0

WAL-MARTs decision to eliminate

purchasing goods through
wholesalers







Group Assignment in CHANNEL MANAGEMENT & LOGISTICS


Julie Rolland 2304969
Bertrand Huth 2304954
Florian Decavele 2304943
Jan Laufhtte 2304958
WAL-MARTs decision to eliminate purchasing goods through wholesalers
I
Table of content
List of figures .i
Introduction ....................................................................... 1
1. The advantages of Wal-Marts decision...................... 2
1.1. Definition of a Power Retailer ............................................................ 2
1.2. Other advantages ................................................................................... 3
2. The disadvantages of Wal-Marts decision................. 6
2.1. Wal-Mart has to acquire new competences ......................................... 6
2.2. Changes in supply chain management ................................................ 7
2.3. Relationship issues................................................................................ 8
3. The role of channels ..................................................... 9
3.1. Channel member functions ................................................................... 9
3.2. Contactual efficiency ........................................................................... 10
3.3. Shifting of channel functions .............................................................. 12
4. Wholesaling activities................................................. 14
4.1. Types of agents and brokers............................................................... 15
4.2. Functions performed by agents and brokers .................................... 15
4.3. Reconversion strategies...................................................................... 16
4.3.1. Consolidation warehouse concept ............................................................. 16
4.3.2. Diversification through premise refurbishment ........................................... 18
4.3.3. Re-organisation into a service provider or a consulting agency.................. 18
References......................................................................... ii
Appendices ...iii-x
WAL-MARTs decision to eliminate purchasing goods through wholesalers
i
List of Figures

Figure 1: Financial Data................................................................................... 1
Figure 2: The distribution channel without a power retailer......................... 2
Figure 3: The distribution channel with a power retailer .............................. 3
Figure 4: Increased number of transaction.................................................... 8
Figure 5: How the introduction of an extra intermediary reduces the
number of contacts and transactions .......................................................... 11
Figure 6: The consolidation warehouse concept ........................................ 17
WAL-MARTs decision to eliminate purchasing goods through wholesalers
1
Introduction
Wal-Mart Stores Inc., Bentonville, Arkansas is today the worldwide biggest
company in terms of net sales (see table 1). The company was originally
founded 1962 by the brothers Sam and Bud Walton with a single retail store in
Rogers, Arkansas. During the decades the company developed and prospered
within the United States and did not become an international company before
the year 1991 and the opening of a SAMS CLUB in Mexico City (see Appendix
Wal-Marts timeline).
Figure 1: Financial Data
FINANCIAL DATA
1991 1992 1993 1994 1995 1996 1997
Net Sales (in Billions of US$) 32.1 43.9 55.5 67.3 82.5 93.6 104.9
Net Income (in Billions of US$) 1.291 1.608 1.995 2.333 2.681 2.740 3.056
Diluted Earnings per share (in US$) 1.14* 1.40* 0.87* 1.02* 1.17* 0.60 0.67
Return on assets (in %) 15.7 14.1 12.9 11.3 9.0 7.8 7.9
Return on Shareholder's Equity (in %) 30.0 32.6 28.5 26.6 22.8 19.9 19.2
* Net Earnings

1998 1999 2000 2001 2002 2003
Net Sales (in Billions of US$) 118.0 137.6 165.0 191.3 217.8 244.5
Net Income (in Billions of US$) 3.526 4.43 5.377 6.295 6.671 8.039
Diluted Earnings per share (in US$) 0.78 0.99 1.20 1.40 1.49 1.81
Return on assets (in %) 8.5 9.6 9.5 8.7 8.5 9.3
Return on Shareholder's Equity (in %) 19.8 22.4 22.9 22.0 20.1 21.6

Source: Annual Reports on http://www.walmart.com








WAL-MARTs decision to eliminate purchasing goods through wholesalers
2
Q1
What are the advantages of Wal-Marts decision to eliminate purchasing
goods through wholesalers (beyond those mentioned in the case)?
1. The advantages of Wal-Marts decision
1.1. Definition of a Power Retailer
When Wal-Mart decided to eliminate purchasing goods through wholesalers, it
became a so-called Power Retailer. Power retailers have a high market share
in their merchandise category, high store loyalty, and high bargaining power
relative to their suppliers. According to Berman the wholesaler loses direct sales
from the power retailer and indirect sales from consumers who now buy from
the power retailer.
The following figures illustrate the differences between the two channels:
Figure 2: The distribution channel without a power retailer
Manufacturer
Manufacturer
Wholesaler
Wholesaler
Traditional Retailer
Traditional Retailer
Final Customer
Final Customer

Source: BERMAN, B. (1996): Marketing Channels. 6
th
edition, John Wiley & Sons Inc,
p.25.



WAL-MARTs decision to eliminate purchasing goods through wholesalers
3
Figure 3: The distribution channel with a power retailer
Manufacturer
Manufacturer
Wholesaler
Wholesaler
Traditional Retailer
Traditional Retailer
Final Customer
Final Customer
Power Retailer
Power Retailer


Source: BERMAN, B. (1996): Marketing Channels. 6
th
edition, John Wiley & Sons Inc,
p.26.

1.2. Other advantages
Wal-Marts decision leads to a number of other advantages beside the fact of
becoming a power retailer.
First of all, a better communication will arise. In fact, the channel is shorter
because there are less members, since the wholesalers are not in the chain
anymore. Due to this, there are less risks of people having different ideas,
struggles, etc. The information gets exchanged quicker and is easier
understandable.
The second advantage will be less conflict. As seen in the lecture of March
2
nd
, a channel conflict exists when a channel member perceives that, another
channel member impedes its goal achievement. The different causes of
conflicts could be:
The role incongruity (a behaviour outside the norms)
The perceptual differences (reaction to different situations)
Decision domain disagreements (on sphere of influence)
WAL-MARTs decision to eliminate purchasing goods through wholesalers
4
Expectation differences (channel member normal expectation of one
another)
Goal incompatibilities (when goals are irreconcilable)
Communication difficulties (Slow or inaccurate exchange of information)
Resource scarcities (misallocation of scarce resources)
In Wal-Marts case, the channel is shorter; the information goes faster and is
more accurate, so the risk of conflict is much reduced.
Wal-Mart increases its bargaining power. In fact, in relation to its suppliers,
Wal-Mart becomes the single intermediary between them and the final
customers. It gives it more power and more influence on the prices of the goods
purchased.
Another advantage of this decision is Wal-Marts new computer system: the
EDI (Electronic Data Interchange). This system enables paperless
communication, bar coding of inventory and a computerized order entry. Its
used by a large number of companies to increase customer service as well as
to reduce costs. It enables Wal-Mart to place orders directly to the
manufacturer, and through it, Wal-Marts vendors can analyse the sales and
verify their invoices. It will also enable Wal-Mart to reduce the number of stock
outs, that is to say, be able to answer more personal demands, be more flexible
and reach the just in time. Finally, the reorders on fast selling merchandise will
be increased more quickly.
Bearing in mind the OCT (Order Cycle Time), the EDI plays an important role
in the order transmittal. The OCT can be defined as the length of time between
the time a customer order is placed and the time the order is received by the
customer. And, the order transmittal refers to the operations that occur between
the time the customer sends the order and the time it is received by the seller.
The EDI is also useful in the order processing and assembly. In fact, it allows
checking order information, entering the orders, locating the warehouse, etc
Finally, as mentioned above, this new computer system allows a regular
inventories check out and transmit the back order to the factorys stocks if the
product is not available.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
5
This decision to eliminate purchasing goods through wholesalers will also
enable Wal-Mart to perceive higher margins on the goods sold. In fact, he
wont have to take into account the wholesaler commission anymore. In fact, he
wont have to take into account the wholesalers commission anymore.
Finally, as Wal-Mart becomes a power retailer, he will have new relations with
its manufacturers. As seen in the lecture of March 2
nd,
we can say that he has
now a referent power. It is referred to the willingness of one channel member to
confer power on another channel member in order to benefit from its corporate
or brand image. Most of the global retailers as Wal-Mart enjoy referent power.
To conclude, we can say that this decision to eliminate purchasing goods
through wholesalers has very good repercussions on Wal-Mart activity, not only
from an organizational point of view but also from hierarchical, financial and
results points of view.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
6
Q2
What are the disadvantages of Wal-Marts decision to eliminate
purchasing goods through wholesalers?
2. The disadvantages of Wal-Marts decision
Even though Wal-Marts decision to bypassing wholesalers, presents a lot of
advantages, in terms of time consumption, bargaining power and costs, it also
brings some drawbacks that Wal-Mart had to bear enforcing this new policy.
2.1. Wal-Mart has to acquire new competences
Wal-Mart has now to perform the duty wholesalers and brokers used to perform
before, that is to say purchasing the goods directly to the manufacturers then
display them in their stores.
Purchasing process in the company is highly centralized: Indeed Wal-Mart uses
huge purchasing centres which have a buying force who negotiates the different
purchases with the manufacturers for all the stores in an defined area, so that
stores managers dont have to bear this task. Store managers can only buy by
themselves some day-to-day products from local small and medium-sized
companies.
These purchasing centres also perform some storage duty.
These centres brought new and high costs to the company, indeed these
centres had to be built which is an important investment, and then they had to
be equipped in storage and transportation facilities like forklifts or trucks to ship
the goods to the different stores which is also a considerable cost. Finally these
purchasing centres need personnel to run them.
So the first disadvantage of this decision is that it made Wal-Mart invest large
sums of money and also raise the overheads with those new capital assets. So,
good return on investments will be compulsory to make this new strategy
profitable.
As told before new personnel are necessary in this strategy, personnel to run
the storage and transportation, and personnel to assume the negotiation with
WAL-MARTs decision to eliminate purchasing goods through wholesalers
7
the manufacturers, this also raises the cost of the operation. But this purchasing
force will have to be trained since former buyers were not used to bargain with
manufacturers sales force.
Another thing in performing the wholesalers duty that will be hard to replace is
the competence that wholesalers had in market analysis, consumer analysis or
research of information (about competitors or producers). These tasks were part
of wholesalers core competencies and were very useful to manufacturers and
retailers.
Now it has to be performed by Wal-Mart or by the manufacturers who were not
prepared to assume such a task and may not have the necessary know-how.
So they will either have to acquire knowledge in this domain or buy their
information from specialized firm (consulting cabinets for instance).
This decision to bypass intermediaries, though it enhances communication
between the two parties, brings a lack of information, which is useful in a good
communication.
2.2. Changes in supply chain management
Wholesalers used also to perform storage of the goods between the time they
left the factory and the time they had to be displayed on Wal-Marts shelves,
now without this protagonist who will take care of the inventories?
To solve this Wal-Mart implemented Just In Time strategy, which means they
have the less stock as possible to reduce the cost of stock management, but
implementing a new strategy is time consuming, and furthermore Wal-Mart will
have to agree with the manufacturers about this policy, manufacturers may not
be willing to be in charge of the inventories so they will have to suit with Wal-
Marts JIT system as well, which is also time consuming for them.
This decision will also occur changes in the supply chain management. When
Wal-Mart used intermediaries there were a number of transactions limited to the
number of intermediaries to whom products were bought. There were a small
number of wholesalers or brokers.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
8
Now Wal-Mart has to deal with each manufacturer separately which highly
increases the number of transactions between Wal-Mart and its suppliers (see
Figure 4).
It means more efforts are needed to coordinate this high number of
transactions, so more personnel (administrative personnel) is needed, and this
is once again a source of cost increase. Wal-Mart will also need an accurate
system to manage all those transactions at their best.
Figure 4: Increased number of transaction
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Retailer
Retailer
Wholesaler
Wholesaler
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Retailer
Retailer
Manufacturer
Manufacturer

2.3. Relationship issues
Here Wal-Mart can be seen as a power buyer on a buyers market since there is
more offer than demand (many manufacturers would like their products to be on
Wal-Marts shelves).
Sometimes Wal-Mart will use its power upon faulty manufacturer, when there
are some delivery delays, some products broken or dented, or simple invoicing
mistakes. Wal-Mart will then give fines to the faulty manufacturer of delay its
payment or sometimes even refuse to pay.
This is especially true with small and medium-sized manufacturers, since Wal-
Mart wont upset its big accounts. For these small and medium suppliers having
their products on Wal-Marts shelves is the best way for them to sell at a large
scale, so they have to comply with this coercive policy to go on trading with
Wal-Mart.

WAL-MARTs decision to eliminate purchasing goods through wholesalers
9
Q3
Evaluate Wal-Marts decision to eliminate purchases from wholesalers
from the perspectives of contactual efficiency and the notion that
channel functions can be shifted but not eliminated.
3. The role of channels
According to the AMA, a channel of distribution is defined as an organized
network of agencies and institutions which, in combination, perform all activities
required to link producers with users to accomplish the marketing task.
Nowadays costs and margins of marketing channels can account for easily up
to 50 per cent of the price the final consumer has to pay. Therefore channel
efficiency is crucial and a source of competitive advantages.
3.1. Channel member functions
Berman identifies five important functions fulfilled by the distribution channel
members:
Sorting Process
Mass Distribution
Consumer Contact
Credit
Market Research
During the sorting process intermediaries, wholesalers and/or retailers,
purchase large shipments from different manufacturers (accumulation). They
normally do not buy a single product, moreover they purchase a broad range of
similar, often related, products and store these (assorting). For instance could a
wholesaler specialized in noodles also purchase and store rice and
complementary sauces. The intermediaries break the big bulks Breaking
Bulk into smaller lots (sorting) and distribute these smaller quantities to their
customers (allocation). According to Doyle Contactual Efficiency describes the
circumstance, that intermediaries sharply reduce the communications and
transport resources required.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
10
Mass distribution results from contactual efficiency. Intermediaries enable
manufacturers mass distribution, because they buy major bulks, divide them
and may add as Doyle mentions, if necessary, value to the products by tailoring
solutions to the specific needs of customers.
Consumer contact is a channel function, which occurs at every single stage in
the channel and before, during and after every sale.
As Berman stated, provide intermediaries an important credit function to their
suppliers. Although they purchase typically on the basis of terms, payment is
normally on purchase date, e.g. directly. Through this Credit Function
manufacturers who sell through wholesalers and retailers are enabled to plan
their cash-flow accurately.
Due to the fact, that they are serving specific markets and customers, the
intermediaries will have a superior knowledge of these. They are doing market
research in terms of generating, collecting, and disseminate important
information to manufacturers.
3.2. Contactual efficiency
Rosenbloom says, that the use of wholesalers provides a much higher level of
contactual efficiency than if a retailer alone was used. By using wholesalers the
need for contacting retailers directly is eliminated and hence the number of
contacts and transactions required for distributing a product through the
marketing channels is reduced. Rosenbloom continues, that from the channel
managers point of view, contactual efficiency is the level of negotiation effort
between sellers and buyers relative to achieving a distribution objective. Figure
X shows that by using one single wholesaler the number of contacts can be
halved.





WAL-MARTs decision to eliminate purchasing goods through wholesalers
11
Figure 5: How the introduction of an extra intermediary reduces the number of
contacts and transactions
Four manufacturers contact four
retailers directly
Four manufacturers contact four
retailers indirectly through a wholesale
intermediary
Number of contacts needed for all
manufacturers to contact all retailers
= (number of manufacturers) X
(number of retailers) = (4) X (4) = 16
contacts
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
Number of contacts needed for all
manufacturers to contact all retailers
= (number of manufacturers) X
(number of retailers) = (4) + (4) = 8
contacts
W
W

Source: ROSENBLOOM, B. (2003): Marketing Channels: A Management View. 7
th

edition, Mason/Ohio: Thomson/South-Western, p. 19.

Bearing in mind that every that every channel member is deserving, as long as
the added value is bigger than the added costs, Wal-Marts decision seems not
to be comprehensible. But beside the fact bypassing the intermediaries enables
Wal-Mart to reduce costs significantly, emerge of information technology and E-
commerce changed marketing channels structure. As Rosenbloom states,
online sales have become an established distribution channel. E-commerce is
merging or converging with conventional channels across virtually all sectors of
the economy. Therefore E-commerce and EDI (Electronic Date Interchange), as
introduced by Wal-Mart became an integral part of marketing channels and
distribution.


WAL-MARTs decision to eliminate purchasing goods through wholesalers
12
The new technology enables Wal-Mart as well to reduce the Order Cycle Time.
Instead of dealing with wholesalers when new shipments are necessary, by
using common IT-systems manufacturers receive an order as soon as a product
passed one of Wal-Marts cashiers.
3.3. Shifting of channel functions
Stern ed al state three important principles in the structure if marketing
channels:
1. One can eliminate or substitute institutions in the channel arrangement.
2. The functions these institutions perform, however, cannot be eliminated.
3. When institutions are eliminated, their functions are shifted either forward or
backward in the channel and, therefore, are assumed by other members.
In Wal-Marts case it can be assumed that the formerly by intermediaries
fulfilled functions, as storage, breaking products into smaller lost, specialized /
additional features, etc., will be mainly backward integrated to the
manufacturers. These will face occurring additional costs for employing an own
sales force, shipping capacities, setting up own outlets, and other tasks
intermediaries undertook before (see also 4.2.).
Referring to Bucklins System of Service Outputs concept (cited in BERMAN),
customers prefer to deal with marketing channels that provide them with higher
levels of service outputs. The more service outputs are required by the
customers, the less likely intermediaries will be bypassed. Due to the fact Wal-
Mart is a retailer for consumer goods it can be assumed, that its customers do
not demand high services.
The four relevant service outputs according the Bucklins System of Service
Outputs are:
Spatial convenience vs. market decentralization
Lot size
Product variety vs. assortment breadth
Waiting vs. delivery time
WAL-MARTs decision to eliminate purchasing goods through wholesalers
13
Spatial convenience / market decentralization could be provided by Wal-
Mart itself, respectively gets, due to the development of IT-systems, less
important. Generally by using IT extensively smaller stocks can be expected
and hence costs for warehousing and inventory will be reduced.
Lot size refers to the sorting process (see before 3.1.) intermediaries undertook
so far. This function has now be fulfilled by the manufacturers or by Wal-Mart. If
the latter inherits this task it adopts the ALDI-approach. The German retail-chain
buys bigger bulks than its competitors and is in doing so able to offer the same
products under its own brands at lower prices.
Product variety vs. assortment breadth could turn out to be a problem.
Manufacturers on the end will focus on keeping their economies of scale in
production. On the other end the consumers may expect a certain variety, which
can Wal-Mart cannot offer anymore by bypassing the intermediaries, which
added features and value before (see before 3.1.).
Waiting vs. delivery time will be significantly reduced by the use of IT, EDI,
etc, which actually enable Wal-Mart to pursue this approach.













WAL-MARTs decision to eliminate purchasing goods through wholesalers
14
Q4
How can brokers and independent representatives respond to Wal-Mart
objections?
4. Wholesaling activities
Agents and brokers account for 10.8% of the wholesales volume, which
represents the smallest category of wholesale trade. They are less
concentrated than the vast majority of wholesalers.
A general categorization of wholesalers is as follows:
Wholesaling intermediaries - Firms that handle the flow of products from the
manufacturer to the retailer or business user.
Independent intermediaries - Channel members that are not controlled by
any manufacturers but rather do business with many different manufacturers
and many different customers.
Merchant wholesalers - Intermediaries that buy goods from manufacturers
take title to them - and sell to retailers and other B-2-B-customers.
Take title: to accept legal ownership of a product, the accompanying
rights and responsibilities of ownership.
Agents and brokers differ from traditional wholesalers, as defined before, by the
fact that they do not take ownership of inventory. But agents and brokers as
well as other intermediaries are compensated on the basis of sales
commissions. The difference between agents and brokers is, that the latter work
on particular projects or deal, mainly on a temporally base. At the opposite
agents are employed more permanently.





WAL-MARTs decision to eliminate purchasing goods through wholesalers
15
4.1. Types of agents and brokers
Agents and brokers can be further subdivided, referring to the specialized tasks
they fulfil.
Several manufacturers with non-competing and complementary product lines
usually employ manufacturers agents. These dispose an exclusive territory
and distribute limited lines within this territory. Depending on the size of the
company, they could have several utilities. For the smallest one, they afford
sales people. The middle size companies, this agent can cover selected
geographical area. The biggest one should be interest by the possibility of a
market fragmentation.
Selling agents assume the entire responsibility of marketing operations for a
single manufacturer. They negotiate prices and other sales conditions
exclusively in the name of one manufacturer. Most commonly they are used in
textile, electronics and chemicals industries.
Commission merchants receive goods on consignment from producers,
accumulate them from local markets, and arrange their sales in a central market
location. They take possession of products. Commission merchants are very
useful to sell specific product on a short-term basis, e.g. in agriculture
businesses.
Food brokers represent generally several producers of food, equipment and
related products. They serve grocery stores, restaurants, hotels and
delicatessens.
Export brokers are specialized in international trade. They possess a specific
knowledge of foreign market conditions and sales rules and have contacts in
specific foreign countries.
4.2. Functions performed by agents and brokers
Agents and brokers fulfil two major functions in the distribution channel. On the
one hand an industrial function with the whole warehousing activities. And
on the other hand they also provide tertiary activities, which are a wide range
of services.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
16
The warehousing activities consist of bulk breaking, creating assortments and
facilitating functions (see before 3.1.). They divide larger quantities of goods into
smaller lots to meet the needs of buyers, provide a variety of products in one
location, and make the purchase process easier for customers and
manufacturers.
The array of tertiary activities includes gathering useful information through
market research for the databases of manufacturers and retailers. Promotion,
as below-the-line advertising like in-store display, gift and sample. Contact
management with both producers and retailers. Through matching products in a
homogenous assortment, they can have a wide or specialized range of goods.
And also negotiations of price and sales conditions with the help of their own
sale force.
4.3. Reconversion strategies
There are three different reconversion strategies identifiable.
4.3.1. Consolidation warehouse concept
The consolidation warehouse concept calls for multiple manufacturers to
combine their output into just a few consolidation warehouses instead of placing
products in corporate distribution centre or public warehouses. Manufacturers
move away from multiple warehouses for downstream storage and combine
their inventory with that of other manufacturers in huge warehouse.
This form of agreement could help both Wal-Mart and producers because its a
third party storage and consolidation point for the manufacturer. And for Wal-
Mart, its a storage and order facility.
Manufacturers could ship full truckloads of a single product to the warehouse.
Afterwards this merchandise could be ship to chain distribution centre (see
Figure 6).




WAL-MARTs decision to eliminate purchasing goods through wholesalers
17
Figure 6: The consolidation warehouse concept
Manufacturers
Manufacturers
Wal-Mart
Wal-Mart
Consolidated
Warehouses
Consolidated
Warehouses


This concept is feasible, because there are no huge modifications in the firms
organisations required and therefore the costs are manageable. However, some
factors are necessary for the concepts implementation. The warehouse must
be huge, minimum of at least 1 million square feet and it needs to be well
situated in a defined geographical area.
Advantages for manufacturers may be:
Having a better capability to forecast the demand and more accuracy to
schedule production. A smoother production schedule is essential to
maintain a constant level at the consolidation warehouse.
Gain ability to ship more production directly from the plant into the
warehouse. The consequence is a reduction of transportation cost and
delivery time. They would have lower rated from truckloads freight.
Advantages for Wal-Mart are:
Out-of-stock-problems could be avoided.
Wal-Mart can grow without high capital investments.
Wal-Mart can increase sales without building expensive new facilities and
hence boost profit and in customer satisfaction.

WAL-MARTs decision to eliminate purchasing goods through wholesalers
18
4.3.2. Diversification through premise refurbishment
Agents and brokers could keep the warehousing and bulk breaking activities.
Hence, the core business would not change fundamentally. They could use the
same industrial equipment facilities as before, e.g. fork lifts.
Some efforts are necessary for the warehouse refurbishment. The firm needs to
increase the car park and set up cashiers. The current staff could be trained
toward several jobs: sales assistant, cashier or truckload driver.
Concerning the tertiary activities, there will be a modification in the client
targeting. Previous client could be prospective customers. But the firms have to
find new one as restaurant, independent retailers, associations, etc.
Diversification is feasible as well. Therefore t
he warehouse must be situated in an industrial area, well-know by professional.
Few investment are needed, maybe an advertising and promotion campaign
must be launched. The marketing department must have an effective client
database or improve the market research activity. A professional licence will be
required for any purchase.
One of the European leader on this market is Metro. Its a direct wholesale/retail
business.
4.3.3. Re-organisation into a service provider or a consulting agency
Even though the company decides to withdrawal and re-orientate it could
keep focused the activity only on service providing and consulting. Shift the
wholesaling function.
a wide range of marketing tasks. For instance advisory activities for
manufacturers and retailers, data base management, provision of
communication, or establishment of required IT resources.
These services should be very useful for the smallest manufacturers recently
put directly in contact with Wal-Mart. The firm could serve as sales & marketing
department for them.

WAL-MARTs decision to eliminate purchasing goods through wholesalers
ii
References
ARMSTRONG, G. (2000): Marketing Channels and Supply Chain Management.
Available at:
<http://www.pearsoned.ca/armstrong/ppt/Armstrong11Exp.ppt>
BERMAN, B. (1996): Marketing Channels. 6
th
edition, John Wiley & Sons Inc.
DOYLE, P. (2002): Marketing Management and Strategy. 3
rd
edition, Harlow:
Prentice-Hall.
MACKLIN, G. (2003): Consolidation warehouses add efficiency. In: Refrigerated
Transporter, July 2003. Available at: <http://www.refrigeratedtrans.com>
ROSENBLOOM, B. (2003): Marketing Channels: A Management View. 7
th

edition, Mason/Ohio: Thomson/South-Western.
SOLOMON, M.R. (2002): Channel Management, Wholesaling, and Physical
Distribution. Available at
<http://sprott.carleton.ca/~hkapoor/SolomonChap14.ppt>
STERN, L.W.; ED-ANSARY, A.I. & COUGHLAN, A.T. (1996): Marketing
Channels. 5
th
edition, Upper Saddle River/New Jersey: Prentice-Hall
International.
WAL-MART - <http://www.walmart.com/>









WAL-MARTs decision to eliminate purchasing goods through wholesalers
iii
Appendices
Appendix 1
FINANCIAL DATA
1991 1992 1993 1994 1995 1996 1997
Net Sales (in Billions of US$) 32,1 43,9 55,5 67,3 82,5 93,6 104,9
Net Income (in Billions of US$) 1,291 1,608 1,995 2,333 2,681 2,740 3,056
Diluted Earnings per share (in US$) 1.14* 1.40* 0.87* 1.02* 1.17* 0,60 0,67
Return on assets (%) 15,7 14,1 12,9 11,3 9,0 7,8 7,9
Return on Shareholder's Equity (%) 30,0 32,6 28,5 26,6 22,8 19,9 19,2
* Net Earnings

1998 1999 2000 2001 2002 2003
Net Sales (in Billions of US$) 118,0 137,6 165,0 191,3 217,8 244,5
Net Income (in Billions of US$) 3,526 4,43 5,377 6,295 6,671 8,039
Diluted Earnings per share (in US$) 0,78 0,99 1,20 1,40 1,49 1,81
Return on assets (%) 8,5 9,6 9,5 8,7 8,5 9,3
Return on Shareholder's Equity (%) 19,8 22,4 22,9 22,0 20,1 21,6

Net Sales (in Billions of US$)
0
50
100
150
200
250
300
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
B
i
l
l
i
o
n
s

U
S
$

WAL-MARTs decision to eliminate purchasing goods through wholesalers
iv
Net Income (in Billions of US$)
0
1
2
3
4
5
6
7
8
9
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
B
i
l
l
i
o
n
s

U
S
$

















WAL-MARTs decision to eliminate purchasing goods through wholesalers
v
Appendix 2
Wal-Marts Timeline

1962 Company founded with opening of first Wal-Mart in
Rogers, Ark.
1967 Wal-Mart's 24 stores total $12.6 million in sales.
1968 Wal-Mart moves outside Arkansas with stores in Sikeston, Mo., and Claremore,
Okla.
1969 Company incorporated as Wal-Mart Stores, Inc. on Oct. 31.
1969 Wal-Mart Aviation hires its first full-time pilot, giving co-
founders Sam and Bud Walton some help.

1970 Wal-Mart opens first distribution center and home office in Bentonville, Ark.
1970 Wal-Mart stock first traded over the counter as publicly-held company.
1970 38 stores now in operation with sales at $44.2 million. Total number of associates is
1,500.
1971 First 100 percent stock-split in May. Market price: $47.
1971 Wal-Mart is now in five states: Arkansas, Kansas, Louisiana, Missouri and
Oklahoma.
1972 Wal-Mart approved and listed on the New York Stock
Exchange.
1972 Second 100 percent stock split in March. Market price: $47.50.
1973 Wal-Mart enters Tennessee.
1974 Wal-Mart stores now in Kentucky and Mississippi.
1975 125 stores in operation with sales of $340.3 million and 7,500 associates. Wal-Mart
enters ninth state: Texas.
1975 Third 100 percent stock split in August. Market price: $23.
1975 Inspired by workers he saw on a visit to Korea, Sam Walton introduces the famous
"Wal-Mart Cheer" to associates.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
vi
1977 Wal-Mart makes first acquisition, 16 Mohr-Value stores in Michigan and Illinois.
1977 Wal-Mart enters its 10th state: Illinois.
1978 Hutcheson Shoe Company acquired; Wal-Mart pharmacy, auto service center and
jewelry divisions introduced.
1979 Wal-Mart is the first company to reach $1 billion in sales in such a short period of
time: $1.248 billion. Wal-Mart now has 276 stores, 21,000 associates and is in its
11th state: Alabama.

1980 Fourth 100 percent stock split in November. Market price: $50.
1980 Largest distribution center to date opens in Palestine, Texas.
1981 Wal-Mart enters Georgia and South Carolina.
1981 Wal-Mart makes its second acquisition with 92 Kuhn's Big K stores.
1982 Fifth 100 percent stock split in June. Market price: $49.875.
1982 Wal-Mart enters Florida and Nebraska.
1983 U.S. Woolco Stores acquired.
1983 First SAM'S CLUB opened in April in Midwest City, Okla.
1983 People Greeter implemented at all stores.
1983 First one-hour photo lab opened in Tulsa, Okla.
1983 Sixth 100 percent stock split in June. Market price: $81.625.
1983 Wal-Mart enters Indiana, Iowa, New Mexico and North Carolina.
1983 For eighth year straight Forbes Magazine ranks Wal-Mart No. 1 among general
retailers.
1984 Sam Walton does the hula at high noon on Wall Street, making good
on promise to associates after company achieves pre-tax profit of 8
percent in 1983.
1984 David Glass named company president.
1984 Wal-Mart enters Virginia.
1985 Seventh 100 percent stock split in September. Market price: $49.75.
1985 Wal-Mart has 882 stores with sales of $8.4 billion and 104,000 associates.
Company adds stores in Wisconsin and Colorado.
1985 Grand Central Stores acquired.
1986 Wal-Mart enters Minnesota.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
vii
1987 Eighth 100 percent stock split in June. Market price: $66.625.
1987 Wal-Mart's 25th anniversary: 1,198 stores with sales of $15.9 billion and 200,000
associates.
1987 Wal-Mart Satellite Network (largest private satellite communication system in the
U.S.) completed, linking all operating units of company and General Office with 2-
way voice, data and one-way video communication.
1988 David Glass named chief executive officer of Wal-Mart Stores, Inc.
1988 First Supercenter opened in Washington, Mo.
1988 Ninety percent of Wal-Mart stores have bar-code scanning capabilities.
1988 16 Wal-Mart distribution centers in operation.
1988 Supersaver units acquired.
1989 Wal-Mart is now in 26 states with the addition of Michigan, West Virginia and
Wyoming.

1990 Wal-Mart becomes nation's No. 1 retailer.
1990 McLane Company of Temple, Texas acquired.
1990 Wal-Mart enters California, Nevada, North Dakota, Pennsylvania, South Dakota and
Utah.
1990 Wal-Mart Visitor's Center opens on site of Sam Walton's
original Walton's 5-10 store.
1990 Ninth 100 percent stock split in June. Market price: $62.50.
1991 Western Merchandisers, Inc. of Amarillo, Texas, acquired.
1991 Wal-Mart enters Connecticut, Delaware, Maine, Maryland, Massachusettes, New
Hampshire, New Jersey and New York.
1991 "Sam's American Choice" brand products introduced.
1991 International market entered for first time
with the opening of a unit in Mexico City.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
viii
1992 President George Bush presents Sam Walton with the
Medal of Freedom.
1992 Sam Walton passes away April 5.
1992 S. Robson Walton named chairman of the board April 7.
1992 Wal-Mart has entered 45 states with the addition of Idaho, Montana and Oregon.
1992 Wal-Mart enters Puerto Rico.
1993 Wal-Mart International division formed with Bobby Martin as president.
1993 Tenth 100 percent stock split in February. Market price: $63.625.
1993 Wal-Mart enters Alaska, Hawaii, Rhode Island and Washington.
1993 First billion-dollar sales week in December.
1993 91 Pace Warehouse clubs acquired.
1994 122 Woolco stores in Canada acquired.
1994 A prototype store designed to be as environmentally friendly as possible opens in
Lawrence, Kansas.
1994 3 value clubs open in Hong Kong. Canada has 123 stores and Mexico has 96.
1994 Code Adam program implemented, named after Adam Walsh, in all stores.
1995 James Lawrence "Bud" Walton,(right, pictured with brother
Sam Walton) co-founder, passes away.
1995 Wal-Mart Stores, Inc. has 1,995 Wal-Mart stores, 239 Supercenters, 433 SAM'S
CLUBS and 276 International stores with sales at $93.6 billion and 675,000
associates.
1995 Wal-Mart enters its 50th state - Vermont - and builds three units in Argentina and
five in Brazil.
1996 Wal-Mart enters China through a joint-venture agreement.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
ix
1997 Wal-Mart becomes the No. 1 employer in the United States with 680,000
associates, as well as an additional 115,000 international associates.
1997 Wal-Mart Stores, Inc. serves more than 90 million customers a week worldwide.
1997 Wal-Mart replaces Woolworth on the Dow Jones Industrial Average.
1997 Wal-Mart has first $100 billion sales year, with sales totaling $105 billion.
1997 Wal-Mart introduces OneSource nutrition centers.
1998 Wal-Mart acquires 21 Wertkauf units in Germany.
1998 Wal-Mart introduces Neighborhood Market concept with three
stores in Arkansas.
1998 Wal-Mart exceeds $100 million in annual charitable contributions, with donations
totaling $102 million.
1998 Wal-Mart enters Korea through a joint venture agreement.
1999 Wal-Mart has 1,140,000 associates, making the company the largest private
employer in the world.
1999 Wal-Mart acquires 74 Interspar units in Germany.
1999 Eleventh 100 percent stock split in March. Market price: $89.75.
1999 Wal-Mart acquires the ASDA Group plc. in the United
Kingdom (229 stores).
1999 Wal-Mart ranked #1 Corporate Citizen in America in the 1999 Cone/Roper Report,
an annual national survey on philanthropy and corporate citizenship.

2000 Wal-Mart ranked 5
th
by FORTUNE magazine in its Global Most Admired All-Stars list.
2000 H. Lee Scott named president and CEO of Wal-Mart Stores, Inc.
2000 Wal-Mart ranked #1 Corporate Citizen in America in the 2000 Cone/Roper Report,
an annual national survey on philanthropy and corporate citizenship.
2001 Wal-Mart named by FORTUNE Magazine as the 3
rd
most admired company in
America.
WAL-MARTs decision to eliminate purchasing goods through wholesalers
x
2001 Wal-Mart ranked by Hispanic Business Magazine as one of the Top 25 Diversity
Recruitment Programs in 2001 for its aggressive program to hire and promote
Latinos.
2002 Wal-Mart received the 2002 Ron Brown Award, the highest Presidential Award
recognizing outstanding achievement in employee relations and community
initiatives.
2002 Wal-Mart ranked #1 on the FORTUNE 500 listing.
2002 Wal-Mart has the biggest single day sales in history: $1.43 billion on the day after
Thanksgiving.
2003 Wal-Mart named by FORTUNE magazine as the most admired company in America.

Source: www.walmart.com