Monday, July 18, 2011

Walmart: The Most Successful Retailer in History

Walmart is without question the most successful retailer in the history of the United States, and in the history of the entire world by almost any measure (number of stores, sales revenue, number of employees, market share, etc.) Here are some Walmart facts:

1. In 2010, American consumers bought almost as much merchandise at low-priced Walmart ($307.7 billion in U.S. retail sales) as they purchased from the next five largest U.S. retailers combined ($324.5 billion): Kroger ($78.3 billion), Target ($65.8 billion), Walgreen ($61.2 billion), Home Depot ($60.1 billion) and Costco ($58.9 billion).   

2. In 2010, American consumers purchased more than 7% of their retail sales at a Walmart or a Sam's Club stores, and more than 8.5% of retail sales if autos are excluded.  

3. Walmart now operates more than 9,000 retail outlets around the world in 15 countries.  

4. For the first time in its history, 2011 marked the first year that Walmart operated more retail stores outside the U.S. (4,803) than in the U.S. (4,427), and the international units generated more than 27% of Walmart's 2010 revenue. 

5. In 2005, almost half (46%) of Americans lived within 5 miles of a Walmart or Sam's Club, and 88% lived within 15 miles of a Walmart or Sam's Club.  

6. As Vincent Geloso points out on his blog (which inspired this blog post), "The growth of productivity at Wal-Mart, matched by real wages growth, has allowed the corporation to cut prices systematically and provide consumers with a service they really desire.  This has resulted in growth that is faster than the overall rate of economic growth."

The chart above shows how Walmart sales as a share of U.S. GDP have grown from about one-third of one percent (0.37%) in 1989 to more than 2% (estimated) in 2011.  In other words, for every $45 dollars spent in the U.S. economy this year, almost $1 will be spent on a purchase at a Walmart. If we account for Walmart's total world sales, its sales as a share of GDP will approach 3% this year.  

MP: There has probably been no other company or organization in the history of the world that has done a better job of serving consumers than Walmart, with its "Everyday Low Prices" and obsession with supply chain efficiency.  Walmart's increasing share of U.S. GDP is a testament to its amazing success at creating more consumer surplus than any company in history. 

Related: Watch this animation of Walmart's amazing expansion in the U.S. from 1962 to 2004:


30 Comments:

At 7/19/2011 7:36 AM, Blogger PeakTrader said...

Many people seem to believe the masses would be better off without WalMart.

 
At 7/19/2011 7:56 AM, Blogger PeakTrader said...

Also, there are many Americans who believe paying 50% in taxes for government services is about right.

 
At 7/19/2011 9:16 AM, Blogger infocyde said...

When a US aircraft carrier is burning off the coast of Taiwan, and the media zooms up on the chard remains of dead and dying US Service Members, remember that shopping at Walmart and other big box outlets enabled. Just saying.

 
At 7/19/2011 9:28 AM, Blogger Che is dead said...

"When a US aircraft carrier is burning off the coast of Taiwan ..."

If your disturbing vision should ever come to pass, the real enabler will have been Bill Clinton who authorized the transfer of classified missile technology to the Chinese to the benefit of key donors. Just saying.

 
At 7/19/2011 9:32 AM, Blogger PeakTrader said...

What is the breakdown of revenues among federal, state, and local governments?
Urban Institute and Brookings Institution

"Federal, state, and local revenues totaled nearly $5.2 trillion in 2007.

Federal revenue made up almost half of that total, states collected about 30 percent, and local governments brought in 20 percent."

 
At 7/19/2011 10:03 AM, Blogger PeakTrader said...

Offshoring low-profitable goods to China benefits the U.S. more than China.

The U.S. imports those goods at lower prices and higher profits, while (limited) U.S. resources shift into more profitable goods and into emerging industries.

The U.S. gains-in-trade are greater than China's gains-in-trade (particularly, given China's unaccounted social costs).

 
At 7/19/2011 10:44 AM, Blogger Jet Beagle said...

infocyde: "remember that shopping at Walmart and other big box outlets enabled."

Please explain the logic by which you come to such a conclusion.

This should be amusing to read.

 
At 7/19/2011 11:11 AM, Blogger Benjamin said...

Aircraft carriers can easily be sunk by missile, or even more easily by submarine-fired torpedo.

The Chinese surfaced a quiet diesel-electric sub in the middle of Seventh Fleet war games recently, and no one knew it was there until it raised itself.

At that range, it could have sunk the Seventh Fleet flagship w/o difficulty.

The vulnerability of surface ships to Exocet-type missiles (which improve every year) has been known for decades.

In 1971, U.S. Admiral Paul Cohen, wrote in Foreign Affairs magazine, "The effectiveness of merchant ships in ocean transport-and of surface naval vessels to protect them or to blockade them as the circumstances require- was the foundation on which Great Britain built her empire, on which the United States bases the credibility of her international commitments and by which the U.S.S.R. hopes to expand her role in Africa and Asia. That foundation continues to erode under an irresistible tide of technology, the key expressions of which are the submarine and the missile."

Cohen suggested an all-submarine Navy.

That we have surface ships today in the US Navy is a expression of the coprolite that characterizes all federal military and civilian agencies. Parasitical self-indulgence is the hallmark of all federal agencies.

In any real sea battle, surface ships will have to retire to port, or the ocean bottom.

All they say, there are two kinds of vessels in the Navy: "Submarines and targets."

 
At 7/19/2011 11:12 AM, Blogger Benjamin said...

BTW, if WalMart is so great, why has the stock done zilch for 10 years running?

 
At 7/19/2011 11:33 AM, Blogger Jet Beagle said...

Benjamin: " if WalMart is so great, why has the stock done zilch for 10 years running?"

Hard to say why investors do not recognize that WMT consistently has a 20% to 23% return on equity.

Many investors such as me do not look at just stock prices. WMT has a dividend yield of about 2.5%. The company has increased its dividend consistently for 37 years running. Some of us value such dividends very highly.

 
At 7/19/2011 11:43 AM, Blogger PeakTrader said...

WalMart same stores annual sales growth has slowed:

http://retailsails.com/monthly-sales-summary/wmt/annual/

 
At 7/19/2011 11:51 AM, Blogger Benjamin said...

Jet Beagle-

I like dividend stocks too. But the stock should go up with higher divvies.

 
At 7/19/2011 11:59 AM, Blogger Buddy R Pacifico said...

It is interesting to note that WalMart stores in China are unionized. What union represents WalMart's Chinese workers? The Communist Party's All China Federation of Trade Unions (ACFTU).

Some may wonder, if the currently non-union U.S. stores may ultimately be represented by the ACFTU.

 
At 7/19/2011 12:49 PM, Blogger Jet Beagle said...

Benjamin,

I agree. My only point about the dividends was that Walmart returned more than "zilch" over the past decade.

Again, I do not understand why Walmart stock price has not appreciated. The company has returned 20 to 23 percent on equity annually. Apparently investors were either expecting more or else do not expect such ROE in the future.

 
At 7/19/2011 1:38 PM, Blogger Benjamin said...

Jet B-

Making predictions is hard, especially about the future. WalMart may have great global future.

But in the USA, I suspect the dollar stores are running away with the ball. Also, Target stores have better merchandise.

WalMart strikes me as the Sears of our time. A terrific business model, but growing old.

 
At 7/19/2011 1:44 PM, Blogger MaggotAtBroad&Wall said...

It's really an amazing story. They've got $36 billion invested in inventory on any given day, and over $100 billion more invested in physical plant and equipment. Yet they're able to generate enough foot traffic to turn over that low margin inventory often enough to pay the salaries and other benefits for over 2 million employees and still generate an acceptable ROI.

BTW, I highly recommend their Open Table pizza.

 
At 7/19/2011 2:01 PM, Blogger Ron H. said...

Jet

"Apparently investors were either expecting more or else do not expect such ROE in the future."

If I had to guess - and that's all I can do - I'd say it was the latter. as the worlds largest company, Walmart is in new, uncharted territory as far as growth is concerned. Obviously there is a saturartion point, at which the world can't support even 1 more walmart. :) Perhaps investors fear the unknown.

 
At 7/19/2011 2:08 PM, Blogger Innovation rules said...

Given the size of MSAs, how many seemingly logical economic rules does Walmarts' early growth defy or contradict?

Since it avoided large MSAs for years, did Walmart limit its growth rate or help ensure its long term success?

 
At 7/19/2011 3:54 PM, OpenID Sprewell said...

I doubt the Walmart model is sustainable, as even conventional retailers are going to be hit by the internet and the changes it brings. Their main advantages appear to be the negotiating leverage their scale affords, their supply chain/logistical innovation, and possibly just the ability to execute better than anyone else. The first two can be reproduced online in different ways, so that leaves their overall competency as their main competency. ;) I doubt that will be enough going forward.

 
At 7/19/2011 5:37 PM, Blogger Craig said...

I doubt that will be enough going forward.

Walmart has shown an ability to innovate in the past. They may still be able to.

 
At 7/20/2011 1:20 PM, Blogger infocyde said...

@Benjamin I see you understand naval warfare. US, due to lack of an industrial base because it has outsourced production to competitors, is reducing it's submarine force. We are producing 2 Virginias a year, and that might go down to one. Filling the gap to replace retiring 688's we would need about 3-4 Virginias a year. Our current surface fleet is now dipping below 285 ships, while the Chinese surface fleet and the capability of its shore based anti ship missiles grow in number and effectiveness. Where do the Chinese get the cash to modernize their armed forces? By trade of course! 500 Billion annually roughly from the US. I think Walmart roughly on it's own if it where a country would be China's third largest trading partner. Your purchases at the big boxes directly enable a foreign antagonistic military that openly advocates future war with the United States as "inevitable" in it's military journals.

Why doesn't the US have the money to maintain a 300 ship navy? Why trade of course! Less domestic players, less domestic competition, smaller indigenous skill base, more cost, and less revenues to purchase ships with. Again, this should't be rocket science or amusement for the likes of @Jeff Beagle. I'm saddened that you think enabling a future adversary is "amusing". Maybe come out and live in Detroit for awhile, actually live on the bleeding edge where this free trading ideology's affects are most felt. You might find that amusing yourself...no? Don't worry, Detroit is coming to a city near you if we don't change course, given time...and I hope all the blessings that come with that you fully enjoy.

 
At 7/20/2011 2:25 PM, Blogger Ron H. said...

infocyde,

"Where do the Chinese get the cash to modernize their armed forces? By trade of course! 500 Billion annually roughly from the US."

That's VERY roughly. According to the US Census Bureau, US firms imported $364.9 bn from China in 2010 and exported $91.9 bn to China. Thats a trade imbalance of $273 bn. Thats a little more than 1/2 the number you carelessly tossed out.

You didn't mention the other side of the equation, capital account surplus, which results in a $0 total balance of payments.

Also missing is any mention of the obvious fact that goods imported by Us companies are not 100% profit, but cost something to make, so a dollar amount of revenue for Chinese manufacturers isn't the amount available to spend elsewhere.

You also ignored the fact that US imports are paid for with US dollars, which the Chinese can't spend directly for military hardware.

And the other side:

"Why doesn't the US have the money to maintain a 300 ship navy? Why trade of course! Less domestic players, less domestic competition, smaller indigenous skill base, more cost, and less revenues to purchase ships with."

Are you suggesting that US consumers should forego the higher standard of living they enjoy by buying cheaply at Walmart, so that they can be taxed more heavily to pay for more ship so that magic number of 300 ships can be maintained?

As Canada, and the EU as a single entity, not China, are the largest US trading partners, I wonder why you don't envision a US carrier burning off the coast of Nova Socia or Germany?

Your comment appears to be more of an emotionally charged rant than a factual economic discussion.

Is it possible that people with slanty eyes speaking an inscrutable foreign language are your real concern?

 
At 7/20/2011 3:24 PM, Blogger Jet Beagle said...

infocyde: "I'm saddened that you think enabling a future adversary is "amusing"

Your explanation wasn't as amusing as I had hoped. I suppose these arguments get less amusing and more boring after hearing them a few dozen times.

By the way, the U.S. industrial base is as strong as it has ever been. Yeah, we don't make so many cars in Detroit anymore. Insteadm we make them in Tennessee, South Carolina, Mississippi, and Texas.

 
At 7/21/2011 7:27 AM, OpenID Zhang Fei said...

I think Walmart roughly on it's own if it where a country would be China's third largest trading partner. Your purchases at the big boxes directly enable a foreign antagonistic military that openly advocates future war with the United States as "inevitable" in it's military journals.

Your beef isn't with Wal Mart - just about every retailer, from single store entities to Target, carries a large number of Chinese-made SKU's. And if they weren't made in China, they'd be made in Taiwan, Korea, Malaysia, Thailand, etc.

 
At 7/21/2011 12:36 PM, Blogger Ron H. said...

"Your beef isn't with Wal Mart - just about every retailer, from single store entities to Target, carries a large number of Chinese-made SKU's. And if they weren't made in China, they'd be made in Taiwan, Korea, Malaysia, Thailand, etc."

And ultimately, your beef is with millions of US shoppers who enjoy buying at lower prices.

 
At 7/22/2011 1:02 AM, Blogger infocyde said...

@Ron H. You were correct; my numbers do not match the official trade deficit. Mine were a guestimate. So the damage I feared done in one year actually takes two.

And of course the capital account surplus, this would be an interesting can of worms to open, but I'll leave it for now.

Of course the good imported are not a 100% profit, but using 14 hour a day near slave labor in an unregulated environment, worst case offender being Walmart, certainly is more profitable than American labor. And of course all that savings is passed directly on to the consumer due to the fierce competition in the market place; this is clearly reflected in the downward pressure we see on CEO salaries and bonuses...

"You also ignored the fact that US imports are paid for with US dollars, which the Chinese can't spend directly for military hardware." Really? Are you intellectually naive enough to think that being paid in the de facto global currency won't allow China to use some of these funds to buy hardware, spend these monies on R&D for military development, and use these funds in intelligence operations to steal US/Russian/European technologies...really?

 
At 7/22/2011 1:03 AM, Blogger infocyde said...

@Ron H "Are you suggesting that US consumers should forego the higher standard of living they enjoy by buying cheaply at Walmart, so that they can be taxed more heavily to pay for more ship so that magic number of 300 ships can be maintained?

Actually, yes. Because part of our standard of living involves maintaining a credible military deterrence to avoid war or persecute one successfully if we have to. If purchasing foreign goods that under cut your industrial base that is critical to your national security interest, yes, you should avoid purchasing those goods. Is this so hard to understand? Short term gains vs. long term gains? Greater good later rather than immediate gratification now? Actually Ron H. what I'm advocating is that you buy all your goods at Walmart. Same with all you other academic bloggers here. Don't just walk in one once or twice a year, go there all the time. Enjoy...live by what you advocate. Something tells me most of you skirt Walmart. Walmart is for the "US Consumer" i.e. poorer and lower middle class people, who I'm sure your tax payer and trans national policy group funded pay checks put you above.

So essentially what you guys are hawking is that our lives are enriched being able to purchase junk at Walmart while our standard of living drops because trillions of dollars have been sucked out of the US Economy through our lassie fair trade policies. Sorry I'm not buying it, and more and more people aren't buying it either. You can toss facts, figures, and ideology all you want...but when people look outside and see numerous houses in their neighborhoods up for sale for months, many of them foreclosures, hear tales from relatives and friends of lost jobs and reduced wages, panic as their retirement savings dwindle...you snake oil isn't going to fly any more.

And to finish off, in a typically liberal manner, Ron H tosses out the race card. Sad. I focus on China because their military focuses on us. Canada isn't selling military drones and missiles at military trade fares with pictures of burning US Carriers in their marketing materials. Germany's military journals aren't filled with the talk of a coming war with the US in the next twenty years. But we could bring out numerous cases about how Germany has ripped off US companies, and how France also actively spies on and steals from us, but I focus on China because they pose the biggest future risk and pose the most immediate damage. As far as China goes though, hats off to them. They successfully identified an Asymetrix weakness, the fact that our schools and leaders are filled with ball-less metrosexual latte drinking Austrian cultist, and they used our blindness to their mercantilism beautifully. Hats off to them. The only racism I see on this page is your characterization of Chinese people as "slanty eyed speaking inscrutable foreign language."

 
At 7/22/2011 1:03 AM, Blogger infocyde said...

@Jet Beagle Sorry to not entertain you. You should research the difference between manufacturing and assembling. It might open your eyes about where cars are actually made. But point taken, Honda might actually be more American in some models than Ford. Of course we could read about how when Japanese assembly plants were first introduced there was much fan fare and how US contractors would supply many of the parts needed. Then slowly stories would creep in (quietly on the back page, so no one spilled their frapachinos) about how Japanese auto suppliers would quietly build additional plants either in the US or back home that would come to replace the US owned contractors...good business I guess for the mainland, as more and more of the profits are sent back to Japan, and political points are scored by employing a few gai jin. When we need a new tank maybe Toyota can build it, or better yet China. Maybe they will pause the war we are having with them so they can spin us up some new hardware.

The US industrial base being as strong as it has ever been...oh boy. Let's approach one aspect of that in laymen's terms. You mean more profitable, more efficient than ever? Perhaps, in what industries it remains in. Some of us still labor under the delusion that having 45,000 factories each employing over 500 people, supplying goods and supporting know how in numerous industries, is better than a handful that are only in a few industries but run very profitably and efficiently. Heck maybe it would be best to just have one factory, making one product, employing one person, and running at almost 100% profit! Our GDP efficiency per worker numbers would be off the charts! Other nations, with their numerous thousands of production plants employing millions would eye us with envy...if only they and their economies could be like us...

@Zhang Fei You are correct, my beef is with the
American consumer and our trade policies that do not penalize foreign economic competitors for dumping, intellectual property theft, near slave labor conditions, protection of copyrights, etc... I'm not against trade, but I like the sound of fair and balanced trade that benefits society as a whole, not just the folks at the top and academics that shrill for them.

 
At 7/22/2011 1:08 AM, Blogger infocyde said...

Alright, I will leave you all to your academic boxed thinking for now, I do like this blog and I push some of the articles out through social media now and then, just not this one.

I took some cheap shots here that weren't called for, but this is a subject I feel passionately about, and I worry you guys in your quest to prove out a theory are betting our future. Since the prevailing wisdom is yours, I hope I am wrong.

Peace.

 
At 7/22/2011 3:46 AM, Blogger Ron H. said...

infocyde: "And of course the capital account surplus, this would be an interesting can of worms to open, but I'll leave it for now."

Well, of course you will. A discussion of capital account surplus would defeat your entire argument.

"Really? Are you intellectually naive enough to think that being paid in the de facto global currency won't allow China to use some of these funds to buy hardware, spend these monies on R&D for military development, and use these funds in intelligence operations to steal US/Russian/European technologies...really?"

We should REALLY have that discussion of capital account surplus. No one is building an entire navy by directly spending USD.

Who do you think can be hired in China to do R&D and get paid in USD instead of the local currency? Think about this more before you hit 'publish'.

"If purchasing foreign goods that under cut your industrial base that is critical to your national security interest, yes, you should avoid purchasing those goods."

What can I buy at Walmart that undercuts the US industrial base? Are plastic lawn chairs now a national security interest? Is making plastic cutlery an important part of US manufacturing?
give me a break.

You should be aware that the US is the top manufacturing country in the world.

"You should research the difference between manufacturing and assembling. It might open your eyes about where cars are actually made."

You probably should have made sure you knew what you're talking about before you made such a suggestion.

"I took some cheap shots here that weren't called for, but this is a subject I feel passionately about..."

If this is important to you, you might want to learn more economics. You can certainly sling popular media talking points like an expert, but appeals to emotion aren't likely to be taken seriously here.

Actual data, perhaps with references, would give more weight to your comments.

 

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