The book was published in 1992
Foreword. Wal-Mart is now the largest retailing outfit in the world. ‘Friend, we just got after it and stayed after it.’ Sam Walton, on Wal-Mart’s success. Be protective of your business dealings. Sam has been fighting cancer. WM’s associates have contributed immensely to the success of the firm. He had the passion to compete.
It is a story about entrepreneurship, and risk, and hard work, and knowing where you want to go and being willing to do what it takes to get there. It’s a story about believing in your ideas even when maybe some other folks don’t, and about sticking to your guns. But I think more than anything it proves there’s absolutely no limit to what plain, ordinary working people can accomplish if they are given the opportunity and the encouragement and the incentive to do their best. – Sam Walton
Learning to Value a Dollar. By 1985, he was the richest man in the US. Sam was pissed with the fame he got. He didn’t like the media to question his personal finances. Some of them weren’t interested in the business. His family kept quite secretive lives. However, they still interacted with people from their town. Sam grew up during the Great Depression. He valued money a lot. His father was Thomas, and he was a very hard worker back then. He was a super honest man. Also, his dad could negotiate very well to squeeze money out of people. Sam’s brother, Bud, picked up the negotiation skills from his dad. Dad did many small jobs during his life. Once, he worked as a person who re-possessed others’ farms due to default. He didn’t come from a rich family. Nan made Sam milk the cows and then sell the bottles for cash. Sam also sold magazines and newspapers and acted as a delivery boy. Sam learnt the importance of contribution when he grew older. His parents were very thrifty people. He met L.S. Robson, some trader and business. Sam admired his success. Together with his family, they established ‘Walton Enterprises’. The family makes the decisions. Walton Enterprises helped to run WM. Their family owns a large % of the stock as well. This enterprise was a way to keep the family together. It helped to bond the family as well. His wife was Helen Walton. The Waltons are very frugal and will not spend excessively, despite their wealth. Don’t ever splurge your money like that. It will come back to haunt you. Sam does not believe in a showy lifestyle. Sam is very competitive and wants to be at the top, money is immaterial to him. It is very easy to fall into the trap of leading the jet setting lifestyle.
The best way to reduce paying estate taxes is to give your assets away before they appreciate. – Sam Walton
We believe in the value of the dollar. We exist to provide value to our customers, which mean that in addition to quality and service, we have to save them money. Every time WM 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 Walton
Starting on a Dime. Sam always wanted to win and he hated losing. He admitted he learnt this trait to be ambitious from his mum. Unfortunately, she passed away when she was young. His mum drilled into him to be the best that you can be in anything that you choose to do. He bet with his peers on who would promote faster in scouts. He won. He once rescued a friend from drowning. He was the president of the student body in High School. Sam achieved some success in his school days. He realized that he was good at motivating others. His school high school track record thought him to expect winning and how to overcome challenges. To lead people in campus, you had to speak to others in the hall before they approached you. He was the student president of his university too. The key is to remember people’s names. Through his newspaper routes, he managed to make some money along the way. Sam was taking on too much. However, when he focused on something, he excelled at it. Even if it was just selling newspapers. In the fact, Sam thought he wanted to be an insurance agent. Sam thought that job suited him. However, he ended up with a job with JC Penney. He would be a management trainee with the firm. It was a retail business. Eventually, Sam loved retail. Duncan Majors was a manager at JC Penney and Sam was impressed by him. Sam had to go for enlistment and had to leave his job. He met Helen Robson at a bowling alley. She was very similar to him. She was ambitious, sporty and smart. Everything rolled into one. Before he entered army, he knew he wanted Helen and that he wanted a career in retail. After he exited from army, Sam wanted to enter into business himself. The both of them moved to St Louis. Sam’s friend, Tom, also wanted to get into the retail business. Sam and Tom wanted to be partners to buy a department store on Del Mar Avenue. Helen didn’t believe in partnerships and then Sam would start out on his own. A guy was selling his store in Arkansas and Sam bought it for $25,000. $20,000 was from Helen’s father. Sam realized the rent was too high but could not do anything about it. He learned how to manage a variety store. Sam was observing John Dunham and his store. The Butler Brothers’ programme was very strict and didn’t have any room for maneuver. Initially, he followed their steps. Sam wanted to buy direct from the manufacturer, without Butler Brothers’ as a middleman or distributor. He sourced for a cheaper distributor, who only took a 5% cut. By then, Sam’s store was cheaper than their competitors. Sam lowered the price and that ate into his profit margin. However, because of this, he sold a larger volume of goods. Overall, this method generated more profit for him. Ben Franklin, the franchisor, had many restrictions on how business was run. After 2.5 years, Sam repaid Helen’s dad the $20,000. Sam placed a popcorn and ice cream machine at the entrance. It sold like hotcakes. Sam bought at Eagle store nearby and set up shop. This was as he knew the competitor was trying to expand their offering too. Now, Sam had 2 stores on Front Street. Sam was excellent at controlling expenses. Sam and Bud cleaned most of the store themselves back then. Helen was fairly involved in church work. After 5 years, his store reached the target of being the one with the largest sales in the state. It turned in $250,000 in sales and $30,000 to $40,000 in profit. Correct the errors fast and don’t let mistakes build. The landlord wanted to drive them out as he didn’t like Sam’s success. Also, Sam didn’t have the option to renew the lease after 5 years. Sam was sick in the stomach by this. Sam and Helen had to move to another town and try again. Sam vowed to read leases in more detail in future.
I have always pursued everything I was interested in with a true passion – some would say obsession – to win. I’ve always held the bar pretty high for myself: I’ve set extremely high personal goals. – Sam Walton
I learned a long time ago that exercising your ego in public is definitely not the way to build an effective organization. One person seeking glory doesn’t accomplish much; at WM, everything we’ve done has been the result of people pulling together to meet one common goal – teamwork – something I also picked up at an early age. – Sam Walton
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 5 years. I felt I had the talent to do it, that it could be done, and why not go for it? Set this as a goal and see if you can’t achieve it. If it doesn’t work, you’ve had fun trying. – Sam Walton
I learnt a lesson which has stuck with me all through the years: you can learn from everybody. I didn’t just learn from reading every retail publication I could get my hands on, I probably learned the most from studying what my competitor was doing across the street. – Sam Walton
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 can lower your markup but earn more because of the increased volume. – Sam Walton
I’ve never been one to dwell on reserves, and I didn’t do so then. It’s not just a corny saying that you can make a positive out of almost any negative if you work at it hard enough. I’ve always thought of problems as challenges, and this one wasn’t any different. – Sam Walton
Bouncing Back. Sam hated leaving Newport. Sam made more than $50,00 on the sale of the department store. They decided on Northwest Arkansas. Sam was 32 now. The town had only 3000 people. He built a 4000 sq feet store. Sam realized from his competitors about self-check out counters. He adopted the idea too. It was still a Ben Franklin franchise. Sam was extremely friendly to the folks around the area. He named the store ‘Walton’s Five and Dime’. Sam was targeting a store at Fayetteville too. The first Wal-Mart only opened when he was 44. He soon hired Willard Walker, a store manager. Sam knew what he was doing and his philosophy worked. Willard owned a lot of Wal-Mart’s stock. Sam wanted to be a shopping centre developer in Arkansas as well. He wanted to sell the idea of shopping centres to others. However, it didn’t take off and people were not drawn to the concept. Sam lost $25,000. One day, his store was leveled by a hurricane. Sam was lucky that the goods were insured. Sam bought a plane and explored other towns. With this, the store fever in him grew. All his stores were set up as separate partnerships with his fellow partners. Sam believed in continuous re-investment in the business. By 1960, they had $1.4 million sales in 14 stores. The mill store, or family centre concept interested Sam. The discount idea was the future. Buy low, stack it high, sell it cheap. The middleman, Bulters Brothers, didn’t want to establish a discounting venture with Sam. Therefore, Sam started his own. He knew he couldn’t complete with Ben Franklin. He had to go elsewhere. This was the first discount store on its own. This was the first Wal-Mart. This would prove to be challenging as they could not fall back on the franchisor expertise. In 1962, Sam opened his first store. As there was already a Ben Franklin store in the area, they were not pleased with Wal-Mart. David Glass thought the store layout of WM sucked. It was extremely messy inside. Sam wanted to roll out the stores as soon as possible. To him, it seemed that even big stores could work. Sam needed to win on price. Having the lowest price possible.
First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong that anyone I’ve ever known. And once he see he’s wrong, he just shakes it off and heads in another direction. – Sam Walton
Swimming Upstream. WM’s aim was to sell for the lower prices than its competitors. He was angry with the Butler Brothers and wanted to swim upstream. Sam was more innovative in business than in his personal life. Sam realized that Ben Franklin staff were spying on him in his store. At that time, WM was still a dwarf compared to Kmart, Woolco etc. However, in the end, they would be surpassed. WM learnt to start in the small American towns and had a firm business model before venturing out into the cities. This would not have been possible if they had been capitalized by the big boys. There was actually a lot of business in the small towns. At that time, customer service was not the priority. The priority was to keep costs down. Also, they built relationships with their customers. Pass on the savings to the customer. There was no basic merchandize assortment and real replenishment system. There were no established distributers and no credit. Some of the big boys like P&G didn’t treat them well. Back then, they didn’t use FIFO or LIFO method. If you couldn’t balance the books, you created a ESP (Error some place). Sam gave the managers freedom to try new stuff. Don Whitaker became the operations manager and he was extremely capable. One bad manager could bring down a store. Therefore, Sam had this knack of hiring the right person for the job. Sam did not necessarily hire college guys. Sam thought that non-graduates would be willing to work harder. Sam was a guy who was always open to suggestions. Claude would be the general merchandize manager. The store manager could explore and buy things he thought could sell. Sam gave them a report so that managers could analyse what were the best selling items. Merchandizing and setting promotions to items are Sam’s passion. Phil bought a ridiculous amount of detergent so as to compete with Kmart and get the bulk discount. He also stacked on lawnmovers. Thankfully, they all sold. The store was new at the time. Part of being a WM manager is that you get to promote items. Just a little promotion is enough to get the stock moving. The location of where the item was placed matters a lot. The item needs to be visible to the public. If you take the trouble to identify those items and promote them, they will sell. This is how to boost high sales per square foot. There were weekly meetings among the managers to plan for merchandizing programs.
The idea was simple: when customers thought of WM, they should think of low prices and satisfaction guaranteed. They could be pretty sure they wouldn’t find it cheaper anywhere else, and if they didn’t like it, they could bring it back. – Sam Walton
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. – Sam Walton
I suspect I have emphasized item merchandizing and the importance of promoting items to a greater degree than most any other retail management person in this country. It has been an absolute passion of mine. It is what I enjoy doing as much as anything in the business. I really love to pick an item – maybe the most basic merchandize – and then call attention to it. – Sam Walton
If you are going to show the kind of double-digit comparable store sales increases that we show every year, and grow a company the way we’ve grown ours, you have to be merchandize driven. Otherwise, you become like everyone else. I can name you a lot of retailers who were originally merchandize driven, but somehow lost it over the years. In retail, you are either operations driven – where your main thrust is towards reducing expenses and improving efficiency – or you are merchandize driven. The ones that are truly merchandize driven can always work on improving operations. But the ones that are operations driven tend to level off and begin to deteriorate. – Sam Walton
Another way we tried hard to make up for our lack of experience and sophistication was to spend as much time as we could checking out the competition. It’s something I did from the beginning, and it’s something I insisted all our managers do. – Sam Walton
We’re really not concerned with what they’re doing wrong, we’re concerned with what they’re doing right, and everyone is doing something right. – Sam Walton
We started out swimming upstream, and it’s made us strong and lean and alert, and we’ve enjoyed the trip. We sure don’t see any reason now to turn around and join the rest of the pack headed down-current. – Sam Walton
Raising a Family. Sam had 4 children. Rob, John, Jim and Alice. They wanted family togertherness. Sam’s parents loved to quarrel. They lived separately after Sam and Bud grew up. Sam and Helen allowed their kids to enjoy themselves. He inculcated the values of hard work, honesty, neighborliness and thrift in his kids. The kids were made to work in the stores as well. However, Helen did bring them out to enjoy once in a while. Despite his busy schedule, Sam really did try his best to help his kids and bond with them. To be successful in retail business, you have to work on weekends. Sam did not push his kids too hard. Rob became WM’s lawyer and took them public. Jim also learnt about negotiation skills. Alice and John have branched into businesses of their own. All the managers had to attend a Saturday morning meeting. If you don’t want to work on weekends, then you shouldn’t be in retail. Helen also didn’t like the public eye on their lives. He didn’t want future generations to end up in the idle rich category and not work. He wanted his kids to do something productive, useful and challenging with their lives.
Recruiting the Team. Sam realized he didn’t want to stop expanding at any point. From 1958 to 1970, discount retailing was extremely successful. If you don’t care about customers, you will fail eventually. Whatever method of business you choose, you have to work damn hard to make it work. Some expanded without distribution centres and were too fast. Sam was a big fan of taking notes and learning from others. He hired Gary Reinboth to manage the size of the business. Ferold was also hired to build a better sorting system and replenishment system. Abe Marks shared with Sam how to use computers to do his business. Sam now realized the importance of keeping inventory to a minimum and getting things delivered to the store in the shortest time possible. Sam would not have been able to grow the business so large without the computer. It would have been impossible. Sam wanted to hire a systems guy. Sam hired Bob Thornton and promised to build him a distribution centre for him to run. Same bought a warehouse and a new office space. Now that they were bigger, systems and distribution were the main problem. Ron joined as vice president of finance and distribution. A data processing manager also hopped on board. Sam was always very guarded with his spending and did not want unnecessary expenses. By 1969, they had 14 variety stores and 18 WMs.
Anybody who has ever known anything about me knows I was never in anything for the short haul; I always wanted to build as fine a retailing organization as I could. – Sam Walton
If you want the people in the stores to take care of your 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. – Sam Walton
Taking the Company Public. Sam never really like debt, although he knew it was essential for business. To get rid of this debt and to raise money from the public market, he decided to get listed. Stephens Inc was the one which proposed the idea to him. They kept taking short term loans to ease their woes. However, it was not sufficient in the long term. Prudential didn’t want to restructure their loan. Mike Smith and Jack Stephens would have to compete for WM’s business to take them public. The plan was to consolidate the company and offer 20% to the public. Some of their relatives and the managers had a stake in the company. They valued it using book value. The IPO price was $15. The stock has risen incredibly and made many people happy over the years. By 1990, it had a market capitalization of $60billion. His wife, Helen hated the public lifestyle that came after the company went public. All their debt was repaid and Sam was delighted. WM organized weekend events for shareholders and especially for the AGM. The shareholders had the chance to really understand what WM was like. Sam banned alcohol from the events as people were acting wildly. The events allowed shareholders to understand their business. If you believe in the basics of the company, there is no reason to buy and sell the company and not hold it long term. Big investors have the power to influence stock prices. WM is also very responsive to shareholders’ needs.
But if we demonstrate in our sales and our earnings every day, every week, every quarter, that we’re doing our job in a sound way, we will get the growth we are entitled to, and the market will respect us in a way that we deserve. – Sam Walton
As long as we’re managing our company well, as long as we take care of our people and customers, keep an eye on those fundamentals, we are going to be successful. – Sam Walton, on WM
But I enjoyed doing what I was doing so much and seeing the thing grow and develop, and seeing our associates and partners do so well, that I never could quit. – Sam Walton
Rolling Out the Formula. The people worked 16 hour days. WM targeted small towns, unlike the big players like K Mart. The big guys were expanding fast, however they left pockets of spaces for WM to enter. It should not be too far from the distribution centre or the managers’ places. They would then tell their best to saturate a small market before moving on. They built their stores around the city. When the city developed, WM would have more business. Saturation also ensures that you not need to advertise too much. Word-of-mouth advertising is extremely powerful. The population would build themselves to WM. Rob and Sam used a plane to scout potential WM sites. It worked very well. Sam like creativity, as long as it got the job done. Sam picked the right people and gave them maximum responsibility. Play on your strengths, and let your employees make up for your weaknesses. Sam loved numbers and statistics. Sam has quite a haphazard style sometimes. To him, new ideas take priority. Sam was relentless with his ideas. If he felt it wouldn’t work, then case closed. He sometimes reaches work at 4:30am. Sam was good at looking over someone’s shoulder. WM did face competition in the past. Its strategy was to keep cost down so as to pass on savings to customers. WM could open 50 years in 2 years. It was incredible. David Glass helped establish the modern and efficient transport system. Some of their competitors tried to copy the discounting model. Although their distribution model was better, they resorted to charging high mark-up. Eventually, they lost sales because of that.
But as long as he is convinced that it is the right thing, it just keeps coming up – week after week after week – until finally everybody capitulates and says, well, it’s easier to do it than to keep fighting this fight. I guess it could be called management by wearing you down. – David Glass, on Sam Walton
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 9 times out of 10. – Sam Walton