Sam Walton: Made In America

by Sam Walton

no partnerships; they were too risky. Her family had seen some partnerships go sour, and she was dead-set in the notion that the only way to go was to work for yourself.

I’ve always believed in goals, so I set myself one: I wanted my little Newport store to be the best, most profitable variety store in Arkansas within five years. I felt I had the talent to do it, that it could be done, and why not go for it? Set that as a goal and see if you can’t achieve it. If it doesn’t work, you’ve had fun trying.

say I bought an item for 80 cents. I found that by pricing it at $1.00 I could sell three times more of it than by pricing it at $1.20.

It’s not just a corny saying that you can make a positive out of most any negative if you work at it hard enough.

He would just yell at everybody he saw, and that’s the reason so many liked

😂

like most other overnight successes, it was about twenty years in the making.

we would offer to bring the managers we hired in as limited partners. If you had, say, a $50,000 investment in a store, and the manager put in $1,000, he’d own 2 percent.

In fifteen years’ time, we had become the largest independent variety store operator in the United States.

Our first big clue came in Saint Robert, Missouri—near Fort Leonard Wood—where we learned that by building larger stores, which we called family centers—we could do unheard-of amounts of business for variety stores, over $2 million a year in sales per store, just unthinkable for small towns.

We really had only two choices left: stay in the variety store business, which I knew was going to be hit hard by the discounting wave of the future; or open a discount store.

1962, the year which turned out to be the big one for discounting.

We paid 50 cents for it. Mark it up 30 percent, and that’s it. No matter what you pay for

The basic discounter’s idea was to attract customers into the store by pricing these items—toothpaste, mouthwash, headache remedies, soap, shampoo—right down at cost. Those were what the early discounters called your “image” items. That’s what you pushed in your newspaper advertising—like the twenty-seven-cent Crest at Springdale—and you stacked it high in the stores to call attention to what a great deal it was. Word would get around that you had really low prices. Everything else in the store was priced low too, but it had a 30 percent margin. Health and beauty aids were priced to give away.

I really love to pick an item—maybe the most basic merchandise—and then call attention to it. We used to say you could sell anything if you hung it from the ceiling. So we would buy huge quantities of something and dramatize it. We would blow it out of there when everybody knew we would have only sold a few had we just left it in the normal store position.

In retail, you are either operations driven—where your main thrust is toward reducing expenses and improving efficiency—or you are merchandise driven.

the kids received your everyday heartland upbringing, based on the same old bedrock values: a belief in the importance of hard work, honesty, neighborliness, and thrift.

Walton Enterprises owns banks in several towns

I bought the newspaper figuring that we would have a cheap place to print our circulars.

“Then he says: ‘Tell me what’s wrong. What am I doing wrong?’ “I look at these numbers—this was in 1966—and I don’t believe what I’m seeing. He’s got a handful of stores and he’s doing about $10 million a year with some incredible margin. An unbelievable performance! “So I look at it, and I say, ‘What are you doing wrong? Sam—if I may call you Sam—I’ll tell you what you are doing wrong.’ I handed back his papers and I closed his attaché case, and I said to him, ‘Being here is wrong, Sam. Don’t unpack your bags. Go down, catch a cab, go back to the airport and go back to where you came from and keep doing exactly what you are doing. There is nothing that can possibly improve what you are doing. You are a genius.’ That’s how I met Sam Walton.”

I couldn’t resist taking that next step to see how far we could go.

our strategy of going to the small towns where there was no competition

MARGARET GILLIAM, FIRST BOSTON: Wal-Mart is the finest-managed company we have ever followed. We think it is quite likely the finest-managed company in America, and we know of at least one investor who thinks it is the finest-managed company in the world. We do not expect to find another Wal-Mart in our lifetime

Kmart wasn’t going to towns below 50,000, and even Gibson’s wouldn’t go to towns much smaller than 10,000 or 12,000. We knew our formula was working even in towns smaller than 5,000 people,

we would go as far as we could from a warehouse and put in a store. Then we would fill in the map of that territory, state by state, county seat by county seat, until we had saturated that market area.

our main real estate effort should be directed at getting out in front of expansion and letting the population build out to us.

Investing in the company’s future growth by targeting urban expansion areas.

From up in the air we could check out traffic flows, see which way cities and towns were growing, and evaluate the location of the competition—if there was any. Then we would develop our real estate strategy for that market.

His mind works ten times faster than everybody else’s.

One way I’ve managed to keep up with everything on my plate is by coming in to the office really early almost every day, even when I don’t have those Saturday numbers to look over. Four-thirty wouldn’t be all that unusual a time for me to get started down at the office. That early morning time is tremendously valuable: it’s uninterrupted time when I think and plan and sort things out.

He is always his own person, totally independent in his thinking.

It was really easy to develop discounting in those small communities before things got competitive. There wasn’t a lot of competition for us in the early days because nobody was discounting in the small communities.

we were tremendously excited about what was going on. I’m not sure we even had time to realize just how phenomenal our growth rate in the seventies would look on a chart years later: STORES SALES 1970 32 $ 31 million 1972 51 $ 78 million 1974 78 $ 168 million 1976 125 $ 340 million 1978 195 $ 678 million 1980 276 $ 1.2 billion

all had a piece of their stores’ profits from the beginning.

store managers.

a profit margin of 6 percent or higher

we didn’t include our associates in the initial, managers-only profit-sharing plan when we took the company public in 1970.

the Retail Clerks Union organized a strike against us

The partnership we have at Wal-Mart—which includes profit sharing, incentive bonuses, discount stock purchase plans,

we chose to call our employees “associates,”

shrinkage, or unaccounted-for inventory loss—theft, in other words—is one of the biggest enemies of profitability in the retail business.

Everything about us gets to the outside. In our individual stores, we show them their store’s profits, their store’s purchases, their store’s sales, and their store’s markdowns. We show them all that on a regular basis, and I’m not talking about just the managers and the assistant managers. We share that information with every associate, every hourly, every part-time employee in the stores.

“Without question, Sam Walton is one of the great all-time merchants. Period.”

most setbacks can be turned into opportunities.

He is the greatest businessman of this century.”

a pretax profit of more than 8 percent—

a pretax profit of more than 8 percent, when most everybody else in the retail industry averages about half that,

In lots of little towns, you didn’t even have many one-stop groceries. You might have one shop that specialized in butchering meat, another that carried good fresh vegetables, and maybe another that would wring a chicken’s neck and dress it for you right there behind the counter while you waited.

The retail market has evolved from specialized shops to generalist shops such as Walmart.

The downtowns of big cities started to lose population and business to the suburbs, and the big downtown department stores had to follow their customers and build branch stores out in the suburban malls. Traditional diners and cafés suffered because of the new car-oriented chains like McDonald’s and Burger King, and the old city variety stores like Woolworth’s and McCrory’s just got smashed by Kmart and some of the other big discounters. The oil companies stuck service stations on practically every other corner, and pretty soon something called convenience stores—7-Elevens and such—came along and started filling up the other corners.

When we arrived in these little towns offering low prices every day, satisfaction guaranteed, and hours that were realistic for the way people wanted to shop, we passed right by that old variety store competition, with its 45 percent markups, limited selection, and limited hours.

craft merchandise than any Wal-Mart could, and they held classes in things like pottery and flower arranging,

Retailers can switch to providing services in order to survive against Walmart.

a good smart hardware store operator can just beat us to death if he thinks about what he’s doing

Hardware stores can coexist with Walmart, because they are not a direct competition.

The same is true in sporting goods, where the customer can’t expect to get nearly the same kind of service from us as from a specialty store.