| BUSINESSWEEK ONLINE : MARCH 29, 1999 ISSUE | ||||||||
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| COVER STORY
Q&A with Wal-Mart's David Glass ''The growth will be there if we're good enough'' For Wal-Mart CEO David D. Glass, the business hasn't been this good "since I've been in retailing." Net sales last fiscal year rose 17%, to $137.6 billion, with net income up 26%, to a record $4.4 billion, of which international sales contributed $12.2 billion, up 63%. And this year, Glass expects sales to jump at least 13% to, $155 billion. As of Jan. 31, '99, Wal-Mart had 1,869 discount stores in the U.S., 564 supercenters, and 451 Sam's Clubs. Internationally, it had 706 stores, including 74 in Germany purchased from Interspar in December. An additional 5 in China and 4 in Korea operate under joint-venture agreements. Glass says the company cut about $1 billion from inventories last year to lower interest costs and let store employees focus more on customer service. He says that Wal-Mart intends to position itself as more than the low-price leader. Glass also talked about where the growth opportunities are for the retailing behemoth in 1999, noting that there's still lots of room for more domestic stores -- in the Northeast, Northwest, and metropolitan areas. He was interviewed by Wendy Zellner, Dallas bureau chief. Excerpts follow: Q: At Wal-Mart's size, with sales of $138 billion last fiscal year, how do you keep the growth going? A: When I talk to our people I explain to them that there's a lot more opportunity ahead of us than anything we've ever seen in the past. And I think that's true. Q: But where do you see the opportunities? A: There's a lot of opportunity in general merchandise domestically...We still don't have coverage in this country. Plus, food's an opportunity. Internationally, we've built a base that will serve as a springboard there. Q: What about your new "Neighborhood Markets"? [These are the smaller, grocery-like units Wal-Mart is experimenting with. The company has four open and one under construction.] A: We are running the ones we have, and we are pleased with the results, and are discussing now what our strategy will be and how to roll that out. We're probably another 30 to 60 days [from making a decision]. Q: Do you still intend to open another 150 supercenters -- the combination grocery-general merchandise stores -- this year? A: Yes. I think food is a real opportunity for us...but we still have a lot to learn. I think the growth will be there if we're good enough to take advantage of it. Q: When was the last time it was this good to be a merchant in the U.S.? A: Not since I've been in retailing. Times are better today than in my memory. Q: But doesn't that make you nervous, make you feel it can't last? A: It can't. Even if [times] weren't this good, they wouldn't necessarily be bad. Q: What do you expect for '99? A: '99 is going to be better than I would have thought. It will be a rerun of '98. The calendar year will be very good. I think if the world doesn't come to an end at midnight, Dec. 31, that the first quarter will be tough. Q: You've often said in the past that Wal-Mart still leaves so much on the table. Where? A: The whole supply-chain function. How do you source $150 billion worth of merchandise comprising 200,000 items and have it in the right place at the right time? We are working on that from a logistics standpoint, but also from a sourcing and selection standpoint. There is a big opportunity for us to gain market share in areas and to improve our supply so we have the merchandise the customer wants to buy in the quantity they want to buy it. Additionally, our technology helps us to understand how the consumer is changing. If you've got 40 departments in a Wal-Mart store and you want them to be unique departments to that store, you can do it today. Q: Are you really doing that? A: We're just starting. We're more experimenting than effective with it, but it's here. Q: What kinds of things are you looking at to improve the supply chain? A: We're taking one of our key people and creating a global sourcing unit. I think sourcing is going to be one of our biggest challenges in the next five years. We'll begin to look at how we source all of our merchandise and how we move it most efficiently to our customers. Q: How is today's consumer different from those in the past? A: I used to say the consumer was concerned about where they bought an item or what label was in it. Now what's prestigious is what did you pay for it and did you get a value. But the consumer wants service. Q: What do consumers hate? A: They hate out-of-stocks. They hate poor service on the front end, and they hate things that they think are overpriced. One reason private labels have grown to the extent they have is some of the branded manufacturers were unable to control their cost and were always passing along that cost to consumers. Consumers began to come to us [and say], 'that's not value, I'm not buying that.' Q: How much private label are you selling now? A: It's not a lot.... We would still prefer to sell national brands. It's the one way our customer can identify that we still have the lowest prices. Q: But do you think you need to tell consumers that you're more than just the low-price leader? A: I do. I think we've got a better story to tell our customer, and we're doing a lot of work now on how to respond to our customers a little more effectively. Business isn't driven by price alone. Q: Does that mean we'll be seeing some new advertising out of Wal-Mart soon? A: Yes. Q: So what other "niches" are you looking at? A: I think our next big opportunity is nonstore retailing. Right now that's pretty much represented by what we are doing on the Internet, and we're encouraged with that, although the numbers are small in relation with the rest of the business. I want us to be on the leading edge of that. Q: But given your huge brick-and-mortar presence, don't you have less incentive than anyone to make online retailing work? A: I don't think that business of ours suffers. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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