The Inexorable Rise of Walmart

Exploring the Case Context

In his 1983 book ‘Imagined Communities’ Benedict Anderson argued that the idea of nation was socially constructed. He went on to say that the very idea of Nationalism is just the imagination of a bunch of people who ‘perceived’ themselves to be a part of a group. Flash forward to 2011, Israeli historian Yuval Noah Harari published his book, Sapiens: A Brief History of Humankind, in which he stated

“Unlike lying, an imagined reality is something that everyone believes in, and as long as this communal belief persists, the imagined reality exerts force in the world. The sculptor from the Stadel Cave may sincerely have believed in the existence of the lion-man guardian spirit. Some sorcerers are charlatans, but most sincerely believe in the existence of gods and demons. Most millionaires sincerely believe in the existence of money and limited liability companies. Most human-rights activists sincerely believe in the existence of human rights. No one was lying when, in 2011, the UN demanded that the Libyan government respect the human rights of its citizens, even though the UN, Libya and human rights are all figments of our fertile imaginations.”

And he was, in my opinion, correct. Imagination has a powerful effect on us human beings, just like lies. It can make us see and feel things that may never have existed. It is the sheer power of imagination that explains the hyper nationalist sentiments that keep finding their way into newspapers from time to time. You know what else is an imagined reality? Sales forecasts and Sales targets.

Think about it. Sales forecasts are simply numbers that we ‘imagine up’. It’s not like all salespeople would queue up and refuse to sell a dollar over the projected figure. The world would not come to an end if the sales team does not meet the number. It’s just an imaginary number that seems to have been cooked up in some logical fashion to get a bunch of people to work towards achieving it. But then, all hell breaks loose when the forecasts are not met. Pick up any financial newspaper on any random day, and you’d see something like this:

Managing investor expectations and meeting targets have become a key part of every executive in recent times. Exceeding expectations can have a very positive effect in the stock market and vice versa. In more ways than one, it is the emphasis on meeting expectation that continues to propagate myopic thinking that Levitt talks about in Marketing Myopia. Now that I have set up the context, imagine the following: A fortune 500 company going out in public and forecasting that there would be no increase in sales the forthcoming year. Imagine the pandemonium. In 2015, Walmart did that.

In October 2015, the New York Times reported “Sales will be flat this year, Walmart said at a meeting with investors in New York. The retailer previously said that it expected net sales to grow 1 to 2 percent for the current fiscal year, through January.” and “The news sent Walmart shares plunging, casting a pall over retail stocks, as analysts worried about broader ripple effects across the economy, and about consumer spending ahead of the holiday season.”. Finally, there was a CEO would could step up and say

“We can deliver stronger financial performance in the short term simply by running our core business better, but that won’t be enough,”

- Mr. McMillon

When his firm’s shares were down 30% he had the strength to say

“Those that are unwilling or unable to change go away. That’s why we’re taking decisive steps now to change and grow our business.”

Interestingly, he still is CEO and he’s managed to do something absolutely amazing in the last decade. Turn around Walmart. Just look at the numbers for a second, from $57 to $144, over 150% increase in about 7 years. That’s IMPRESSIVE!!!

This is precisely the reason I picked up this case for the class on retailing. The idea was to showcase that building deeper relationships with consumers and adding supply chain capabilities can do wonders for a firm. It is indeed sad that here in India, many retail giants don’t seem to understand that. The words of Zig Ziglar summarise what I wanted to say perfectly, so let me just quote him.

“The seed of a bamboo tree is planted, fertilized and watered. Nothing happens for the first year. There´s no sign of growth. Not even a hint.

The same thing happens – or doesn´t happen – the second year. And then the third year.

The tree is carefully watered and fertilized each year, but nothing shows. No growth. No anything. For eight years it can continue. Eight years!

Then – after the eight years of fertilizing and watering have passed, with nothing to show for it – the bamboo tree suddenly sprouts and grows thirty feet in three months!”

-Hilary Hinton Ziglar, American author, salesman, and motivational speaker

We would all be wise to learn from him.

Have a great day ahead!

See you in the next one!