March 29, 1918: Addicted to Walmart
Sam Walton, the founder of Walmart, is born.
Traveling through the American West at a young age, Sam Walton saw how his family combined ingenuity and tenacity to make ends meet. In young adulthood, the nascent entrepreneur would enter retail. He became obsessed with making the shopping process easier and with offering a tantalizing price for consumers.
He combined the two and built an operation known as Walmart.
Product of the Depression Era
Sam Walton excelled in school and then attended the University of Missouri in 1935. During a period of economic uncertainty (especially in the Western states), his parents struggled for stability. By 1940, his yearning for financial success grew while working in sales at a small shop in Des Moines called J.C. Penney. At that point, the store was not the consumer paradise it would become later in the century. Though it was a turbulent experience, Walton received exposure and knowledge of the retail industry.
But World War II breaks out and Walton follows the path of many younger Americans by serving the Allied effort. He became a captain in the military’s Intelligence Corp as he was based in Oklahoma. He found love and, upon the war’s end, he went back into a major industry moving postwar America: retail.
The first store Walton managed went well. He turned a bad contract that started him at a loss into remarkable profits. He found places to buy store supplies outside of traditional sources. Thus, allowing him to lower costs and undercut his variety store competition. Yet, the owners of this town's “Ben Franklin store” didn’t add a renewal clause and ended the, now, family man's management stint.
Much of the local business community expected Walton to fail, and when he didn’t, the hive mind swarmed in anger.
So, the salesman built his own establishment- a very American practice.
Thus, “Walton’s Five and Dime” (Walton’s 5-10) would lay the roots for a massive retail empire.
Postwar Consumer Dream
Bentonville, Arkansas is an ideal spot to start a business in postwar America. It was part of an emerging Sunbelt development spree that would change American politics and consumer life. Large retailers (Sears, Roebuck, and Company and the K-Mart Corporation) located themselves near metropolitan spaces serving many purposes. For example, cities offered massive pools of consumers, manufacturing hubs, and a variety of commercial agendas.
But Americans became enamored with suburban sprawls. With that, businesses would need to follow migratory patterns.
Walton’s was one of the early retailers to take advantage of changing trends. Thus, exploiting an emerging gap. Prime market intelligence was a major ingredient for success. One testament to the power of this intelligence is how the rising purchasing power of Americans, easier transportation, and the bright shine of a dying manufacturing star gave birth to big-box dealers and declining small businesses. Another feature of Walton’s success was his flirtation with self-service. The process allowed customers to pick out their own items (instead of a clerk) and then check themselves out at the front. The practice lowered costs and hiring needs. At the same time, it increased consumer flow, meaning more money.
The people of Bentonville now had access to a metropolitan luxury.
In 1960, Walton opened the first “Wal-Mart: Discount City” in Rogers, Arkansas with borrowed money and extra funds from his prior venture. The name came from a business partner.
Walton incorporated intelligence, sales practices, supply line ingenuity, and customer satisfaction schemes to make a profit as well as expand stores all over Arkansas. By 1969, Walton and his partners incorporated their venture to become Wal-Mart Stores, Inc. The following year the company went public.
The Baby Boomers came of age with a franchise that expanded from a regional option in the 1960s (the Appalachian South and the borderlands of the Southwest) into a national entity by the late 1980s. The introduction of computerization created a sophisticated supply and item tracker that systematized the store’s pricing and load operations. Computer systems also allowed customers to have a fast and easy checkout. By the start of the 1990s, Walmart brought in $26 billion dollars in sales ($44.2 million in 1970 and $1.2 billion in 1979) and it was the largest retailer in the game.
Yet, the need to keep the lowest-priced items in stock (or at least make it appear that way) would open up a new dark chapter for Walmart and America.
Made in China
By the late 1980s, Walton stepped down as Chief Executive Officer but continued to be Board Chairman until his death in 1992.
After his death, the company kept the tradition alive by finding cheap products to sell from foreign nations. This formula featured lower labor requirements and labor costs, as well as a reduced valuation of currency on the part of welcoming nations.
The pathway to foreign manufacturers ended at a rapidly developing nation-state called China.
The founder and CEO had already been traveling to other nations for cheap goods that would please Wal-Mart’s pricing framework. Yet, this process expanded after the signing of the North American Free Trade Agreement (NAFTA). This was a policy project of both Republican and Democratic establishments. As cheap goods flowed from China to Walmart, what was described as a “giant sucking sound” killing American manufacturing seemed to be coming true in the Rust Belt and in small towns. People couldn't help but notice more and more small business closures coupled with empty plants.
The trade deficit became lopsided due to cheap products and labor coming from deals made with China, and also because American incomes are large enough to buy so many of these finished products. But it all begs the question, has the ultimate realization of a consumer dream become a double-edged sword for Americans wedded to foreign-produced goods?
Walmart has helped China’s distributors win in court. For example, these lawsuits stem from smaller American companies claiming the East Asian giant was lowballing the market. To do this the nation floods the marketplace with high-valued products at a much lower price. The consequence is not being able to stand up to foreign distributors that make the Walmart price miracle possible. Challenging this format is a threat to an ecosystem benefitting established corporate giants. Even if the outcomes are hollowing out the former manufacturing bases of America.
Is this a story about Walmart or the American consumer?
Walmart’s rise parallels a period when Americans were thrust into global wealth. With these developments also comes a stasis within people inheriting and inhabiting such a well-endowed nation. We love our cheap flat screens and our ability to walk into a Walmart with fifty dollars and leave with bags full of home and beauty products. Even bags of groceries at the supercenters.
But we don’t reflect on how that system benefits and detracts average people. Let alone the horrific consequences on foreign peoples.
Are Americans willing to pay more to support domestic businesses?
Or do they feel the pinch of a modern middle-class decline and thus rely on cheap foreign goods?
With the rise of a global market that sells similar products to billions around the world, could any of these trends have been stopped in the first place?
There is little doubt that our modern political anguish is conceived out of economic and cultural shocks to our postwar bubble. Too many Americans thought this would last forever. Whether it be social factors or economic changes, this trend continues to point to an immature America unable to take on the responsibilities and mindset of a global system. We have miseducated our citizens while also failing to prepare them for a future we could have influenced.
To rule the world as a democracy (meaning citizen involvement is important), a nation’s leaders must also make those citizens worldly - even if many of those citizens are not in their preferred race or religion.
Something America has failed to do.
Our addiction to Walmart is a symptom of a larger tragedy.
