A Glass act - Wal-Mart CEO David Glass - Chief Executive of the Year - Cover Story

Chief Executive, The, July-August, 1995 by J.P. Donlon

David Glass is no Sam Walton, swapping the latter's affability for expertise in distribution and technology. With Wal-Mart set to crack $100 billion in sales, Glass is targeting global markets and adjusting to slower growth.

One may be forgiven for not immediately identifying David D. Glass from a lineup of leading executives as the CEO of the world's largest and most successful retailer. The Mountain View, MO-born Glass is unlikely to don a Hawaiian grass skirt and dance the hula on Wall Street as his predecessor and Wal-Mart founder Sam Walton once did on a bet. Where Sam was avuncular in person and spellbinding in public, Glass is quiet - almost reticent - preferring to listen rather than talk. Nor would Glass be seen dressed in a pink tutu, riding on the back of a flatbed truck cruising the town square as Wal-Mart managers from Ozark, MO, once did to raise money for charity. From James Cash Penney, Stanley Marcus, Marvin Traub, and Leslie Wexner to Sam Walton, retailing is over-stuffed with colorful personalities. Glass, 59, admits he has no charisma of this sort. His talents lie in a different direction.

Son of a feed-mill-operator father and a mother who worked as a uniform factory supervisor, David Glass earned a business degree at Southwest Missouri State University before working for a small Springfield, MO, drugstore chain, J.W. Crank Co. in 1960. He later joined another chain, Consumers Markets, where he came to the attention of Sam Walton, who, over the next several years, tried to hire him. Attending Wal-Mart's second store opening in Harrison, AR, Glass was not impressed with the yet-to-be-legendary Walton. On that summer day, watermelons trucked in for outdoor sale and display exploded from the intense heat and soon mixed with the droppings left by a donkey brought in for kiddie rides. The mess was not auspicious for a store opening. Glass remembers telling Walton that maybe he should find another line of work. Thinking Glass "one of the finest retail talents" he had met, Walton persisted. Glass joined Wal-Mart in 1976 as executive vice president of finance, before rising to vice chairman and CFO in 1982, and president and COO in 1984. Walton's first attempt at CEO succession proved a disaster. EVPs Ron Mayer and Ferold Arend became chairman/CEO, and president/COO, respectively, in 1974. By his own admission, Walton did not truly wish to retire, thus causing divided loyalties among management. Chastened by the experience, Walton took his time over a decade later in tapping Glass for the job and stepping down in earnest.

From its rise from a single discount store in Rogers, AR, in 1962 to more than 2,000 units (see chart, p. 49) in North America with more on the way in South America and Asia, Wal-Mart changed the competitive fundamentals of retailing. By locating large discount stores in small rural towns with "everyday low prices," Sam Walton grew his company and its profits at an average annual rate of 25 percent. At its current rate of 18 percent, Wal-Mart should hit the $100 billion sales mark by the close of the fiscal year ending Jan. 31, 1997. By locating in obscure, one-horse towns, Walton avoided direct competition from urban-centered retailers such as Kmart, which throughout the 1980s, he held in awe. At the time, manufacturers had the whip hand in deciding what goods were available to which retailers. The distribution revolution changed all that. Wal-Mart was not the first to marry computers to retailing. But in building on the innovations of others, it forged an integrated supply chain, enabling vendors to exchange invoices, purchase orders, and other documents with Wal-Mart via electronic data interchange. Stores are linked to the Bentonville, AR, headquarters via satellite, enabling the $83 billion giant to track and rapidly replenish inventory, and reorder at will from any of its thousands of suppliers. Sharing data with vendors, Wal-Mart merchandisers track sales by store and by item for a 65-week period. Satellite video links enable store managers in real time to inform one another of what's selling and what's not. Wal-Mart Stores Division President Bill Fields observes, "Computers can always tell you what you've sold, not what you should have sold." Addressing that conundrum, the company is working with the Teradata unit of AT&T Global Information Solutions to troubleshoot the store product mix with an expert system, software that reviews more than 50 million store and product combinations daily to make replenishment and marketing decisions. The collaboration also allows Wal-Mart to streamline basic customer transactions such as using scanners to automatically fill out and approve customers' personal checks, thereby reducing delays at the cash register.

Assessing the distribution juggernaut in hindsight - and the executives who contributed to its success - Walton wrote in his autobiography, "Made In America," that "David Glass has to get the lion's share of the credit for where we are today in distribution. David had a vision for automated distribution centers - linked by computer both to our store and to our suppliers - and he set about building such a system, beginning in 1978 at Searcy, AR." The math can be disarmingly simple. If it costs Wal-Mart 3 percent to ship goods to its stores while competitors' costs run 4.5 percent to 5 percent to move the same goods to its stores, that's 2.5 percent more profit before merchandising skills come into play. To hardscrabble Sam Walton, "damncomputer" was one word. To David Glass, it was the great enabler to develop Wal-Mart as the low-cost merchandiser. (Wal-Mart's sales, general, and administration expenses tend to average around 15 percent of sales compared with Kmart's 20 percent, and 22 percent to 25 percent for other mass merchants.)