Walton's mountain - Wal-Mart founder Sam Walton

Nation's Business, April, 1988 by Michael Barrier

Outside, it is high summer in northwestern Arkansas. The temperature is pushing 100 degrees, and this is not a dry southwestern heat, but the unctuous kind that crawls all over you the second you step outside the door.

Inside, it is Christmas.

The building looks like an abandoned storefront-its plate-glass windows have been painted over-but this is a historic site in retailing. Twenty-five years earlier, Sam M. Walton opened his first Wal-Mart discount store here, on U.S. Highway 71 as it passed through Rogers, Ark.

"Old No. 1" has since been joined by more than 1,100 other Wal-Mart Discount City stores. Wal-Mart Stores, Inc., is now headquartered in a sprawling red-brick building that dominates the small town of Bentonville, just northwest of Rogers. The Rogers store itself has moved to much larger quarters a block down the street.

On this last day of July, though, Old No. 1 has come back to life as something resembling the Wal-Mart store it once was. Christmas decorations and potential gifts-microwave ovens and the like-fill racks and counters, with almost everything arranged as it will be in the stores in a few weeks. (Wal-Mar will send photographs of the displays to every store, so that the managers can follow the photos when they are setting up their own displays.)

Dozens of district managers and other Wal-Mart executives, including Sam Walton himself, are scrutinizing the goods and peppering the merchandise buyers with questions and, sometimes, complaints.

Walton, the company's 69-year-old chairman, takes special pride in one item of Christmas merchandise: a small table in the Queen Anne style. This is not an elegant piece-it has a woodgrained Formica top-but, rather, sturdy furniture that will fit comfortably in the modest homes where so many of Wal-Mart's customers live. In any event, what Walton likes most about this table is not how it looks, but where it was made.

The previous year, Wal-Mart sold a similar tablethat was made in Taiwan. The new table was made in Mississippi; and Wal-Mart is paying $4 less for each one than the $42 it paid for each Taiwanese table. Wal-Mart is spending about $3.5 million on the Mississippi-made tables (which it will sell at retail for $70 apiece). By Walton's reckoning, that $3.5 million translates into close to 100 American jobs that otherwise would have gone overseas.

For Wal-Mart, deciding to sell the American table, instead of the Taiwanese, was not simply a matte of lining up the two tables, comparing their looks and their prices, and then going with the domestic product. Rose Hill Company, an Okolona, Miss., manufacturer, did not make such tables until Bill Smith, a Wal-Mart buyer, took one of the Taiwanese tables to Mississippi and asked Rose Hill to come up with a table like it. Beyond that, Wal-Mart committed itself in ways that let Rose Hill operate more efficiently-and thus keep its price to Wal-Mart lower than the import price.

"Bill helped develop the item, with the factory," Sam Walton says, "and they now know we're going to buy three or four million dollars' worth. They've bought their raw materials in quantity, and we pay them on time, so they're able to get their costs down. If all of our retailers in this country had done the same thing before they went running off overseas, if they had worked with our manufacturers, they could have done this in a lot of instances-we could, and a lot of other folks could. And, of course, we're doing it now."

Wal-Mart carries growing weight with manufacturers. It is now the country's third-largest retailer, trailing only Sears, Roebuck and K mart Corporation. In the fiscal year just ended, sales rose 34 percent-to around $16 billion from the year before. In addition to its Wal-Mart Discount City stores, the company owns around 90 Sam's Wholesale Clubs and two of the huge new hypermarkets.

And yet Wal-Mart operates in only 24 states, with its stores concentrated in economically wobbly Mississippi Valley and Gulf Coast states (Texas has more than 200).

A majority of Wal-Mart's stores are found not in glossy malls, but in humbler company. In Russellville, Ark., for example, Wal-Mart's neighbors bear names like Bargain Mart and Family Dollar; in Conway, Ark., Wal-Mart shares a parking lot with the No Item Over $6 Store. Wal-Mart has prospered not because its customers are prosperous, but for other reasons.

Its discount prices on name brands are one; but rival retailers sell at comparable prices. Wal-Mart has surpassed most of them by mastering details that often confound its competitors. Successful retailing, as one Wal-Mart executive has said, is "made up of thousands of little things," and Wal-Mart is especially strong at identifying those little things and doing them right.

For instance, long checkout lines are rare at Wal-Mart stores; most now scan bar codes. Wal-Mart's shelves stay full, even though the turnover of goods is rapid; Wal-Mart has heavily automated the flow of merchandise, from manufacturers to warehouses to stores, and can send goods quickly wherever they are needed.