The big-box decade

Discount Store News, Oct, 1999

The 1980s will forever be remembered as the decade in which Wal-Mart earned its place in retail history books.

The company began the decade with sales of $1.2 billion and 276 stores and ended with sales of $25.8 billion and more than 1,500 stores. It was the decade during which the company continued to push forward with technology to create greater efficiencies, recognized the importance of food retailing to its growth, and made its first moves to explore international retailing.

In a span of 10 years, Wal-Mart would emerge from relative obscurity and regional expansion to become the chain best positioned to dominate mass market retailing.

Wal-Mart's growth during the '80s wasn't a sure thing, and during the early part of the decade the company was hardly a proven commodity. Talented management had joined the chain during the '70s, but questions began to emerge about future growth. There were questions about whether the company could handle the acquisition of a chain called Big K and whether its gras-roots style of management could survive rapid unit and geographic expansion. Even in the early '80s, the question of Wal-Mart's increasing size and its ability to react to change was raised as a concern.

But right from the start, Wal-Mart was already laying the foundation upon which it would build its future.

In 1980, Wal-Mart was among the first retail companies in the country to begin experimenting with the use of universal price code scanners. Wal-Mart executives hoped the technology might help the stores handle more goods, reduce the amount of labor involved in the process and move customers through checkout more rapidly.

At the time, about 45% of the basic, fast-moving hard lines in its inventory were already being shipped to the store UPC marked. Wal-Mart installed 24 scanners in two stores and quickly discovered that the technology was fulfilling its promise--it was increasing cashier productivity by more than half.

In the coming years, it would be the application of UPC technology in its distribution centers that provided Wal-Mart's second great efficiency coup. But in 1980, the company had only three DCs in operation: Bentonville and Searcy, Ark.; and Palestine, Texas. By mid-decade, Wal-Mart had doubled its DC capacity and was operating six centers to serve 20 states.

In 1986, Wal-Mart ran its first laser scanning test in a newer DC in Douglaston, Ga. The facility was able to track and sort merchandise, and provide Wal-Mart's growing store base with "paperless" invoices. Within a year, the company was rolling out the system.

Through experimentation and the rapid adoption of the tests that met their objectives, Wal-Mart proved it could meet the challenges it faced.

And it continued to set ambitious goals, such as planning for a 40% sales gain in 1982. That would bring sales to $3.44 billion from $2.44 billion in fiscal '81. Wal-Mart also set a unit-growth projection of 60 stores, which would increase its store count by 13% to 555. During 1981, Wal-Mart had entered Georgia and South Carolina through the 104-store Big K acquisition. Nebraska and Florida would be entered in 1982.

Wal-Mart's explosive growth phase meant the company would also turn to different formats. In 1983, Wal-Mart opened its first Sam's Club, a format that would expand to 123 units by the decade's end and produce $6.4 billion in sales.

Not everything Wal-Mart did worked exactly as planned, but even disappointments could be turned into learning experiences.

Wal-Mart opened 260,000-sq.-ft. hypermarkets during the mid-'80s, and although the economics of the format couldn't be made to work, Wal-Mart learned a lot about being a food merchant. The hypermarkets were the predecessors to the supercenters opened toward the end of the decade. The first Wal-Mart Supercenter opened its doors in 1988 in the form of a 126,000-sq.-ft. store in Washington, Mo.

Another initiative that failed to bear fruit but ultimately set the course for furture growth was its near-entry into Mexico in 1981. Although its planned joint venture with the Futurama food and general merchandise chain fell apart, the experience set the stage for Wal-Mart's successful partnership with Cifra nearly 10 years later.

The '80s was also a decade in which Wal-Mart dealt with important management issues. David Glass was named president and coo in 1984 and in 1988 was named ceo. That same year, Don Soderquist was named vice chairman and coo.

Throughout the course of these changes, many observers were struggling to understand the reasons for Wal-Mart's success. Wal-Mart, after all, was not the only company growing at a rapid pace during the 80s. The category killer segment in particular was expanding rapidly as seasoned retail executives around the country created concepts to exploit discrete category segments.

But Wal-Mart throughout the '80s operated with a unique set of factors that fostered its success: the company's culture, an everyday low price strategy, an emphasis on distribution and technology, rigid cost controls and a unique blend of participatory management and entrepreneurial flexibility.