five for over a week’s worth of groceries…
But what happens when Walmart comes into a small town, bankrupts small businesses, and then decides to leave?
Walmart often becomes integral to the community, providing jobs and low prices. It has become a one-stop shop for many residents, offering a grocery store, pharmacy, clothing, and a variety of retail items.
When Walmart decides to close stores in these rural communities, it leaves a significant void. Local economies can struggle to recover, and residents find themselves without easy access to essential goods.
On the other hand, people’s dependence on Walmart is a testimony of how successful the company is. Walmart’s low prices and wide range of products make it a staple in many households, showing the company’s impact on consumers and the retail industry as a whole.
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