Can Wal-Mart Get Any Bigger?

Monday, Jan. 13, 2003 By BILL SAPORITO/BENTONVILLE

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THE AISLES ARE CLEAN, THE STORE IS brightly lit, and "associates" in red polo shirts provide friendly service to customers who flock there for the low prices and the wide range of products offered. Throughout the store the image of a kindly old man appears in posters and photographs. His slogans and philosophy have been internalized by all employees, and they can tell you the story of his long march from humble rural roots to become a great leader.

And by the way, would you like us to skin that frog for you?

Welcome to Wal-Mart in China, where the late Sam Walton has a new image: the Mao of retailing. There, as in Walton's home state of Arkansas, having the right merchandise is paramount. So the store in Shenzhen, just north of Hong Kong, is crowded with tanks of crabs, fish, frogs and shrimp, which can be taken home wiggling or be expertly gutted and cleaned on the spot.

Wal-Mart's push into China--and Brazil and Germany and deeper into California and New York--offers a hint of why the world's largest retailer seems unfazed by this stinker of a holiday shopping season. Wal-Mart's sales in stores open at least a year were up only about 3% compared with the same period last year--at the low end of its expectations. But many other retailers were hurt much worse. Wal-Mart just keeps gaining market share, not only from bankrupt discounter Kmart but also from grocers like Kroger, drugstore chains like CVS and electronics sellers like RadioShack.

Wal-Mart is mounting an audacious expansion that could double its sales within just five years, to $480 billion. Some of that growth will come in new markets abroad, where 1,200 stores in nine countries already account for about 16% of the chain's total sales. But even more growth will be won as the chain insinuates itself into more U.S. neighborhoods and invades more product categories.

If you think Wal-Mart already sells just about everything, think again. Think PCs, ceiling fans, more fashionable clothing, gasoline and even cars. "Their goal is to have a 30% share of every major business they are in," says Linda Kristiansen, a retail analyst for UBS Warburg Equity Research. If there's no Wal-Mart store near you, just wait. If you shop at Wal-Mart, expect your store to get bigger or a new store to open even closer. The chain plans to expand from 3,400 U.S. locations today--half of them in the South--to a nationwide network approaching 5,000 stores in five years.

Wal-Mart has 1,300 Supercenters, many of them converted from standard discount stores, offering everything from hardware to groceries and drugs. In some areas, it is placing these 180,000-sq.-ft. monsters as close as 5 miles apart. And in the spaces between, it's tormenting local grocery and convenience stores with Neighborhood Markets (call 'em Small-Marts). Wal-Mart is building its first urban Supercenter, in downtown Dallas. And without fanfare it is testing used-car sales alongside one of its Houston stores. "It's surprising how much room we have for growth," says Robson Walton, 58, Sam's son and the company's nonexecutive chairman. "I'm not trying to be flippant," adds Lee Scott, 52, Wal-Mart's CEO. "But simply put, our long-term strategy is to be where we're not."