With its Regency furniture, rich wood paneling and commanding view of Chicago's skyline, the executive floor of the 110-story Sears Tower is a monument to the company's glorious century as America's favorite store. Now those days are gone. When Sears' 13 directors gathered last week in the spacious, peach-carpeted 68th-floor boardroom, the reports they faced were overwhelmingly bad. A mammoth increase in advertising had scarcely budged sales. Profits were way down. The Christmas selling season was the worst in 15 years. One piece of news especially seemed to mock the setting's regal grandeur. Sears, officially, is no longer America's largest retailer. The new king: Wal-Mart, a onetime backwoods bargain barn that, according to late figures, has pulled past Sears in North American sales. K mart, advancing steadily but less spectacularly, edged up just behind Sears, leaving the former leader an uncertain No. 2.
While worried Sears directors were seeking solutions in Chicago, Wal-Mart founder Sam Walton, 72, was working in his spartan little office at headquarters in Bentonville, Ark. (pop. 11,000). Starting at 7 every morning, well-scrubbed, energetic employees scurry through the drab two-story building whose Formica desks and battleship-gray walls belie the company's immense profitability. Before long, a crowd of would-be suppliers begins forming at the front door: vendors carrying trunks and cases of products, hoping to interest Wal-Mart buyers in their toothpaste, panty hose, toasters and hundreds of other products. Wal-Mart buyers are notoriously tough bargainers, so sales representatives prepare their pitches carefully. Wal-Mart has plenty of room to grow -- shoppers in 15 states, mostly in the Northeast, have yet to see one store. The chain got started in 1962 much the way Sears did decades earlier, by targeting far-flung small towns and underserved rural areas. Stocking everything from cosmetics and record albums to shirts and lawn furniture, Wal-Mart developed a loyal core of customers devoted to fast, friendly service and consistently low prices.
Wal-Mart advanced on one market after another, building regional clusters of stores no farther than a day's drive from huge warehouse hubs. While other large retailers were allowing service to deteriorate, Wal-Mart stores were stationing a friendly greeter at the front door to welcome customers. The headquarters' down-home feel is real enough, but don't look for rolltop desks and clipboards. Walton -- Mr. Sam to his 350,000 employees -- invested in a state-of-the-art corporate satellite system that has enabled the company to perfect round-the-clock inventory control so that the products customers want are nearly always in stock. In Bentonville a computer center the size of a football field controls the widespread operations, tracking inventory, credit and sales via a Hughes satellite.