Sam Walton: Made In America

by Sam Walton

1962, the year which turned out to be the big one for discounting. In that year, four companies that I know of started discount chains. S. S. Kresge, a big, 800-store variety chain, opened a discount store in Garden City, Michigan, and called it Kmart. F. W. Woolworth, the granddaddy of them all, started its Woolco chain. Dayton-Hudson out of Minneapolis opened its first Target store.

we had people come from as far as Tulsa to buy toothpaste and antifreeze. The crowd was so big that the fire

We had no established distributors. No credit. Salesmen would just show up at our door, and we would try to get the best deals we could.

When you’re only making $8,000 or maybe $12,000 a year net in a store, it would have only taken one or two managers who were dishonest to lose the whole company.

He was so good at evaluating and selecting these fellows. He wasn’t just looking for store managers. I think he was selecting people he thought he could go forward with.

there hasn’t been a day in my adult life when I haven’t spent some time thinking about merchandising.

So he worked up a detergent promotion that turned into the world’s largest display ever of Tide, or maybe Cheer—some detergent.

It made up a pyramid of detergent boxes that ran twelve to eighteen cases high—all the way to the ceiling, and it was 75 or 100 feet long, which took up the whole aisle across the back of the store, and then it was about 12 feet wide so you could hardly get past it.

we always felt we had to try some of this crazy stuff.

Ask him about his minnow bucket, though. That was his worst item ever.

there was a great big open trash bin out behind that store, and at night, after both stores were closed, John and Larry would go over to Gibson’s and get down in their trash and check as many prices as they could find.”

I guess we had very little capacity for embarrassment back in those days. We paid absolutely no attention whatsoever to the way things were supposed to be done, you know, the way the rules of retail said it had to be done.

I’m glad my kids remember the good times and don’t seem to resent me too much for my absences and distractions over the years.

I’d hate to see any descendants of mine fall into the category of what I’d call “idle rich”—a group I’ve never had much use for.

I read in some trade publication not long ago that of the top 100 discounters who were in business in 1976, 76 of them have disappeared. Many of these started with more capital and visibility than we did, in larger cities with much greater opportunities.

If you want the people in the stores to take care of the customers, you have to make sure you’re taking care of the people in the stores. That’s the most important single ingredient of Wal-Mart’s success.

all those guys who were failing to meet their customers’ needs and who didn’t build strong organizations—all those promoters—started to fall apart and, eventually, fall out.

Kmart and Woolco were using the same distribution system that was supplying their thousands of variety

My son Rob had graduated from Columbia University law school the year before and had gone to work at the biggest law firm in Tulsa.

From 1977 to 1987, our average annual return to investors was 46 percent. And even in the middle of the recession, in 1991, we reported a return on equity of more than 32 percent.

put good-sized discount stores into little one-horse towns which everybody else was ignoring. In those days, 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.

But while the big guys were leapfrogging from large city to large city, they became so spread out and so involved in real estate and zoning laws and city politics that they left huge pockets of business out there for us.

Each store had to be within a day’s drive of a distribution center.

We never planned on actually going into the cities. What we did instead was build our stores in a ring around a city—pretty far out—and wait for the growth to come to us.

we never believed in spending much money on advertising, and saturation helped us to save a fortune in that department.

We had five different store sizes—running from about 30,000 to 60,000 square feet—and we would hardly ever pass up any market because it was too small.

getting out in front of expansion and letting the population build out to us.

He said, ‘The store looks really good, guys.’ And he drove away and left us.”

I’ve played to my strengths and relied

on others to make up for my weaknesses.

But if you asked me am I an organized person, I would have to say flat out no, not at all.

For twenty years back East, they always said Wal-Mart never had any competition, and that we wouldn’t know what to do with it when it hit us.

We would be putting in fifty stores a year, when most of our group would be trying to start three, four, five, or six a year. It always confounded them. They would always ask, “How do you do it? There’s no way you can be doing that.”

He’d make them an assistant manager. They were the ones who would go around and open all the new stores, and they would be next in line to manage their own store. In my opinion, most of them weren’t anywhere near ready to run stores, but Sam proved me wrong there. He finally convinced me. If you take someone who lacks the experience and the know-how but has the real desire and the willingness to work his tail off to get the job done, he’ll make up for what he lacks. And that proved true nine times out of ten. It was one way we were able to grow so fast.”

I remember being very nervous when everybody decided we needed to buy our own trucks, but we did it.

“The faster we grew, the further behind we fell. We were always behind with our distribution. We never opened a warehouse soon enough, and we always had too many stores to service before the warehouse would get opened. Nowadays, I think they stay about one and a half distribution centers out front of demand,

It’s amazing that our competitors didn’t catch on to us quicker and try harder to stop us. Whenever we put a Wal-Mart store into a town, customers would just flock to us from the variety stores.

What has carried this company so far so fast is the relationship that we, the managers, have been able to enjoy with our associates.

The larger truth that I failed to see turned out to be another of those paradoxes—like the discounters’ principle of the less you charge, the more you’ll earn. And here it is: the more you share profits with your associates—whether it’s in salaries or incentives or bonuses or stock discounts—the more profit will accrue to the company.

the biggest single regret in my whole business career is that we didn’t include our associates in the initial, managers-only profit-sharing plan when we took the company public in 1970.

I guess I was just too worried about my own debt, and in too big a hurry to get somewhere fast.

historically, as unions have developed in this country, they have mostly just been divisive.

themselves in the middle as almost a separate business, one that depends on division between the other two camps.

I think anytime the employees at a company say they need a union, it’s because management has done a lousy job of managing and working with their people.

The decision we reached around that time, to commit ourselves to giving the associates more equitable treatment in the company, was without a doubt the single smartest move we ever made at Wal-Mart.

Every associate of the company who has been with us at least a year, and who works at least 1,000 hours a year, is eligible for it.

you’ll just stay with me for twenty years, I guarantee you’ll have $100,000 in profit sharing.’ I thought, ‘Big deal. Bob Clark never will see that kind of money in his life.’ I was worrying about what I was making right then. Well, last time I checked, I had $707,000 in profit sharing, and I see no reason why it won’t go up again.

Today, more than 80 percent of our associates own Wal-Mart stock,

If a store holds shrinkage below the company’s goal, every associate in that store gets a bonus that could be as much as $200.

our shrinkage percentage is about half the industry average.