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Shopping Centers Today -> July 2002
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WAL-MART CEO SCOTT: THE SECRET OF OUR SUCCESS
By Debra Hazel
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| H. Lee Scott Jr. |
Some might think that being the world’s largest retailer, with more than $218 billion in sales last year, would earn Wal-Mart Stores pretty high marks. But Wal-Mart President and CEO H. Lee Scott Jr. said he thinks the retailer can do better: During a luncheon address, he gave it a score of only six out of 10.
Only six? The company operates more than 4,000 units in 10 countries in Asia, Europe and North America, and its annual profits exceed $6 billion, Scott noted.
“That is the size of Wal-Mart, but this is not who we are,” he told an overflow crowd at the Las Vegas Hilton, where he gave a glimpse of the retailer’s inner workings and future goals. “What is meaningful is three basic building blocks: service to the customer, respect for the individual and striving for excellence.”
Many retailers, he argued, build stores more to serve the CEO’s ego or to boost short-term shareholder profits. Wal-Mart, on the other hand, believes in offering a broad assortment of merchandise that the customer can trust will always be available at the lowest possible price, he explained. To be able to offer everyday low pricing, however, Wal-Mart must practice everyday low costs; associates share rooms when traveling, and the per diem for meals was raised only recently from $15 per day.
Those who complain that their counterparts at other companies do things differently are told simply, “You can’t be special if you won’t do special things.”
But this toughness is accompanied by an across-the-board respect, he said — for customers, employees, vendors and landlords, he said. This has become a particular challenge as the company has grown.
He also made a quip about the chain’s relationship with shopping center owners.
“All the developers say, ‘I don’t make money on your deals, but we like the association with Wal-Mart.’ We appreciate that,” Scott said, tongue firmly in cheek. “Of course, I notice that you’re staying at the Bellagio, and I’m staying with my sister-in-law.”
Integrity is yet another high priority for Wal-Mart, especially in this age of Enron, he said. Though other chains might violate laws in foreign countries as a matter of doing business, Wal-Mart will not, he said. “After 20 years of meetings, I’ve never heard, ‘How can we get around it?’”
Looking ahead, company plans call for top-line sales growth through comparable-store increases, the opening of new units (including 185 Supercenters and more than 100 international stores this year) and acquisitions.
Another challenge for the future is people development (including succession planning), a greater focus on performance reviews and staff training. Wal-Mart also continues to focus on asset utilization; Scott reported that first-quarter sales rose 14 percent on inventory increases of just 3 percent and said he believes that the company can be twice as efficient on merchandise turnover as it already is.
On the real estate side, the company continues to sell off older and smaller but still well-located units as it moves to the Supercenter format. Outlot leasing and in-store boutique leasing will also increase. Cutting costs to boost profits always remains a goal, he said.
“We [consider] as competition all of the national chains who sell what we do. There is not one single competitor,” Scott told SCT after his speech. “We’re paranoid.”
Scott attributed Wal-Mart’s staggering growth to one person: Sam Walton, even though he died in 1992.
“The No. 1 secret to Wal-Mart’s success is having the best founder you could possibly have,” Scott said. “His vision is as clear and true today as when we were founded 40 years ago. As you think about Wal-Mart, don’t think about $218 billion in sales. That doesn’t make us special or different. The vision is the associate with the blue smock and the smile who makes sure you are satisfied and want to come back. … If we accelerate our commitment to these principles, we could be a successful company some day.”
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