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Wal-Mart Grows from a Single Store to World Leader


The discount chain store Wal-Mart began as a small shop in the U.S. state of Arkansas some 40 years ago. Today, it's the largest private company in the world. The business' phenomenal growth is just one of its hallmarks. Wal-Mart has also revolutionized the way people shop - with results that have brought the company both praise and criticism.

The statistics are startling: Wal-Mart has about 5,000 stores worldwide, and more than 1.5 million employees. In the fiscal year ending in January 2005, the company's sales revenues amounted to $256 billion. Besides its thousands of locations in the United States, Wal-Mart has some 1,300 stores overseas with locations in Mexico, Canada, Britain, Germany, Japan and China.

As if this isn't enough, consider its share of shoppers. Eight out of 10 American households shop at Wal-Mart at least once a year. Worldwide, more than 100 million customers visit Wal-Mart every week.

"I think Wal-Mart is a brilliant company with a tremendous amount of growth potential." says retail expert Michael Silverstein, senior vice president of the consulting firm Boston Consulting Group. "[The company] has made it from generation 1 to generation 2, which is to move from the Wal-Mart discount store to the Wal-Mart Supercenter." Mr. Silverstein says he believes the company will continue it's winning strategy in the future. "They have a hunger to add categories [of products]," he says, "and a very powerful internal culture. My guess is that they have many, many, many good years ahead of them."

The consultant says those good years will likely be built on the same premise that Wal-Mart has used so effectively up until now: low prices. "It has a fantastic logistic system, and a great ability to provide America with bargains," Mr. Silverstein says. "[They advertise] 'always lowest prices, always here', stack it out, sell huge quantities of merchandise, and pass the economy (the savings) onto the consumer."

According to research by the consulting firm AT Kearny, Wal-Mart's three biggest sources of cost advantage are low corporate overheads, efficient supply chain and, above all, low labor costs. A newly hired employee at Wal-Mart might earn as little as $8 an hour, some 20-30% less than unionized workers at rival discount stores.

Although some of Wal-Mart's business practices -- such as resisting unionization -- are controversial, it's impossible to argue with the company's success. And in spite of the fact that Wal-Mart already dominates the retail industry, most experts agree it still has huge potential for growth.

"As I understand it, [there] is a[n] $8 trillion retail market," says Jorge Leis, a partner at consultants Bain and Company. "[So] you are probably looking at closer to 3-4% of the total domestic market, if you assume an $8 trillion retail sales market, and they (Wal-Mart) are at $270 and $280 billion, you are looking at about 3.5%.

According to Mr. Leis, Wal-Mart once believed that each of its stores served people living within a 24-kilometer radius. But recent research indicates that each store's actual trading zone - the area within which it attracts customers - is an 8-kilometer radius. That could mean more Wal-Mart stores, much closer together. In fact, according to a report by The Economist, Wal-Mart's corporate headquarters approves $1 billion in real estate purchases each month.

This report was based on reports and interviews originally done by Ruosi Wu of VOA's Mandarin Language Service.

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