﻿In a world where everyone seems to be on a mission to make as much profit as possible,
a man named Sam Walton dared to think differently when starting his retail business. Sam believed
that he could help people save money, reduce their cost of living and ultimately improve their lives.
With this goal in mind, he went on to open a discount department store to sell goods
at low prices. Despite what people said, he maintained that reducing his profit margin
would be the best choice for his business as well as for customers. The result of this was
the birth of Walmart which turned out to be even more successful than Sam ever imagined.
This is the story of how Sam Walton took an unpopular idea and built it into the biggest
retailer in the world. Welcome to Planet Biz.
Growing Up in Tough Times Samuel Moore Walton, more commonly
known simply as Sam, grew up during one of the toughest economical situations in the history
of the US – the Great Depression. He was born on March 29, 1918 in Oklahoma where he lived with
his parents on their farm. Even though they were a farming family, his father, Thomas Walton, soon
realized that their farm couldn’t provide enough income to raise children and take care of the
family. So he decided to go into farm mortgaging, working for his brother’s mortgage company.
In 1923, the family moved away from Oklahoma, going from one small town to another,
eventually settling in Columbia, Missouri. Even with Sam’s father’s new job as a farm mortgager,
things weren’t going so smoothly for the Walton family. It was during the heat of
the Great Depression and so, Walton had to work to help his family out financially.
As a young boy, he did several odd jobs. He milked the family cow and sold the excess milk to
customers, delivering the milk to them in bottles. In addition, he sold magazine subscriptions and
delivered newspapers on a paper route. Fortunately for Walton, he was able to get
an education. He attended David Henry Hickman High School, after which he went on to college
in the hopes of being able to provide better for his family. As a student at
the University of Missouri, Sam continued to work odd jobs so he could get by. Sometimes,
he would even wait tables in exchange for meals. Just a few days after graduating from college,
Sam got a proper job as a management trainee at a J.C. Penney store in Des Moines, Iowa.
This was his first real introduction to the retail business and Sam was excited. His boss,
on the other hand, wasn’t. A Shaky Career
Walton enjoyed the retail business and he was good at it too. But there was a problem – Sam
paid very little attention to paperwork, his books were a mess. It got so bad that his
boss even threatened to fire him, telling him that he wasn’t cut out for the retail business.
This threat didn’t do much to push Sam to improve his recordkeeping
because it was his concern for customers that brought about the problem in the first place.
Sam hated having to make customers wait while he did paperwork so he would put more time into
attending to customers and focus very little on making sure his paperwork was in order.
What saved Walton’s job was his talent as a salesperson. He was so good at closing
deals that he was able to add about $25 of commission to his salary every month.
In 1942, after just about 18 months of working at JCPenney,
Walton had to quit his job to serve during World War II as part of the US military. Before leaving
the military in 1945, Sam had reached the rank of captain, and had gotten married.
At the end of his military service, he and his wife Helen settled in Arkansas for a while.
During their time there, Sam gained some more experience in the retail business
by working as the manager of a Ben Franklin variety store franchise.
While working as manager, Sam realized the potential that retail and variety stores had. This
led him to take the risk of owning his own variety store. He borrowed $20,000 from his father-in-law
which he added to $5,000 he had saved from his time in the military. With this money, he bought a
Ben Franklin variety store in Newport, Arkansas. It was in this store that Sam decided to implement
his policy of pricing products below what other retailers charged. With this principle in play
and with a lot of hard work, Sam’s business grew unbelievably fast. He soon tripled his business.
In just three years, the sales volume of his variety store grew from $80,000 to $125,000. Sam’s
store was an obvious hit. But when Sam’s success caught the attention of a particular someone,
things started to go south for his business. The Quit Notice
Great success comes with a lot of baggage. Not everyone will be happy about what you’ve achieved.
Some may be bitter, and some may be outright jealous. But every successful person can
only hope that the people who are unhappy about their success aren't in a position
to hinder their progress. Unfortunately, this wasn’t the case with Sam and his business.
By 1950, Sam’s franchise had become the leading Ben Franklin store in a six-state region. His
low prices and wide variety were drawing in customers in droves. When this got to the
attention of the shop’s landlord, he wanted Sam’s success for himself. Or more precisely,
for his son. The landlord wanted to reclaim the store and the franchise for himself,
but Walton had no intention of selling out. So the landlord did the one thing
he could do – he refused to renew Sam’s lease on the store. With no other option,
Walton was forced out and the landlord paid him $50,000 for the store’s fixtures and inventory.
Sam still had a year left on his lease, but his store was as good as sold. Instead of giving up
after such a disheartening experience, Sam Walton took the situation as a lesson and took steps
to move on and start a new store. But starting over would prove more difficult than it seemed.
Right at the beginning of his journey to start a new store, Sam encountered a hurdle.
And the more he tried to scale this hurdle, the more impossible it seemed.
Starting Over Walton must have known that starting a new
store would not be a breeze. But he most likely wasn’t expecting the situation he encountered
when trying to choose a location for the store. To set up their new store, Sam and his wife left
Newport for Bentonville, Arkansas. They found a small discount store and this time, he negotiated
a 99-year lease. Smart move. But there was one problem, he wanted to expand his business into
the shop next door. After presenting his offer to rent the next door shop, the owner refused. As the
persistent businessman that he was, Sam refused to settle, he returned and asked to rent the shop
and again, the owner turned him down. Walton’s request was rejected a total of six times,
after which he finally gave up. But that wasn’t the end for Walton.
Unknown to him, his father-in-law paid the owner of the shop one more visit.
He offered the shop owner $20,000 to secure the lease. The owner accepted and finally,
Walton’s problems were over. He had just enough money from the sale of his previous store to seal
the deal and also to repay his wife’s father. On May 9, 1950, his new “five and dime” store was
officially open for business. Although there were a few other variety stores in the area,
Walton’s consistently low prices and attention to customer service, made his store outshine the
others. Soon, the store was experiencing a level of success similar to that of his previous store.
In just one year of business, he had increased the amount of sales from $75,000 to $105,000.
Inspired by the simultaneous success of his Newport and Bentonville stores,
Sam opened more Ben Franklin franchises. By 1960, he owned 15 stores in three states in the US. Sam
encouraged the managers of his stores to invest financially in the business. This motivated them
to take the business with even more dedication. That same year, Sam decided to open up his very
own discount store which he called the Wal-Mart Discount City Store.
To Sam, it was an experiment, but to many others, it was an idea that was bound to fail.
The First Walmart Even with 15 stores by 1960,
Walton wasn’t seeing as much profit considering the amount of effort he was putting in.
This was when he came up with a new plan – he would have to slash prices even further,
in the hopes of making his profit through increased volume of sales rather than a wide
profit margin. When he approached the company that owned his store's franchise with this idea,
they turned him down firmly. With this rejection, he decided
to strike out on his own and implement this incredibly risky plan. To raise capital, Sam had
to mortgage his house and borrow lots of money. He opened the first Wal-Mart in Rogers, Arkansas.
Walton wasn’t the first one offering low prices at that time. In fact, he had big,
already established competition that could easily have pushed him off the map. But Sam used to say:
“Most of us don't invent ideas. We take the best ideas from someone else.”
So to be able to compete, Walton chose to set up his stores in smaller towns
while his competition was concentrated in big cities. It worked. People were
thrilled that they didn’t have to travel long distances to get good prices.
Sam’s competition thought that it was impossible for him to sustain his lower prices indefinitely
and that his business would eventually fail. Even brand owners refused to support his store with
merchandise because they weren't confident that Walton’s low prices would be a profitable idea.
Unfortunately, Walton ran into some trouble when he opened his second Walmart store,
further convincing people that his business model was an impractical and unprofitable one. Despite
all the opposition and the hitches along the way, Sam and his team managed to pick themselves
up and prove themselves right. After three years of struggle,
the company had established 24 stores all over Arkansas with over $12.5 million in sales.
Walmart went public in 1970, with Walton and his family retaining 61 percent of the company.
At a point, Walmart was opening new stores at a rate of about 100 per year.
As Walmart grew, Walton diversified the store’s retail formats,
creating Sam’s Club discount warehouses in 1983 and Walmart Supercenters in 1988.
In 1985, Walton was declared the richest man in America by Forbes magazine and by 1990, Walmart
was officially the largest retailer in the United States and started branching out internationally.
In March 1992, Walton was awarded the Medal of Freedom by President George H.W. Bush. During his
acceptance speech, he articulated the core purpose of his company saying, "If we work together,
we'll lower the cost of living for everyone... we'll give the world an opportunity to see what
it's like to save and give a better life." Today, Walmart has over 11,000 stores worldwide
and rakes in an annual revenue of over $500 billion of which about $14 billion is net income.
For eight consecutive years, Walmart has occupied the number one spot on the Fortune
500 list of the largest corporations in the United States by revenue.
It’s almost hard to believe that all this started with a farm boy that was
constantly being told that he would fail. Sam Walton’s most important advice to us is:
“Swim upstream. Go the other way. Ignore the conventional wisdom.”
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