Wal-Mart Stores is an irresistible (or at least unavoidable) retail force that has yet to meet any immovable objects. Bigger than Europe's Carrefour, Metro AG, and Tesco combined, it's the world's #1 retailer with some 2.2 million employees. In the US, Wal-Mart operates more than 4,000 stores, including 3,000-plus Supercenters that sell groceries and general merchandise, 620 Sam's Club warehouses, and a growing number of smaller format stores. The company's faster growing international division (29% of sales) numbers more than 6,100 locations; Wal-Mart is the #1 retailer in Canada and Mexico and has operations in Asia (where it owns a 95% stake in Japanese retailer SEIYU), Africa, Europe, and Latin America.
Wal-Mart Stores rings up about 70% of its sales in the US. In the 20 years since the Arkansas-based retailer entered Mexico (its first and largest foreign market), Wal-Mart Stores has become an international retail powerhouse with operations in 26 countries. Of its 10,000-plus stores, more than half are located outside of the US. Indeed, Walmart International is the company's growth engine, accounting for nearly 30% of sales. Major foreign markets include Mexico, the UK, Brazil, and Japan.
Wal-Mart's general merchandise and food retailing operations come in multiple formats, the largest being its 3,000-plus Supercenters. The retailer also operates a dwindling number of discount stores (many of which are being enlarged to become Supercenters) and Sam's Club warehouse stores. Smaller formats include Neighborhood Markets in the US and supermarkets and bodegas in Mexico. The International division operates a diverse portfolio with nearly 70 banners, representing three major categories: retail, wholesale, and other (which includes restaurants in Chile, Japan, and Mexico).
The retail giant's online incarnation, Walmart.com (launched in 2000), offers more than 1,000,000 products. The e-tailer is expanding by offering merchandise from other retailers at its new virtual mall called Walmart Marketplace. Launched in August 2009, Walmart Marketplace offers apparel, baby, home, and sporting goods items from other sellers in return for a share of the revenue. In Demonstrating its commitment to e-commerce and social media, Wal-Mart acquired Kosmix, a social media technology provider, in 2011. Kosmix developed a platform that enables users to filter and organize content into social networks. As part of the transaction, Kosmix became @WalmartLabs, and founders Venky Harinarayan and Anand Rajaraman stayed on to lead the business. Also, in 2012 Walmart Global eCommerce agreed to increase its investment in Yihaodian, one of China's leading business-to-consumer e-commerce companies, to 51%.
Sales and Marketing
Wal-Mart Stores spent $2.3 billion on advertising for both fiscal 2013 and 2012 (ended January), down from $2.5 billion for fiscal 2011. Its advertising consists primarily of print, television, and online ads.
The world's largest retailer's sales topped $466 billion in fiscal 2013 (ended January), another all-time high for the company, driven by rapid growth overseas and improved performance at home. Net sales increased 5% in fiscal 2013 versus the prior year, driven by a 7% gain for the international division, a 5% jump in sales for Sam's Club, and a 4% hike in sales for Walmart US. While the US business lagged the others, it represented an improvement over fiscal 2012 when sales grew by just 1.5%. Same-store sales increased 2% in fiscal 2013, after rising just 0.3% in fiscal 2012, and posting negative comparisons in the two previous years.
With its US operation stuck in a rut, Wal-Mart in mid-2014 replaced the head of its US stores division and announced plans to significantly accelerate small store growth here, adding approximately 270 to 300 small stores, including up to 140 Express format stores, over the course of the year. (Wal-Mart is rebranding the smaller-scale Walmart Express stores under the Neighborhood Market banner.) The retailer also plans to open 115 new supercenters. Among the many measures the company has taken to get its groove back at home (including a sunny new logo), was a restructuring of its US organization (including top executive changes), the formation of a new division to oversee global e-commerce (called Walmart Global eCommerce), and a new global sourcing partnership with Hong Kong-based Li & Fung. Under the terms of the deal, Li & Fung -- a provider of supply chain services -- will form a new company to manage the Wal-Mart account and will act as the company's buying agent. The reorganization in the US entails the formation of three geographic business units: Walmart West, Walmart South, and Walmart North, in an attempt to more efficiently manage its domestic stores. While the retail operation was carved into three geographic slices, the logistics, real estate, and store operations functions were consolidated under one leadership team.
With US suburbs saturated with Wal-Mart stores, the retailer has tried -- mostly unsuccessfully -- to gain access to urban markets. In 2011 Wal-Mart scored a significant breakthrough in its plan to build stores in US cities when it teamed up with Michelle Obama to launch its five-year plan to provide its customers with healthier, more affordable foods. Wal-Mart will reformulate its Great Value private label line of foods to reduce sodium, fats, and added sugars (and encourage its major suppliers to follow suit). Concurrently, with the first lady's support, it announced a commitment to building stores in underserved communities (aka "food deserts").
Given the breakneck pace of its international expansion over the past two decades and the growing importance of the international business to Wal-Mart's overall financial health, the fact that its Mexican subsidiary, Wal-Mart de México, is the subject of a bribery scandal is a serious blow to the company and its leadership. Mexico is Wal-Mart's largest foreign market and home to more than 2,000 of its supercenters, Sam's Clubs warehouse stores, and numerous other retail formats. Farther south, Wal-Mart is growing quickly in numerous other countries in Latin America, including Chile and Brazil, where it operates 316 and 512 stores, respectively. One of the world's fast-growing emerging markets, Brazil is key to Wal-Mart's expansion in the region.
Asia -- with the exception of Japan -- is another hot growth market for Wal-Mart. Through joint ventures the company operates almost 400 stores in China. To support its growth there, Wal-Mart is building its Asian headquarters in the coastal city of Shenzhen, the site of its first supercenter and Sam's Club in China. And in a move that demonstrates how important the vast Chinese market is to the world's largest retailer, staunchly anti-union Wal-Mart has announced that it will work with officials there to establish labor unions in all Wal-Mart stores in China. Wal-Mart is poised to enter India's huge but fragmented market via a joint venture with the Bharti Enterprises Ltd. (Regulations in India prohibit retailers like Wal-Mart from selling directly to consumers, but allow them to engage in wholesale cash-and-carry and back-end supply chain management operations in the country.) Wal-Mart's first wholesale outlet in India -- a BestPrice Modern Wholesale store --opened in 2009 and the company has since grown to number 20 locations. Another 50 locations are expected to open by 2019. In an about face, Wal-Mart in fall 2014 announced it will shutter 30 underperforming stores in Japan, just two years after it began expanding in there.
Mergers and Acquisitions
In 2011 Wal-Mart completed two major acquisitions. It added its first locations in Africa through its purchase in June of a controlling stake in South African retailer Massmart Holdings. The purchase bought Wal-Mart entry into the fast-growing African market where Johannesburg-based Massmart runs 290 stores in about a dozen countries (with most locations in South Africa). Prior to its purchase of the Massmart stake, Wal-Mart's UK arm, ASDA, in April acquired the Netto Foodstores chain of discount supermarkets in the UK from owner Dansk Supermarked Gruppen. The addition of Netto's stores will help ASDA narrow the gap with Tesco, Britain's leading retailer.
Following the death of Helen Robson Walton in 2007, the Walton family announced that much of the Wal-Mart stock held by Mrs. Walton through a family partnership will be donated to charity over several years. As a result, the Walton family's grip on the world's largest retailer will slip from about 50% (as of April 2013) to about 33%, following the disposition of Mrs. Walton's stake.