Wednesday, January 09, 2008

Wal-Mart's Diffusion: A Slowly Blooming Flower

Wal-Mart started with its first store near Bentonville, Ark., in 1962. The diffusion of store openings radiating out from this point was very gradual. And this diffusion didn't just occur in one direction, but spread out in all directions, with the same measured deliberation. Imagine a slowly blooming flower, or a pebble dropped in a pond, with the waves moving across the water in slow motion.

It is useful to contrast Wal-Mart with Kmart, as both opened their first stores in 1962. Wal-Mart, from the very beginning, was different from Kmart. Wal-Mart built up its store network gradually from the center out; Kmart (and Target, for that matter) began by scattering stores all over the country. Early on, Wal-Mart focused on logistics, with things like daily deliveries from its distribution centers, early adoption of advanced communication technology and so forth. Kmart did not do these things. A customer going into these two stores might not be able to see much of a difference between the two stores. But underneath, in the way that merchandise was getting on the shelves, these stores were very different.

I don't think that Wal-Mart's logistics strategy was appreciated at the time. Its model, now being replicated by others, was a new model.

From an interview with University of Minnesota economist Thomas J. Holmes in the Minneapolis Federal Reserve's "FedGazette" on
Wal-Mart's location strategy.

Watch
an incredible video of Wal-Mart's entire year-by-year diffusion path and location strategy throughout the United States, beginning in Arkansas in 1962.

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