“Most everything I’ve done I’ve copied from someone else,” said Sam Walton, the founder of America’s largest retail stores, Wal-Mart, which has now grown to include over 11,000 superstores in 28 countries. As such, it has become the world’s largest corporation by revenue as well as the biggest private employer in the world.
Walton got his first direct exposure to retailing business, working part-time in a five-and-ten-cent store. This retailing format (also known as a variety store) featured a wide range of low-priced merchandise such as apparel, toys, housewares, and other goods.
Before going into business for himself, however, he signed on as a management trainee with a departmental store company, J.C. Penny, for $75 a month. That was in 1941. It was while working there, Walton settled on a career in retailing. He also started his lifelong habit of prowling competitors’ stores for ideas---using his lunch hours for that purpose—and began devouring books on retailing. But since his family finances were too tight, he resigned from J.C. Penney and joined the U.S. army. Again, during his military services, he continued spending his off-duty hours checking into departmental stores, hoping to gather new ideas.
As soon as World War II ended, and married by now, Walton borrowed some money from his father-in-law and purchased a Ben Franklin variety store in Newport, Arkansas, in 1945. The store was a franchise of the Butler Brothers chain, where he found considerable success in retail management. He converted his operation to the self-service format after reading that two Minnesota Ben Franklin stores had introduced the concept. In fact, he made the long trip north by bus to observe firsthand this new style of doing business. Also, from the Sterling variety store chain, he borrowed the idea of replacing the standard wooden merchandise displays with all-metal fixtures. And by the early 1960s, Walton, along with his brother James, could own 15 Ben Franklin franchises and one independent store.
Walton now planned to open bigger stores in rural areas with discounted prices in order to attract more customers and achieve a higher sales volume. He believed that lower prices could increase sales volume. In turn, the huge sales volume could generate high profits, as long as the retailers held down operating costs, such as labor, rent, and advertising. Walton became convinced that discounting was the wave of the future and to ignore it would be fatal. However, the Ben Franklin executives were not in favor of this concept and turned down his plan.
But undaunted by the rejection, Walton still went ahead on his own and opened the first Wal-Mart store on July 2, 1962, in Arkansas at discounted prices. Walton, to be sure, was influenced by Michael Cullen who first introduced the formula of low overhead, low margins, and high volume to the retailing business in 1930, when the latter opened his first supermarket in New York. But Walton improvised the discounted concept of Cullen and executed it far more effectively. By his own admission, the key to his success was to be found in his copying of the methods of other successful discounters.
In the 1980s, Walton opened his first Wal-Mart Supercenter, offering all sorts of merchandise and making them all available under one roof for shopping convenience. But once again, Walton took this idea from Sol Price who introduced a warehouse format, selling everything from food to appliances under one roof, through the Price Club chain in 1976. However, Walton’s desire was to take Price’s idea to a whole new level. He wanted to treat the customer as the boss. He would say, “There is only one boss: The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
After his visit to South Korean and Japanese factories in 1975, observing the morale-building effects on their workers, Walton also began to treat his employees as his business associates. In the late 1970s, he made a provision to share the benefits of team-efforts in saving costs by reducing internal theft, shoplifting, or faulty records. Profit sharing and stock-purchase programs were also introduced to encourage his employees to be company owners. As a result of these incentives, their sales increased exponentially. By 1980, the company had reached $1 billion in annual sales.
Obviously, Walton’s business expansion came at the expense of the small-town retailers who could not compete with Wal-Mart’s low prices. But despite all the criticism, he remained focused and determined in his business efforts. Indeed, he did extremely well because he sincerely believed that he was doing good by helping consumersstretch their incomes. And they vindicated his belief by choosing his Wal-Mart and making it the America’s largest retail shopping center.
