Picking Wal-Mart’s POCKETS ©

Michael Bergdahl International Speaker, Author &

Wal-Mart Competition Authority

Baltimore, Maryland

November 6, 2007

American Logistics Association Presents:

1962

World’s Largest Company

World’s Richest Man

Picking Wal-Mart’s POCKETS

“Bird-Dawg”

X

X Bentonville, Arkansas Wal-Mart Headquarters

Wal-Mart Big #’sWal-Mart Big #’s

• 7100 Stores & 120 DC’s7100 Stores & 120 DC’s

• 1.9 million Employees1.9 million Employees

• 176 million Customers176 million Customers

Fact: 31 regional grocers have failed since Wal-Mart entered the grocery business.

Wal-Mart Big Wal-Mart Big #’s#’s

• $39,000,000 Sales $39,000,000 Sales

• $20,000 Profit $20,000 Profit

• Home Depot + Kroger + Target Home Depot + Kroger + Target + Sears + Costco + K-Mart + Sears + Costco + K-Mart

Fact: Wal-Mart’s net profit is only 3.2% of total sales.

Every Hour!

Every Minute!

Picking Wal-Mart’s Picking Wal-Mart’s P.O.C.K.E.T.S. P.O.C.K.E.T.S. Price

Operations

Culture

Key Item Promotion/Product

Expenses

Talent

ServicePOCKETS = NICHE

“Why is Wal-Mart’s Every Day Low Price

Strategy such a powerful competitive

advantage?”

Price

Price Strategy Question:

Sam Walton’s Discounting PrincipleSam Walton’s Discounting Principle

A. Buy in large quantity for 80¢

B. Price it at $1.00 rather than $1.20.

C. Make ½ the profit per item

D. He sold 3 times as much generating a greater profit overall

Price

Wal-Mart’s Guaranteed Low Prices

Accomplished via Shopping Cart Comparisons

Price

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

Price

• Leverage economies of scale - buying

• Special Buy Merchandise Opportunities

• Leverage customer loyalty programs

Operations Strategy Question:

“What makes Wal-Mart’s Store Operations so unique?”

Operations

““Commoditization”Commoditization”

• Wal-Mart is a supply chain Wal-Mart is a supply chain driven company, not driven company, not merchandise driven. merchandise driven. Cross docking

distribution centers No Warehouses

Largest privately owned IT systems in the world

7000 privately owned truck fleet – largest in the USA

Operations

Hurricane Hurricane KatrinaKatrina

“Wal-Mart’s trucks were the first to arrive in New Orleans.”

Operations

Fact: US Feds studied Wal-Mart’s Logistics after KatrinaFact: US Feds studied Wal-Mart’s Logistics after Katrina

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

Operations

- Focus on the basics

- Continuous improvement

- Share Best Practices with Suppliers

Culture Strategy Question:

“How does Wal-Mart focus its leaders and employees as it continues to grow?

Culture

The Teachings of Sam The Teachings of Sam WaltonWalton

Golden Rule Values

Storyteller – Company Folklore

Innovator & Imitator

Embraced change like a friend

Culture

Sam Walton’s Sam Walton’s 10 Rules for Success10 Rules for Success

1 - Controlling Expenses

1 - Serving Customers

1 - Taking Risks

1 - Your Personal Commitment

6 - Treatment of People

Culture

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

Culture

- Treat employees like business partners

- Solicit ideas from employees - use them

- Take care of your people . . .

“What is the secret to Sam Walton’s strategy for selecting products and services for

Wal-Mart’s stores?”

Key Item Promotion / Products Strategy Question:

Key Item Promotion / Products

“Sam Walton gathered product ideas by visiting his stores, talking to his customers and

employees & visiting his competitor’s stores!”

Outside / In ApproachOutside / In Approach

Key Item Promotion / Products

Saturday Morning MeetingsSaturday Morning Meetings

Everyone at Wal-Mart is a Merchant

Key Item Promotion / Products

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

Key Item Promotion / Products

- Form Vendor Partnerships

- Use an outside / in approach

- Innovation versus Imitation

Expenses“How important is

expense control to Wal-Mart’s overall

retailing strategy?”

Expenses

Managing CostsManaging Costs

“Wal-Mart’s success in creating EDLP is driven equally by buying

products at low prices & continuously reducing costs.”

Expenses

Savings in cost are passed on to customers by lowering prices

Expense Control at Wal-MartExpense Control at Wal-Mart

-Centralized Temperature Control-Centralized Temperature Control

-Office Supplies / Paper Costs-Office Supplies / Paper Costs

-Executive Travel-Executive Travel

Expenses

Wal-Mart’s People GreetersWal-Mart’s People Greeters

Theft control specialists

Expenses

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

- As volume rises – expenses go downAs volume rises – expenses go down

- Lead by your own exampleLead by your own example

- Culturally integrate cost control- Culturally integrate cost control

Expenses

Talent“How did Sam Walton get his employees to execute his aggressive tactics?”

Talent

H.E.A.T.K.T.E.H.E.A.T.K.T.E.

HHigh EExpectations AAre TThe KKey TTo

EEverything

“Average People – Above Average Performance”

Talent

Talent PoolTalent Pool

- Bentonville - hired off the farms - 75% of managers promoted internally - Demoted non-performers

Talent

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

- Hire for attitude and teach skillsHire for attitude and teach skills

- E.D.I.D.D.E.D.I.D.D.

- Get people involved in goal setting- Get people involved in goal setting

Talent

Service“What is the importance

placed on customers and customer service at

Wal-Mart?”

Service

Sam Walton’s Sam Walton’s Legendary Service Standards Legendary Service Standards

- The customer is the boss

- “99.9% of Customers are honest”

- 2 rules of Customer Service

Service

The Wal-Mart CheerThe Wal-Mart Cheer

Service

Who is Number One?

Picking Wal-Mart’s Picking Wal-Mart’s POCKETSPOCKETS

- One agenda – The CustomerOne agenda – The Customer

- Stand behind your products / servicesStand behind your products / services

- Empowerment – give people authority- Empowerment – give people authority

Service

Lions or Lions or Gazelles?Gazelles?

Wal-Mart Competition Blog: www.michaelbergdahl.net

Picking Wal-Mart’s POCKETSPicking Wal-Mart’s POCKETS