When Sam Walton opened the first Wal-Mart store in 1962,... story that no one could have predicted. A small-town merchant...

When Sam Walton opened the first Wal-Mart store in 1962, it was the beginning of an American success
story that no one could have predicted. A small-town merchant who had operated variety stores in Ar
kansas and Missouri, Walton was convinced that consumers would flock to a discount store with a wide
array of merchandise and friendly service. Hence, Wal-Mart's mission is to deliver big-city discoun
ting to small-town America. Sam's Roots From humble, hard-working roots, Sam Walton built Wal-Mart S
tores, Inc. into the largest, fastest-growing, and most profitable retailer in the world. A child of
the Depression, Sam always worked hard. He would milk the cows, and by the age of eight, he started
selling magazine subscriptions. When he turned 12, Sam took on a paper route that he continued well
into his college days to support himself. Walton began his retail career at J.C. Penney in Des Moin
es, Iowa in 1940 making just $75 per month. In 1945, Sam borrowed $5,000 from his wife and $20,000 f
rom his wife's family to open a Ben Franklin five and dime franchise in Newport, Arkansas. In 1950,
he relocated to Bentonville, Arkansas and opened a Walton 5"10. Over the next 12 years they built up
and grew to 15 Ben Franklin Stores under the name of Walton 5"10. Sam had plenty of new ideas. He l
iked to deal with the suppliers directly so he could pass the savings on to the customers. He later
brought a new idea to Ben Franklin management that they should open discount stores in small towns.
They rejected his idea. The First of 3054 Sam and his brother James (Bud) opened their first Wal-Mar
t Discount City store in Rogers, Arkansas in 1962. Walton and his wife Helen had to put up everythin
g they had, including their house and property to finance the first 18,000 square-foot store. With g
radual growth over the next eight years, they went public in 1970 with only 18 stores and sales of $
44 million. While other large chains lagged behind, Wal-Mart soon grew rapidly in the 1970's, due to
their highly automated distribution centers and computerization. By 1980, they were up to 276 store
s with revenues of over $1.2 billion. Sam Walton's guiding philosophy for his stores from the beginn
ing was to offer consumers a wide selection of goods at a discounted price. The company saved money
by keeping advertising costs low and located stores in small towns where residents had few options f
or retail shopping. On one level, Sam Walton was just folks, the guy with the red dented pickup with
the bird dogs in back. On another, he was the flinty entrepreneur, there to peer as deep into the s
alesmen's souls as into their sample kits and persuade them to give a deeper discount for Wal-Mart's
bulk and massive purchases. Wal-Mart's success in small towns led to criticism that the stores took
business away from small, hometown merchants. Nevertheless, the company managed to successfully mar
ket the stores as friendly, local businesses. In the Wal-Mart spirit, employees often greet shoppers
at the store's entrances. Since their early days, Wal-Mart stores have paid careful attention to sp
ecific community needs and wants, often selling local merchandise along with items sold throughout t
he chain. In addition, the company honors selected graduating high school seniors with college schol
arships, and the stores hold charity fund-raisers and sponsor various community events. Wal-Mart's c
orporate community spirit began to exert an influence on public policy in the 1990s. After the recor
d industry established a parental advisory system of stickering music albums containing potentially
offensive material, Wal-Mart decided to ban the stickered albums altogether from their stores. The c
ompany subsequently has succeeded in influencing many record companies to release clean versions of
stickered albums. Wal-Mart has considerable impact in the music industry, largely because about onetenth of all compact disks sold in the United States are sold at Wal-Marts. Today, Wal-Mart has over
728,000 Associates worldwide with 3,054 stores, sales of over $104 billion, is in operation in all
50 states and it's still growing. In an average week, approximately 60,000,000 customers will shop a
t Wal-Mart throughout the world. In the United States, on average, every man, woman and child spends
5360 annually there as well. In his autobiography "Sam Walton, Made in America: My Story," Sam shar
es with us, "If you believe in your dreams, there's no limit to what you can do." In 1992, American
legend, Sam Walton left us with these words, "I would like to be remembered as a good friend to most
everyone whose life I've touched; as someone who has maybe meant something to them and helped them
some way." The Story Behind the Story While Walton's techniques over the years were hardly the stuff
of an MBA program, it represents the kind of grassroots common sense that many entrepreneurs readil
y acknowledge-but too seldom heed. (People have a knack for making business more complicated than it
needs to be.) What Walton showed the world, but especially the retailing world, was that success wa
s rooted in a mindfulness of a few basic principles. These principles consisted of constantly being
mindful of; customer service and satisfaction, always take advantage of the competitions ideas, dive
rsify, employee satisfaction, and give back to the community. Couple this with a relentless drive to
put these principles into practice. Customer Service and satisfaction Sam Walton understood better,
it seems, than anyone else that no business can exist without customers. He lived by the creed of,
make the customer the centerpiece of all your efforts. In addition, in the process of serving Wal-Ma
rt's customers he served Wal-Mart associates, shareholders, and communities. He accomplished this al
most without parallel in American business. Walton knew what the customer wanted. The customer wante
d everything: a large assortment of quality merchandise; low prices; satisfaction guaranteed; friend
ly service; convenient hours; free parking; a pleasant shopping experience. His motto was, always ex
ceed the customers expectations. In the 1950's and 1960's the great migration from the inner cities
and from the rural areas to the suburbs had begun. The big retail giants stayed put, around the larg
e populated suburban and urban areas. Small town and rural America either had to travel to the big c
ity to buy cheaper or buy from the local merchant at higher prices. These merchants seemed to think
that since they had a captive audience they could stick with their 35 to 45 percent mark-ups. There
seemed to be an ever widening or let me say, vacuum occurring. Walton has been accused of single han
dedly driving the small town merchants out of business. Reality shows though that the small town mer
chants brought about their own demise, by being greedy and only trying to monopolize their small pie
ce of the market. They also viewed that their loss of revenue, declining because of people moving ou
t and people driving to the urban areas to shop, could only be solved by raising the mark-up on thei
r goods. Sam saw just the reverse of this. Buy in tremendous volume, mark the goods up less (30%) an
d carry a large variety of goods. Every day low prices is a hall mark of Wal-Mart and Sam credits a
manufacturer's agent from New York, Harry Weiner, with his first real lesson about pricing: "Harry w
as selling ladies' panties for $2 a dozen. We'd been buying similar panties from Ben Franklin for $2
.50 a dozen and selling them at three pair for $1. Well, at Harry's price of $2, we could put them o
ut at four for $1 and make a great promotion for our store. "Here's the simple lesson we learned ...
say I bought an item for 80 cents. I found that by pricing it at $1.00, I could sell three times mo
re 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 ear
n far more at the cheaper retail. Sam's adherence to this pricing philosophy was unshakable, as one
of Wal-Mart's first store managers recalls: "Sam wouldn't let us hedge on a price at all. Say the li
st price was $1.98, but we had paid only 50 cents. Initially, I would say, 'Well, it's originally $1
.98, so why don't we sell it for $1.25?' He'd say, No. We paid 50 cents for it so mark it up 30 perc
ent, and that's it. No matter what you pay for it, if we get a great deal, pass it on to the custome
r.' And of course that's what we did." Moreover, that's what we continue to do - work diligently to
find great deals to pass on to our customers. Some will argue that Walton's plan was, and Wal-Mart's
plan even today, is to drive all competition out and raise prices for even larger profits. In essen
ce, become a monopoly similar to the previous small-town merchants. The argument is mute though beca
use a true free market will not allow this to occur. Someone will come in to fill the new vacuum tha
t will be in existents. Just like Sam Walton did with Wal-Mart. Walton also saw a large segment of t
he country, although widely dispersed in small towns, being totally inconvenienced by the big retail
ers. Yet the treatment by the people who owned the small-town stores who were neighbors, and sat in
the same pew on Sundays was even worse in Sam's eyes, it was unconscionable. He could not understand
how neighbors could treat one another in such a way over profitability. It was not right and he wou
ld make sure people were treated like friends and family when they came into a Wal-Mart. Respect You
r Competition and Steal Their Ideas Sam Walton from the very beginning would scope out his competito
rs. When he would go to a competitor's store, it was always tempting to see how dumpy it was, how sm
all it was, or any other negative aspect that would make his stores seem better. He would never tole
rate those types of thoughts. When he and whomever came back from visiting the competition, he would
force them to focus on what the competition did better than their stores did. Once he went into a s
tore in Tennessee and the place was awful. The produce smelled, and it was just a disaster. In addit
ion, his associates were kidding each other wondering what Sam was going to say about this situation
. Sam looked at the back of the store and saw a cigarette rack and said, "You know, that's the fines
t cigarette merchandising I've seen in a year." Sam's view of his visits to the competition was that
you have to see what they do better than you and learn from them. You must never have the arrogance
to take your competition for granted, because that can come back and hurt you. Diversification Sam
Walton felt that a business should always diversify, spread their risk. While Walton may have had hi
s fortune tied up in one business, he still sold everything and anything he could get a good price o
n. Sam Walton felt that if you want anything bad enough, you could find a way to do it. Sam Walton s
aid,"There's a steep price you pay for success, and successful people in business know that." Sam's
philosophy on leverage was that you couldn't spend more than you're taking in, that leverage will al
ways come around and bite you. Conversely, Walton also felt that tough times magnify opportunity for
those who avoid debt. He always said that there will come a time when big opportunities will be pre
sented to you, and you have to be in a position to take advantage of them. Sam Walton told a story a
bout how back in the late 1970s, when Wal-Mart had about 250 stores, when he received a call from th
e chairman of Kmart offering to buy Wal-Mart. Walton replied, "Gee, that's funny. I thought we'd buy
you." The Kmart people were amused. After all, at the time Kmart had five times as many stores as W
al-Mart. However, Walton knew that internal and external problems were plaguing Kmart. The company w
as over leveraged and lacked focus. Kmart was a retailer in distress. Walton could see that, and he
knew it was time to seize the moment and go for the jugular. In the sluggish, high-interest-rate eco
nomy of the early '80s, Kmart faltered and Wal-Mart ate its proverbial lunch. Employee Satisfaction
Sam is notorious for calling his employees, "as did J. C. Penney, 'associates'" instead of clerks or
workers. This may not seem like a large difference, however, it instills a feeling in each employee
that he/she is responsible for the operations of the firm. Sam had never thought of using it at Wal
-Mart until during a visit to England when he saw a storefront window. "It was the Lewis Company, J.
M. Lewis Partnership. They had a partnership with all of their associates listed up on the sign. Fo
r some reason, that whole idea really excited me: a partnership with all our associates." His openne
ss to talk and listen to anyone of his employees made them feel that they were an integral part of t
he company. He would later on use his company's satellite system to communicate live to all of the s
tores at once to relay messages, which he thought, were vitally important. Although this practice is
not copied from any company, the very concept of being close to all associates is being copied from
his early mentor, J. C. Penney. Sam believes in opening the lines of communication, so they do not
only flow from top to bottom, but from bottom to top. Mr. Penney also displayed this idea by spendin
g as much time as possible in his stores. One author said, "Walton does a remarkable job of instilli
ng near religious fervor in his people." Sam borrowed this idea from Mr. Penney, the president of J.
C. Penney, while Sam worked for him. "Then, of course, the icing on the cake was when James Cash Pe
nney himself visited the store one day. He didn't get around to the stores as often as I would later
on, but he did get around." Sam made a point to be in the store as much as he could, unlike many ma
nagers of today. The reason for this was to allow his associates to really feel important with the p
resident of the company coming to visit them. Giving Back Few could argue with Adam Smith's statemen
t that "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our
dinner, but from their regard to their own interest." Those businesses that refuse to look after the
ir own self-interests will not be businesses long enough to have any impact. At the same time, howev
er, there can certainly be regard for a larger purpose. For some businesses, commitment to a larger
purpose would be simply learning the difference between right and wrong, while others take a more re
sponsible view of the role they play in the lives of their employees, their customers, and ultimatel
y how they affect the world. Sam Walton's philosophies were and are fundamentally based on giving ba
ck some of the wealth that he and his family recieve. Sam Walton, was not just one of the most succe
ssful and rich men in America, but prided himself and his family on giving something back. His famil
y's gifts reflect a wide variety of interests, spread across numerous organizations, with a heavy em
phasis on education. His programs continue after his death. Walton funded a special scholarship prog
ram that sends kids from Central America to college in Arkansas. Presently, there are about 180 of t
hese children enrolled at three different Arkansas schools, and Sam paid about $13,000 a year per st
udent. He also sponsored seventy scholarships of $6,000 each year for children of Wal-Mart associate
s. In addition to many educational institutions, recipients of Walton family gifts include church gr
oups and community projects like zoos, libraries, and recreational facilities. He supported hospital
s and medical research programs. He funded art groups and theater groups and symphonies. He gave to
conservation and environmental causes and veterans' groups, as well as to economic development group
s and free enterprise groups. Sam and his family also supported both private and public schools. Sam
supported such groups as the Citizens Against Government Waste, Students in Free Enterprise, and th
e Arkansas Business Council. He conducted an aggressive United Way campaign. He was the largest sing
le contributor to the Children's Miracle Network Telethon, donating $7.5 million. Sam donated his sh
are of the proceeds from his book, Made in America, to the New American School Corporation, a privat
e initiative started by business leaders who have pledged to raise $200 million for the development
of "break-the-mold schools." Most of the giving that Sam Walton has done has either been anonymously
, or linked to strict requests for no publicity. The Ten Commandments of Leadership by Sam Walton 1.
Commit to your goals. 2. Share your rewards. 3. Energize your colleagues. 4. Communicate all you kn
ow. 5. Value your associates' contributions. 6. Celebrate your success. 7. Listen to everyone. 8. De
liver more than you promise. 9. Work smarter than others do. 10. Blaze your own path.
Bibliography 1. Jon Heuy. Sam Walton: Made in America: My Story (New York: Doubleday, 1992) 2. Kenne
th E. Stone, Competing With the Retail Giants, (Toronto: John Wiley " Sons Inc. 1995) 3. Vince, H. T
rimble, Sam Walton: The Story Inside America's Richest Man (New York: Dutton, 1990) 4. www.SmartLead
ership.com 5. Inc Magazine, Spies Like Us, Stemberg, Tom, with Gruner, Stephanie. August, 1998, p4548 6. Inc Magazine, The Mentors, Welles, Edward O. June, 1998, p48-50 7. www.walmart.com 1996, 1997,
1998 Wal-Mart Stores, Inc. 8. Stone, Kenneth E. Competing With the Retail Giants. (New York: John W
iley " Sons Inc., 1995) 9. Taylor, D., Archer ,J.S. Up Against the Wal-Marts. (New York: AMACOM, 199
4) 10. Microsoft Encarta 98. Samuel Walton when walton opened first mart store beginning american su
ccess story that could have predicted small town merchant operated variety stores arkansas missouri
walton convinced that consumers would flock discount store with wide array merchandise friendly serv
ice hence mart mission deliver city discounting small town america roots from humble hard working ro
ots walton built mart stores into largest fastest growing most profitable retailer world child depre
ssion always worked hard would milk cows eight started selling magazine subscriptions when turned to
ok paper route that continued well into college days support himself began retail career penney moin
es iowa making just month borrowed from wife from wife family open franklin five dime franchise newp
ort arkansas relocated bentonville arkansas opened over next years they built grew franklin stores u
nder name plenty ideas liked deal with suppliers directly could pass savings customers later brought
idea franklin management they should open discount small towns they rejected idea first brother jam
es opened their first discount city store rogers wife helen everything including their house propert
y finance square foot with gradual growth over next eight years went public only sales million while
other large chains lagged behind soon grew rapidly their highly automated distribution centers comp
uterization were revenues over billion guiding philosophy beginning offer consumers wide selection g
oods discounted price company saved money keeping advertising costs located towns where residents op
tions retail shopping level just folks dented pickup bird dogs back another flinty entrepreneur ther
e peer deep into salesmen souls sample kits persuade them give deeper bulk massive purchases success
towns criticism took business away hometown merchants nevertheless company managed successfully mar
ket friendly local businesses spirit employees often greet shoppers entrances since early days have
paid careful attention specific community needs wants often selling local merchandise along items so
ld throughout chain addition company honors selected graduating high school seniors college scholars
hips hold charity fund raisers sponsor various community events corporate community spirit began exe
rt influence public policy after record industry established parental advisory system stickering mus
ic albums containing potentially offensive material decided stickered albums altogether subsequently
succeeded influencing many record companies release clean versions stickered albums considerable im
pact music industry largely because about tenth compact disks sold united states sold marts today as
sociates worldwide sales billion operation states still growing average week approximately customers
will shop throughout world united states average every woman child spends annually there well autob
iography made america story shares believe your dreams there limit what american legend left these w
ords would like remembered good friend most everyone whose life touched someone maybe meant somethin
g them helped them some story behind while techniques years were hardly stuff program represents kin
d grassroots common sense many entrepreneurs readily acknowledge seldom heed people have knack makin
g business more complicated than needs what showed world especially retailing success rooted mindful
ness basic principles these principles consisted constantly being mindful customer service satisfact
ion always take advantage competitions ideas diversify employee satisfaction give back couple this r
elentless drive these principles practice customer service satisfaction understood better seems than
anyone else business exist without customers lived creed make customer centerpiece your efforts add
ition process serving served associates shareholders communities accomplished this almost without pa
rallel american knew what wanted wanted everything large assortment quality merchandise prices guara
nteed friendly convenient hours free parking pleasant shopping experience motto always exceed expect
ations great migration inner cities rural areas suburbs begun retail giants stayed around large popu
lated suburban urban areas town rural america either travel city cheaper local merchant higher price
s merchants seemed think since captive audience could stick percent mark seemed ever widening vacuum
occurring been accused single handedly driving merchants reality shows though brought about demise
being greedy only trying monopolize piece market also viewed loss revenue declining because people m
oving people driving urban areas shop only solved raising mark goods just reverse this tremendous vo
lume mark goods less carry variety every prices hall credits manufacturer agent york harry weiner re
al lesson about pricing harry selling ladies panties dozen been buying similar panties dozen three p
air well harry price four make great promotion here simple lesson learned bought item cents found pr
icing sell three times more than pricing might make half profit item because three times many overal
l profit much greater simple enough really essence discounting cutting your price boost sales point
where earn more cheaper adherence philosophy unshakable managers recalls wouldn hedge list paid cent
s initially originally sell paid cents percent matter great deal pass course moreover continue work
diligently find deals pass some will argue plan plan even today drive competition raise even larger
profits essence become monopoly similar previous argument mute though true free market will allow oc
cur someone come fill vacuum existents like also segment country although widely dispersed being tot
ally inconvenienced retailers treatment owned were neighbors same sundays even worse eyes unconscion
able understand neighbors treat another such profitability right sure treated like friends family wh
en came respect competition steal ideas very beginning scope competitors competitor tempting dumpy o
ther negative aspect seem better never tolerate those types thoughts whomever came back visiting com
petition force focus better once went tennessee place awful produce smelled disaster addition associ
ates kidding each other wondering going situation looked cigarette rack said know finest cigarette m
erchandising seen year view visits learn must never arrogance take granted come hurt diversification
felt should diversify spread risk while fortune tied still everything anything good felt want anyth
ing enough find said steep successful know philosophy leverage couldn spend taking leverage come aro
und bite conversely also felt tough times magnify opportunity those avoid debt said time opportuniti
es presented position take advantage told late received call chairman kmart offering replied funny t
hought kmart amused after time kmart five however knew internal external problems plaguing leveraged
lacked focus retailer distress knew time seize moment jugular sluggish high interest rate economy e
arly faltered proverbial lunch employee notorious calling employees penney instead clerks workers se
em difference however instills feeling each employee responsible operations firm never thought using
until during visit england storefront window lewis lewis partnership partnership listed sign some r
eason whole idea really excited partnership openness talk listen anyone employees made feel integral
part later satellite system communicate live once relay messages which thought vitally important al
though practice copied very concept close copied early mentor penney believes opening lines communic
ation flow bottom bottom displayed spending much possible author does remarkable instilling near rel
igious fervor borrowed president worked then course icing cake james cash himself visited didn aroun
d often later made point much unlike managers today reason allow really feel important president com
ing visit giving argue adam smith statement benevolence butcher brewer baker expect dinner regard in
terest those businesses refuse look after self interests businesses long enough impact same however
certainly regard larger purpose commitment larger purpose simply learning difference between right w
rong others responsible view role play lives ultimately affect philosophies fundamentally based givi
ng wealth family recieve most successful rich prided himself giving something gifts reflect wide var
iety interests spread across numerous organizations heavy emphasis education programs continue death
funded special scholarship program sends kids central college presently children enrolled different
schools year student sponsored seventy scholarships each year children educational institutions rec
ipients gifts include church groups projects zoos libraries recreational facilities supported hospit
als medical research programs funded groups theater groups symphonies gave conservation environmenta
l causes veterans economic development free enterprise supported both private public schools support
ed such citizens against government waste students enterprise council conducted aggressive united ca
mpaign largest single contributor children miracle network telethon donating million donated share p
roceeds book school corporation private initiative started leaders pledged raise million development
break mold schools done either been anonymously linked strict requests publicity commandments leade
rship commit goals share rewards energize colleagues communicate know value contributions celebrate
listen everyone deliver promise work smarter others blaze path bibliography bibliography heuy york d
oubleday kenneth stone competing giants toronto john wiley sons vince trimble inside richest york du
tton smartleadership magazine spies stemberg gruner stephanie august magazine mentors welles edward
june walmart stone kenneth competing giants john wiley sons taylor archer against marts amacom micro
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