In 2001, Kmart, with its network of tens of thousands of retail stores, declared bankruptcy, leaving only the ‘giant’ Wal-Mart standing. The owner of this retail group, Sam Walton, had once started with just a few coins in his pocket.
“I do not know what makes people ambitious, but the truth is that I was blessed with an innate drive and ambition,” Sam Walton said of himself. Sam Walton graduated from the University of Missouri in June 1940 with a business degree, and he worked as hard as he had throughout his life.
“I was always full of energy, but I also felt tired. From high school onward, I earned my own money and bought my own clothes. In college, I paid additional tuition, food costs, membership fees, and dating expenses. My parents would gladly have helped me if they could, but it was the Great Depression, and they had no money to spare. I had to continue my newspaper delivery job from high school, and in college I took on several new routes, hired a few people to help, and turned it into a fairly successful business. I earned about 4,000 to 5,000 dollars a year, which was a relatively large amount at the end of the Great Depression.
Besides delivering newspapers, I waited tables in exchange for meals, and I also headed the swimming pool lifeguard team. You can see that I was quite busy, and understand why I increasingly respected the value of a dollar. But now it was time to graduate from college, and I was ready to leave those jobs behind and eagerly step out into the world to create some value for myself through a real job.
My first retail opportunity came in 1939, when my family moved next door to a man named Hugh Mattingly. He had been a barber in Odessa, Missouri, before joining his brothers to develop a chain that then had 60 stores. I could talk with him about trading, how to operate and business results. He took a keen interest in me and later even offered me a job.
But at the time, I was not seriously interested in retail. In fact, I was sure I would become an insurance salesman. My high-school girlfriend’s father was a very successful salesman for the American Life Insurance Company, and I had talked with him about the business. He seemed to make all the money in the world, and insurance felt like an obvious fit because I believed I could sell it.
I sold everything. As a child, I sold Liberty magazine for a 5-cent coin, then switched to Woman's Home Companion when it sold better, charging a dime and realizing I could earn twice as much. Although my girlfriend and I broke up, I still had big plans.
I planned to earn my degree and attend the Wharton School of Finance in Pennsylvania. But when it came to college, I realized that even if I kept selling newspapers to pay for my education, I still could not afford Wharton. So I decided to invest in what I already had and follow up with two recruiters who had visited schools in Missouri. Both offered me jobs at their companies. I accepted JC Penney's offer and passed on Sears Roebuck's. Now I realize a simple truth:\ I became a retailer because I was exhausted and wanted a job.
Things went quite smoothly: three days after graduating, on 3/6/1940, I reported for work at the JC Penney store in Des Moines, Iowa, starting as a management trainee earning $75 a month. That was the day I entered retail, and apart from military service, I have remained in it for 52 years.
Perhaps I was born to be a merchant; perhaps it was fate. I do not know much about such things, but I am certain of this: I loved retail from the beginning and still love it today. Yet things did not run smoothly right away.
As I said, I could sell, and I loved selling. Unfortunately, I had never practiced writing neatly. Helen said only about five people in the world could read my scrawl, and she was not one of them. This began causing trouble in my new job. Penney had a New York employee named Blake who traveled around the country auditing stores, evaluating personnel and handling miscellaneous matters, and he visited us quite often. He was very annoyed because I made a mess of sales invoices and often confused merchandise registration numbers. I could not make a new customer wait while I wasted time on paperwork for goods already sold, and I admit it caused many problems.
When Mr. Blake came to Des Moines, he would meet me and say: “Walton, if you were not such a good salesman, I probably would have fired you. Perhaps you simply were not born for retail.”
Fortunately, I found a champion in the store where I worked: manager Duncan Majors, a wonderful motivator who prided himself on training more Penney managers than anyone else in America. He had his own techniques and was very successful. His secret was getting us to work from 6:30 AM until 7 or 8 PM. We all wanted to become managers like him.
On Sundays, when we were not working, all eight of us, all men, would go to his house. Of course, we would talk about retail and play table tennis or cards. It was a job that occupied the whole week. I remember one Sunday when Duncan Majors received his annual bonus check from Penney and showed it off everywhere. The bonus of about 65,000 dollars made a strong impression on us. Watching this man work made me enthusiastic about retail. He was really good. One nice thing back then was that Mr. James Cash Penney often visited the store personally. He did not visit stores as frequently as I later did, but he did get around. I still remember him showing me how to tie and package merchandise, wrapping it with small pieces of string and paper so that it still looked attractive.
I worked for Penney for around 18 months, and as far as I knew, they truly led the industry. But at the time, I was looking into the competition. The department I worked in at Des Moines had 3 stores, so during lunch breaks I would wander over to Sears and Yonkers stores to see what they were doing.
In early 1942, with the war still underway, as an ROTC graduate I eagerly volunteered, ready to cross the ocean and fulfill my duty as a soldier. But the army surprised me. A minor heart defect made me physically ineligible for combat, so I could only receive limited assignments. This disappointed me. Wanting only to be called to combat, I left Penney and headed south toward Tulsa, vaguely interested in seeing the oil business there. Instead, I found work at Du Pont's huge gunpowder plant in Pryor, outside Tulsa. The only room I could find was up in Claremore. There I met Helen Robson one April evening at a bowling alley, and we fell in love.
Helen's father was a prominent lawyer, banker, and rancher, and Helen felt we needed to live independently. I agreed and thought our best opportunity was in St. Louis. When we arrived, my old friend Tom Bates also wanted to enter the department store business. I had known Tom since we were children in Shelbina—his father owned the town's largest general store, and Tom and I were roommates at Beta Theta Pi in Missouri. After leaving the military, I met Tom in St. Louis. He was working at a Butler Brothers shoe store. Butler Brothers was a regional retailer with two systems: Federated Stores, a chain of small department stores, and Ben Franklin, a chain of variety stores we used to call “five-and-dimes” (shops selling clothing and small household goods for 5 and 10 cents) or “10-cent stores.”
I thought Tom had a wonderful idea. He and I would become partners, each contributing $20,000, and buy a Federated department store on Del Mar Boulevard in St. Louis. Helen and I had around $5,000, and I knew we could borrow the rest from Helen's father, who had always believed in and supported me. I had everything ready to become a department-store owner in a big city when Helen shared her thoughts and set her own ground rules.
Therefore, cities with populations over 10,000 were out of the question for the Walton family. If you know a little about the initial small-town strategy that drove Wal-Mart's growth for the next two decades, you can see that this set the stage for what was to come. Helen even said we did not need partners because that was too risky. Her family had experienced some partnerships that went sour, and she insisted that running the business ourselves was the only way. So I went back to Buler Brothers to see whether they had anything else for me.
What they had was a Ben Franklin variety store in Newport, Arkansas, a town of about 7,000 people built around cotton and the railroad, in the Mississippi Delta in eastern Arkansas. I remember traveling there by train from St. Louis, still wearing my uniform with a Sam Browne belt, and heading to Front Street to look at this dream store. A man from St. Louis owned it, but his business had gone nowhere. He was losing money and wanted to sell everything as quickly as possible. I realized I was the sucker Butler Brothers had sent to rescue him. I was only twenty-seven and full of confidence, but I did not know that the first thing to do was evaluate an offer like this, so I jumped straight into the deal. I bought the store for $25,000, including $5,000 of my own money and $20,000 borrowed from Helen's father. My naivety about contracts and such matters caused me plenty of trouble later.
Of course, only after completing the purchase did I realize the store was truly worthless. It generated around 72,000 dollars a year, but rent consumed 5% of sales—something I had thought sounded good, but which turned out to be the highest rate in the grocery business. Nobody paid 5% of sales to rent a store. It also had a major competitor: the Sterling store across the street, with an excellent manager, John Dunham, and annual sales of 150,000 dollars, twice those of my store.
Although I was very confident, I had never had a single day of experience managing a grocery store. Butler Brothers therefore sent me to the Ben Franklin store in Arkadelphia, Arkansas, for two weeks of training. After that, I stood on my own two feet, and we opened the store on 01/09/1945.
I will never forget a deal with Harry, one of the best deals I ever made and an early lesson in pricing. It was what first got me thinking along the lines of what eventually became the foundation of Wal-Mart's business philosophy. If you are interested in ‘how Wal-Mart did it,’ this is a story you should sit up and pay close attention to. Harry sold women's underwear — knitted, two-bar, with elastic waistbands — for $2 a dozen. I had been buying a similar product from Ben Franklin for $2.5 a dozen and selling it at $1 for three pairs. At Harry's price, we could sell it at $1 for four pairs and run a major promotion for our store.
This is a very simple lesson we learned—a lesson others also learned that ultimately changed how retailers sell and customers buy throughout America. I found that at a price of 1 dollar, I could sell three times as many as at 1.2 dollars. I might earn only half as much profit per item, but because I sold three times as many, total profit was much greater.
Things began moving quickly in a fairly positive direction in Newport within a very short time. After just two and a half years, we had repaid the $20,000 borrowed from Helen's father, and I was very pleased about that. It meant the business could stand on its own, and I could see that we were truly on our way.
We tried many promotional methods, and they worked well. First, we placed a popcorn machine outside on the sidewalk, and sales were very strong. So I thought about it a great deal and eventually decided that we needed to put an ice cream machine there too. I summoned my courage and went to the bank to borrow 1.800 dollars (a very large sum at the time) to buy the machine. It was the first time I had borrowed money from a bank. We then put the machine on the sidewalk beside the popcorn machine, hoping to attract attention. It was a novel approach, another experiment, and we actually made a profit from them. We repaid the 1.800 dollars within two or three years, and I felt wonderful. I really did not want to be remembered as someone who lost everything because of an ice cream machine.
My first 5 years in Newport had passed, and I had achieved my goal. My small Ben Franklin store had sales of USD 250,000 and generated USD 30,000 to 40,000 in annual profit. It was the number-one Ben Franklin store in sales and profit, not just in Arkansas but across the entire six-state region. It was the largest general store in Arkansas, and I do not believe there was a larger one in the three or four neighboring states.”
Beneath the Wal-Mart sign were two lines that later became its famous way of working: “We Sell for Less” and “Satisfaction Guaranteed.” Throughout his turbulent business career, Sam remained true to that motto.
“I have never been someone who stops in the face of adversity, and I did not stop then either. People often say that you can find good fortune in any misfortune if you truly try. I have always seen difficulties simply as challenges, and the challenge at hand was fairly straightforward to address: I had to pick myself up, cope with the situation, and start all over again—this time even better,” Sam emphasized.
According to “A Business Life in America”
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