Walmart’s Trillion-Dollar Mojo
Walmart was the most recent member in the trillion dollar club companies. After coming to IPO in 1970, it took them almost 54 years to reach half a trillion dollar of Enterprise Value (EV). The next $500 Billion took just two years! As they say, the first $500 Billion is the difficult one.
I initially found it a bit strange that investors enthusiasm about Walmart somehow coincided with two of the most consequential technological revolution. Walmart’s EV peaked in December 1999 and it took them almost two decades to surpass such EV again in 2019!
Perhaps it’s less of a surprise considering Walmart’s deep penchant to stay at the cutting edge of retail technology even from the 1980s. A key reason Walmart could run circles around other retailers in the 80s and 90s was its technological lead over others. Some excerpt from this podcast would help you appreciate that history:
“…you're at the register at your neighborhood Walmart location: you scan the toothpaste, the barcode beeps. Within seconds, a satellite dish behind the store sends that transaction to the sky and over to Bentonville, Arkansas, where they're hosting their mainframe computer to record the sale.
A few minutes later, a massive data warehouse would update how many tubes of toothpaste you had just bought. Then, perhaps before the end of the day, Procter & Gamble's factory would receive an update that they needed to make more toothpaste.
This was the cutting edge of retail in the late 80s, and Walmart made a massive decision to take this a step further, truly driving innovation across the retail industry. They invested $24 million to build their own private satellite network linking all Walmart stores to headquarters. This was fairly unprecedented at the time…It was the largest private satellite network.
So any single event that happened within the Walmart ecosystem rode on this private network, enabling them to mine their data in a way that was unheard of before.
By mining their sales data – which could now be collected in real time across all Walmart stores over their private satellite network – they discovered that when hurricanes approached, the sale of Pop-Tarts increased 7x over their normal rate.”
While Amazon took the lead on defining the future of retail post-2000, Walmart has gradually found its mojo and now increasingly seem very well-positioned to stay at the frontier of retail for the decade(s) ahead. I will discuss more behind the paywall.
In addition to “Daily Dose” (yes, DAILY) like this, MBI Deep Dives publishes one Deep Dive on a publicly listed company every month. You can find all the 66 Deep Dives here.