Sam Walton: Made In America

by Sam Walton

If I had to single out one element in my life that has made a difference for me, it would be a passion to compete.

It’s a story about believing in your idea even when maybe some other folks don’t, and about sticking to your guns.

But now I’d like to explain some of my attitudes about money—up to a point. After that, our finances—like those of any other normal-thinking American family—are nobody’s business but our own.

My dad, Thomas Gibson Walton, was an awfully hard worker who got up early, put in long hours, and was honest. Completely, totally honest, remembered by most people for his integrity. He was also a bit of a character, who loved to trade, loved to make a deal for just about anything: horses, mules, cattle, houses, farms, cars. Anything. Once he traded our farm in Kingfisher for another one, near Omega, Oklahoma. Another time, he traded his wristwatch for a hog, so we’d have meat on the table. And he was the best negotiator I ever ran into. My dad had that unusual instinct to know how far he could go with someone—and did it in a way that he and the guy always parted friends—but he would embarrass me with some of the offers he would make, they were so low.

I’d get up early in the morning and milk the cows, Mother would prepare and bottle the milk, and I’d deliver it after football practice in the afternoons. We had ten or twelve customers, who paid ten cents a gallon. Best of all, Mother would skim the cream and make ice cream, and it’s a wonder I wasn’t known as Fat Sam Walton in those days from all the ice cream I ate.

I also started selling magazine subscriptions, probably as young as seven or eight years old, and I had paper routes from the seventh grade all the way through college. I raised and sold rabbits and pigeons too, nothing really unusual for country boys of that era.

I learned from a very early age that it was important for us kids to help provide for the home, to be contributors rather than just takers. In the process, of course, we learned how much hard work it took to get your hands on a dollar, and that when you did it was worth something. One thing my mother a...

“People can’t understand why we’re still so conservative. They make a big deal about Sam being a billionaire and driving an old pickup truck or buying his clothes at Wal-Mart or refusing to fly first class. “It’s just the way we were brought up. “When a penny is lying out there on the street, how many people would go out there and pick it up? I’ll bet I would. And I know Sam would.”

The partnership works in a number of different ways. First, it enables us to control Wal-Mart through the family and keep it together, rather than having it sold off in pieces haphazardly. We still own 38 percent of the company’s stock today, which is an unusually large stake for anyone to hold in an outfit the size of Wal-Mart, and that’s the best protection there is against the takeover raiders. It’s something that any family who has faith in its strength as a unit and in the growth potential of its business can do. The transfer of ownership was made so long ago that we didn’t have to pay substantial gift or inheritance taxes on it. The principle behind this is simple: the best way to reduce paying estate taxes is to give your assets away before they appreciate.

“It was great moneywise, but there was another aspect to it: the relationship that was established among the children and with the family. It developed their sense of responsibility toward one another. You just can’t beat that.”

So along comes Forbes in 1985 and says I’m the richest man in America. Well, there’s no question that if you multiply the Wal-Mart stock price by how much we own, then maybe we are worth $20 or $25 billion, or whatever they say. The family may have those kinds of assets, but I have never seen that myself. For one thing, Helen and I only own 20 percent of our family’s total interest in Wal-Mart. For another, as long as I have anything to do with it—and I’m confident this attitude will last at least another generation—most of that Wal-Mart stock is staying right where it is. We don’t need the money. We don’t need to buy a yacht. And thank goodness we never thought we had to go out and buy anything like an island.

We just don’t have those lands of needs or ambitions, which wreck a lot of companies when they get along in years. Some families sell their stock off a little at a time to live high, and then—boom—som...

One of the real reasons I’m writing this book is so my grandchildren and great-grandchildren will read it years from now and know this: If you start any of that foolishness, I’ll come...

If we had enough groceries, and a nice place to live, plenty of room to keep and feed my bird dogs, a place to hunt, a place to play tennis, and the means to get the lads good educations—that’s rich. No question about it. And we have it. We’re not crazy. We don’t live like paupers the way some people depict us. We all love to fly, and we have nice airplanes, but I’ve owned about eighteen airplanes over the years, and I never bought one of them new. We have our family meetings at fine places like the Ritz-Carlton in Naples, Florida, or the Del Coronado in San Diego. This house we live in was designed by E. Fay Jones, who lives down the road in Fayetteville and is a world-famous disciple of Frank Lloyd Wright. And even though I think it cost too much, I have to admit that it’s beautiful—but in a real simple, natural kind of way.

A lot of what goes on these days with high-flying companies and these overpaid CEO’s, who’re really just looting from the top and aren’t watching out for anybody but themselves, really upsets me. It’s one of the main things wrong with American business today.

But sometimes I’m asked why today, when Wal-Mart has been so successful, when we’re a $50 billion-plus company, should we stay so cheap? That’s simple: because we believe in the value of the dollar. We exist to provide value to our customers, which means that in addition to quality and service, we have to save them money. Every time Wal-Mart spends one dollar foolishly, it comes right out of our customers’ pockets. Every time we save them a dollar, that puts us one more step ahead of the competition—which is where we always plan to be.

“Sam is one of those rare people who knows every janitor by name, passes plates in church, loves to join organizations … Sam’s ability to lead has been the cause of much ribbing. His military uniform has let him be called ‘Little Caesar.’ For his presidency of the Bible class he suffered the nickname ‘Deacon.’ ”

It appeared to me that he was making all the money in the world. Insurance seemed like a natural for me because I thought I could sell. I had always sold things.

Now I realize the simple truth: I got into retailing because I was tired and I wanted a real job.

Instead, I got a job at a big Du Pont gunpowder plant in the town of Pryor, outside Tulsa. The only room I could find to stay in was nearby, over in Claremore. That’s where I met Helen Robson one April night in a bowling alley.

“I was out on a date with another fellow, and it was the first time I’d ever been bowling. I had just rolled the ball and when I came back to the seats—they were those old wooden theater chairs—Sam had his leg up over the armrest of one of them, and he smiled at me and said, corny as it was, “Haven’t I met you somewhere before?” We discovered that he had dated a girl I knew in college. Later on, he called me and asked me for her number, and I think maybe he even went out with her. But pretty soon, he and I were going out together. My whole family just fell in love with him, and I always said he fell in love as much with my family as he did with me.” When Helen and I met and I started courting her, I just fell right in love. She was pretty and smart and educated, ambitious and opinionated and strong-willed—with ideas and plans of her own. Also, like me, she was an athlete who loved the outdoors, and she had lots of energy.

By the time I went into the Army I had two things settled: I knew who I wanted to marry, and I knew what I wanted to do for a living—retailing. About a year after I went into the Army, Helen and I were married on Valentine’s Day, 1943, in her hometown of Claremore, Oklahoma.

“Sam, we’ve been married two years and we’ve moved sixteen times. Now, I’ll go with you any place you want so long as you don’t ask me to live in a big city. Ten thousand people is enough for me.”

So any town with a population over 10,000 was off-limits to the Waltons. If you know anything at all about the initial small-town strategy that got Wal-Mart going almost two decades later, you can see that this pretty much set the course for what was to come.

It was a real blessing for me to be so green and ignorant, because it was from that experience that I learned a lesson which has stuck with me all through the years: you can learn from everybody.

I’ll never forget one of Harry’s deals, one of the best items I ever had and an early lesson in pricing. It first got me thinking in the direction of what eventually became the foundation of Wal-Mart’s philosophy. If you’re interested in “how Wal-Mart did it,” this is one story you’ve got to sit up and pay close attention to. Harry was selling ladies’ panties—two-barred, tricot satin panties with an elastic waist—for $2.00 a dozen. We’d been buying similar panties from Ben Franklin for $2.50 a dozen and selling them at three pair for $1.00. Well, at Harry’s price of $2.00, we could put them out at four for $1.00 and make a great promotion for our store.

Here’s the simple lesson we learned—which others were learning at the same time and which eventually changed the way retailers sell and customers buy all across America: 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. I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough.

But this is really the essence of discounting: by cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you ca...

I heard that Sterling was going to buy Kroger’s lease and expand John’s store into that space, making their store much bigger than mine. So I hustled down to Hot Springs, to find the landlady of that Kroger building. Somehow, I convinced her to give me the lease, instead of giving it to Sterling. I didn’t have any idea what I was going to do with it, but I sure knew I didn’t want Sterling to have it.

We went over to the railroad tracks and unloaded the fixtures, put them together, laid out the store, put the merchandise together—and opened six days later on Monday. We called it the Eagle Store.

together, laid out the store, put the merchandise together—and opened six days later on Monday. We called it the Eagle Store. So now we had two stores on Front Street in Newport.

The Eagle never made much money, but I figured I’d rather have a small profit than have my competitor over there in a big store.

“That Newport store was really the beginning of where Wal-Mart is today. We did everything. We would wash windows, sweep floors, trim windows. We did all the stockroom work, checked the freight in. Everything it took to run a store. We had to keep expenses to a minimum. That is where it started, years ago. Our money was made by controlling expenses. That, and Sam always being ingenious. He never stopped trying to do something different. One thing, though: I never forgave him for making me clean out that damned ice cream machine. He knew I’d hated milk and dairy products ever since we were kids. He used to squirt me when he milked the cows. I always thought he gave me that job because he knew I didn’t like milk. He still laughs about it.”

By now, my five years in Newport were about up, and I had met my goal. That little Ben Franklin store was doing $250,000 in sales a year, and turning $30,000 to $40,000 a year in profit. It was the number-one Ben Franklin store—for sales or profit—not only in Arkansas, but in the whole six-state region. It was the largest variety store of any sort in Arkansas, and I don’t believe there was a bigger one in the three or four neighboring states. Every crazy thing we tried hadn’t turned out as well as the ice cream machine, of course, but we hadn’t made any mistakes we couldn’t correct quickly, none so big that they threatened the business. Except, it turned out, for one little legal error we made right at the beginning. In all my excitement at becoming Sam Walton, merchant, I had neglected to include a clause in my lease which gave me an option to renew after the first five years.

And our success, it turned out, had attracted a lot of attention. My landlord, the department store owner, was so impressed with our Ben Franklin’s success that he decided not to renew our lease—at any price—knowing full well that we had nowhere else in town to move the store. He did offer to buy the franchise, fixtures, and inventory at a fair price; he wanted to give the store to his son. I had no alternative but to give it up. But I sold the Eagle Store lease to Sterling—so that John Dunham, my worthy competitor and mentor, could finally have that expansion he’d wanted.

It was the low point of my business life. I felt sick to my stomach. I couldn’t believe it was happening to me. It really was like a nightmare. I had built the best variety store in the whole region and worked hard in the community—done everything right—and now I was being kicked out of town. It didn’t seem fair. I blamed myself for ever getting suckered into such an awful lease, and I was furious at the landlord...

you can make a positive out of most any negative if you work at it hard enough.

Somehow over the years, folks have gotten the impression that Wal-Mart was something I dreamed up out of the blue as a middle-aged man, and that it was just this great idea that turned into an overnight success. It’s true that I was forty-four when we opened our first Wal-Mart in 1962, but the store was totally an outgrowth of everything we’d been doing since Newport—another case of me being unable to leave well enough alone, another experiment. And like most other overnight successes, it was about twenty years in the making.

Sam was down there every day from the time we started until the time we left. He rolled up his sleeves and worked every day until we built that store from scratch.

most everything I’ve done I’ve copied from somebody else

Once I took to the air, I caught store fever. We opened variety stores, many of them Ben Franklin franchises, in Little Rock, Springdale, and Siloam Springs, Arkansas, and we had a couple more in Neodesha and Coffeyville, Kansas. All these stores were organized as separate partnerships between Bud and me, along with other partners, including my dad, Helen’s two brothers—Nick and Frank—and even the kids, who invested their paper route money.

Whatever money we made in one store, we’d put it in another new one, and just keep on going. Also, from Willard Walker on, 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.

By then, I knew the discount idea was the future.

BOB BOGLE, FIRST MANAGER—WALTON’S FIVE AND DIME, BENTONVILLE, NOW RETIRED FROM WAL-MART: “We were flying to Fort Smith in the spring of 1962, and Sam was piloting the plane over the Boston Mountains. It was that Tri-Pacer by then, not the original plane that we had made a lot of trips in. Sam pulled this card out of his pocket, on which he had written down three or four names, and he handed it to me and asked me which one I liked best. They all had three or four words in the title, and I said, ‘Well, you know, Scotch as I am, I’d just keep the Walton name and make it a place to shop.’ I scribbled ‘W-A-L-M-A-R-T’ on the bottom of the card and said, ‘To begin with, there’s not as many letters to buy.’ I had bought the letters that said ‘Ben Franklin,’ and I knew how much it cost to put them up and to light them and repair the neon, so I said, ‘This is just seven letters.’ He didn’t say anything, and I dropped the subject. A few days later I went by to see when we could start setting the fixtures in the building, and I saw that our sign maker, Rayburn Jacobs, already had the ‘W-A-L’ up there and was headed up the ladder with an ‘M.’ You didn’t have to be a genius to figure out what the name was going to be. I just smiled and went on.”

Something else about that sign that’s worth mentioning. On one side of it, I had Rayburn put “We Sell for Less,” and on the other, “Satisfaction Guaranteed,” two of the cornerstone philosophies that still guide the company.

On July 2, 1962, we finally opened Wal-Mart No. 1, and not everybody was happy about it.

A few minutes later, Sam came down and told Whitaker and me that they had issued an ultimatum: Don’t build any more of these Wal-Mart stores. We knew he felt threatened because he had all those Ben Franklin franchises. But we also knew Sam Walton wasn’t the kind of guy you issued ultimatums to.”

Sterling had a huge variety store in downtown Harrison, with tile on the floor, nice lights, really good fixtures, and good presentations. Ours was just barely put together—highly promotional, truly ugly, heavy with merchandise—but for 20 percent less than the competition. We were trying to find out if customers in a town of 6,000 people would come to our kind of a barn and buy the same merchandise strictly because of price. The answer was yes.

Sam wouldn’t let us hedge on a price at all. Say the list price was $1.98, but we had only paid 50 cents. Initially, I would say, ‘Well, it’s originally $1.98, so why don’t we sell it for $1.25?’ And he’d say, ‘No. We paid 50 cents for it. Mark it up 30 percent, and that’s it. No matter what you pay for it, if we get a great deal, pass it on to the customer.’ And of course that’s what we did.”

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.