50 Years of Walmart's Supply Chain

If you haven't heard, it is the fiftieth anniversary of Walmart - and its legendary supply chain - this month.

The first Walmart store was opened on July 2,1962 in Rogers, Arkansas. (You may be surprised to know that Kmart and Target first opened stores that same year). The impact on the retail sector, the supply chain, and society as a whole from what is now by far the world's largest merchant has been nothing short of profound, especially the last 25 years.

Founder Sam Walton, a notorious cheapskate in his personal life, was even more so in business. The chain's fantastic success was driven by Sam's obsession with keeping costs low, and then using that cost advantage to drive down prices to increase volume, which lowered costs and thus prices further, in a virtuous circle.

Ultimately, that focus on costs turned to logistics, and Walmart certainly led the way in developing sophisticated systems to drive down logistics costs much earlier than almost everyone else.  The company honed these systems and capabilities in the South and Southwest regions of the country, sort of hidden from the major retailers headquartered in the Northeast, Chicago, etc., until it was too late to stop or even slow down a chain headquartered in then rural Bentonville, AR.

In 2011 (really its 2012 fiscal year ending in January), Walmart had global sales of $444 billion, a number almost hard to imagine. Of that, $318 billion was domestic US (combining US store sales and Sam's Club), and $126 billion was international. A chart of Walmart's sales growth since 2001 across those three segments is shown below. Wow. By comparison, the next largest US retailer is Kroger, with sales of about $90 billion, less than one-third of Wal-Mart's US total.

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So that means the cumulative average growth rates over that time are: US stores 6.62%; Sam's Club 6.23%; international  13.5%; and total company 8.08%.

I have seen at various times numbers looking at Walmart's sales as a percent of the US total, but most have seemed flawed to me. So I did something I haven't seen done before. I took total US retail sales as reported monthly from the US Census Bureau.

I then subtracted from that total each year sales of automobiles, auto parts, gasoline stations and restaurants. This then gives us a better look at the markets in which Walmart more legitimately competes (yes, I know Walmart sells some gasoline and does a bit of in-store restaurant business, but I believe these aren't material to the analysis).

So, I then calculated Walmart's US retail market share by combining US store and Sam's sales and dividing that by the size of the overall US retail market (from my definition.) And what results is a pretty powerful and important story, as shown in the chart below. US market share has grown from 10% in 2001 to 13.8% in 2011, after having topped 14% in the preceding two years.

That's because Walmart's US sales have been growing at more than 6%, while overall retail sales over that time have grown at just a 3.2% rate, from about $1.6 trillion in 2001 to $2.3 trillion last year. Walmart's growth in US sales from 2001 through 2011 is an amazing $149 billion - $50 billion more than the total sales of no. 2 Kroger last year. That is coming out of somebody's lunch, and there are only so many mom and pops to knock off.

All this in the end of course has a supply chain impact, as Walmart becomes a larger and larger share of the business of most consumer goods manufacturers. And as Walmart continues to push its own private label brands very aggressively (as do Kroger and others, I will note).

Walmart has had a huge impact on supply chain thinking and practice, and is regularly cited for its supply chain excellence by pundits who can't even really tell you why it is great. See final comments at end of this article.

There is no question that Walmart has been at the heart of many supply chain innovations. The crack staff helped me put together a succinct timeline of the many major intersections of Walmart and the supply chain, but there just isn't room here. You can find it here: Walmart Supply Chain Timeline.

It really is critical to this story - I encourage you to take a look. It is really interesting.

As to whether Walmart's supply chain is truly great, I have my thoughts (and those of others), but am saving that for another day

How important has Walmart been to the development of supply chain practice? What do you think its most important contributions were? Anything major we missed in our timeline? Let us know your thoughts at the Feedback button below.

Supply Chain Graphic of the Week:

US Trade Deficit with China Continues to Grow

This Week's Supply Chain by the Numbers for July 26, 2012:

• How Many US Manufacturers are Coming Back Home?
• Caterpillar Strike a War of Attrition
• Walmart's Amazing Store Count
• UPS Flying a Bit Lower Out of Asia
  

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Supply Chain Thought Leadership

Making e-Commerce Economically Sustainable in the Consumer Goods to Retail Sector Using Supply Chain

SUPPLY CHAIN TRIVIA

Before opening his first Walmart, Sam Walton first ran a franchise store for what once popular "Five and Dime" store chain?

Answer Found at the Bottom  of the Page