Sam Walton's journey from a small-town shopkeeper to the founder of one of the world's largest retail chains is a quintessential American success story. In his autobiography, "Sam Walton: Made in America," he shares the insights and experiences that shaped his business philosophy and led to the creation of Walmart, a company that revolutionized the retail industry.
Introduction
Sam Walton was born in 1918 in Kingfisher, Oklahoma, during a time when America was still recovering from World War I and heading towards the Great Depression. Despite his humble beginnings, Walton would go on to become one of the richest people in the world by the time of his death in 1992. His story is not just about building a retail empire, but also about the values and principles that guided him throughout his life and business career.
Early Life and Lessons
The Great Depression and the Value of Hard Work
Growing up during the Great Depression, Sam Walton learned early on about the importance of hard work and resourcefulness. His father, Thomas, was a hardworking man who took on various jobs to support the family. Thomas's pride prevented him from taking on debt, which meant he couldn't start his own business. This experience would later influence Sam's decision to use loans to fund his business ventures.
Sam's mother, Nan, was entrepreneurial in her own right. During the tough times of the Depression, she started a small milk business. Sam would milk the cows, his mother would bottle the milk, and Sam would deliver it to customers in the neighborhood. This early exposure to entrepreneurship and customer service would prove invaluable in Sam's future endeavors.
First Jobs and Developing a Work Ethic
Inspired by his mother's efforts to bring in extra money, Sam got his first job at the age of eight, selling magazine subscriptions in the neighborhood. By seventh grade, he was delivering newspapers on his bicycle. As he grew older, he expanded his paper route into a small business, even hiring assistants. This early venture was already bringing in around $5,000 a year, a significant sum for a young man in those days.
These experiences instilled in Sam a strong work ethic and the understanding that success comes from dedication and effort. By the time he was ready to start his first business at 27, he knew that hard work was the key to getting ahead in the world.
The Birth of Walton's 5-10
In 1945, at the age of 27, Sam Walton opened his first discount store, Walton's 5-10. While the store performed adequately, Walton knew there was room for improvement. This marked the beginning of his journey to build what would eventually become Walmart.
Learning from the Competition
One of Walton's key strategies for success was his willingness to learn from others. He paid close attention to his competitors and wasn't afraid to adopt and adapt their successful practices. This approach led to innovations that are now standard in the retail industry.
For example, Walton noticed that a store in Minnesota had only two checkout counters at the front, unlike the common practice of having multiple cashiers scattered throughout the store. He implemented this idea in his own shop, reducing costs by employing fewer cashiers.
Another innovation came from observing a competitor who used wooden shelves to display goods. Walton took this idea a step further by replacing all his shelves with metal ones. While not as aesthetically pleasing, the cheaper shelves allowed him to keep prices lower than his competitors.
The Walmart Cheer
Even after achieving success, Walton continued to borrow good ideas wherever he found them. In 1975, during a visit to a supplier, he noticed how the staff would gather before the workday and perform a company cheer. Impressed by the positive impact on employee morale, Walton introduced the "Walmart cheer" at his flagship store in Bentonville, Arkansas.
This practice became so ingrained in Walmart's culture that employees even performed the cheer for President George H. W. Bush during his visit to a store. Walton took pride in the president's surprised reaction to the enthusiasm displayed by the staff.
Customer-First Philosophy
Attracting Customers
From the very beginning, Walton understood the importance of investing in customer attraction. He even took out an $1,800 loan to purchase an ice cream machine for his first store, believing that such amenities would draw more customers.
Walton's customer-first approach extended to his business model. He observed that farm families would drive into town on Saturdays to shop at various specialty stores, which often closed early and had limited selections. This observation led to his revolutionary idea: keep the store open longer and offer a wider variety of goods under one roof.
This philosophy continued throughout his career. When Walton opened his 18th Walmart in 1969, the store's low prices, extended hours, and free parking were major draws for customers.
Controversy and Defense
Despite the popularity of his stores, Walton faced criticism for practices that some viewed as harmful to small businesses. However, he maintained that it wasn't Walmart's fault if local competition suffered when one of his stores came to town. He argued that customers were free to choose where to shop, and if they chose Walmart, it must be because their needs were better met there.
Walton even believed that his customer-first philosophy could benefit local businesses. He cited an example from Wheat Ridge, Colorado, where a Walmart paint department had been recommending a local paint store to customers who couldn't find what they needed at Walmart. To Walton, this demonstrated Walmart's commitment to customer satisfaction, even if it meant sacrificing potential business.
Thriving on Competition
Learning from Rivals
Walton's approach to competition was unique. Instead of avoiding it, he embraced it as an opportunity to learn and improve. This mindset led to innovative sales strategies that set Walmart apart from its competitors.
One such instance occurred in the early 1970s when Walmart opened a new store in direct competition with a town's Kmart. At the time, Kmart had about 1,500 stores compared to Walmart's 150. To attract customers, the store manager, Phil, came up with a bold promotional strategy: a massive display featuring a one-dollar-off sale on Tide laundry detergent. The display, measuring 12 by 100 feet and requiring 3,500 cases of detergent, was initially met with skepticism by Walton. However, he ultimately embraced the idea, and it proved to be a huge success.
Walton acknowledged that without the competition from Kmart, they might never have conceived such an innovative promotion. This approach to using competition as a catalyst for creativity became a cornerstone of Walmart's business strategy.
Benefits for Customers
Walton's competitive spirit also led to benefits for customers. In 1977, a Walmart in Little Rock, Arkansas, faced fierce competition from a newly opened Kmart. The rival store was slashing prices dramatically, forcing Walton to take action. He instructed his manager to ensure that everything in their store was priced as low as, if not lower than, the items in Kmart.
This price war reached extreme levels, with toothpaste selling for as low as six cents. However, Walton refused to back down, and eventually, Kmart gave up trying to undercut Walmart's prices. This experience taught Walton an important lesson: when faced with big competitors, Walmart needed to maintain the lowest possible prices to keep customers satisfied.
Valuing Employees
From Tight-Fisted to Employee-Centric
For a long time, Walton's frugal nature, a result of his humble upbringing, led him to be tight-fisted when it came to employee wages. In 1955, he even instructed a store manager to revoke raises given to clerks because the store hadn't yet reached Walton's goal of a six-percent profit margin.
However, a pivotal moment came during a visit to England in 1971. Walton noticed a sign for a store that listed the company name as "Lewis Company, J. M. Lewis Partnership," with a list of all the "associates" working there underneath. This concept of a partnership with associates, rather than simply managing employees, resonated with Walton.
The Birth of Walmart Associates
Upon returning from his trip, Walton announced that Walmart employees would now be called associates. But he knew that actions speak louder than words. To back up this change, he implemented a profit-sharing plan for the new associates, which included stock options or cash bonuses. This allowed everyone in the company to benefit from Walmart's success.
This shift in perspective marked a significant change in Walmart's corporate culture. By valuing his employees more, Walton created a more motivated and loyal workforce, which in turn contributed to the company's continued growth and success.
Celebrating Successes and Learning from Failures
The Saturday Massacre
While Walton's career was marked by numerous successes, he also faced significant challenges and made mistakes along the way. One of his biggest missteps nearly cost him his company.
In 1974, with Walmart performing well, Walton decided to consider early retirement. He promoted Ron Mayer, one of his two executive vice presidents, to CEO. This decision caused tension with Ferold Arend, the other vice president, leading to a division within the company.
Realizing his mistake, Walton met with Mayer in 1976 to ask for his old job back. What followed became known as the "Saturday Massacre": Mayer and dozens of senior managers who supported him left the company, causing Walmart's stock prices to plummet. Walton feared he might not be able to save the company.
Turning Disaster into Opportunity
However, true to his resilient nature, Walton didn't give up. He quickly found new managers to fill the vacant positions and persuaded an old friend, David Glass, to replace Mayer. Glass proved to be an excellent choice, turning the disaster around. Under his leadership, Walmart's performance improved almost immediately, exceeding everyone's expectations.
This experience taught Walton valuable lessons about leadership succession and the importance of maintaining a unified corporate culture. It also demonstrated his ability to adapt and overcome even the most challenging situations.
Celebrating Milestones
Walton also knew the importance of celebrating successes. In 1984, Walmart reached a financial milestone that Walton had never thought possible: an eight-percent pre-tax profit. He had even made a bet with David Glass that this would never happen.
When Walton lost the bet, Glass made him step out onto Wall Street dressed in a Hawaiian outfit and perform a hula dance accompanied by ukulele players. The press was amazed to see one of the most successful CEOs engaging in such a lighthearted display. But for Walton, this was part of the Walmart philosophy: knowing when to work hard and when to celebrate achievements.
This incident not only boosted employee morale but also humanized Walton in the eyes of the public. It showed that despite his immense success, he remained down-to-earth and willing to laugh at himself.
Giving Back to the Community
Investing in Education
Despite facing criticism for perceived lack of charitable donations, Walton was a firm believer in the power of education and contributed significantly to this cause. He recognized that the future workforce of America needed the best possible education to succeed and keep companies competitive in a rapidly changing marketplace.
As of 1992, the Walton family was awarding around 70 university scholarships per year to children of Walmart associates. This initiative not only helped individual families but also contributed to building a more educated workforce for the future.
Walton's philanthropy extended beyond the United States as well. In the early 1990s, he sponsored 180 Central American children with scholarships to American universities. His hope was that these students would return to their home countries with the knowledge to address economic issues and potentially manage future Walmart stores in countries like Honduras or Nicaragua.
Walmart as a Form of Charity
Walton also argued that Walmart's very existence was a form of charity due to its customer-centric approach and low prices. He suggested that by keeping prices extremely low, Walmart helped communities save billions of dollars every year.
To illustrate this point, Walton provided some impressive statistics. Between 1982 and 1992, Walmart sold approximately $130 billion worth of products. Assuming a conservative estimate of 10% savings for customers compared to other stores, this would mean that during that 10-year period, customers saved over $13 billion.
Walton believed that these savings could help Walmart's customers improve their living standards, especially those in rural areas who would otherwise have to rely on more expensive small-town merchants. In this way, he saw Walmart as not just a business, but as a force for improving the quality of life in the communities it served.
Final Thoughts
Sam Walton's journey from a small-town shopkeeper to the founder of a global retail empire is a testament to the power of hard work, innovation, and customer-focused business practices. Throughout his career, Walton demonstrated a willingness to learn from others, adapt to changing circumstances, and always put the customer first.
Key lessons from Walton's life and career include:
Embrace competition: Instead of fearing competitors, use them as inspiration to improve and innovate.
Put customers first: Always prioritize customer needs and satisfaction, even if it means occasionally sending them to a competitor.
Value employees: Treating employees as associates and partners can lead to increased motivation and loyalty.
Learn from mistakes: Even significant setbacks can be overcome with resilience and adaptability.
Give back to the community: Investing in education and providing value through low prices can have a positive impact on society.
Celebrate successes: Knowing when to work hard and when to celebrate achievements is crucial for maintaining a positive corporate culture.
Stay humble: Despite immense success, Walton never forgot his humble beginnings and remained down-to-earth.
Sam Walton's legacy extends far beyond the retail empire he built. His business philosophy and practices continue to influence the retail industry and beyond. By focusing on customer satisfaction, employee welfare, and community impact, Walton created a business model that proved both profitable and beneficial to society.
As we reflect on Walton's life and achievements, it's clear that his success was not just about building a retail giant, but about creating a company culture and business approach that valued people – both customers and employees – above all else. His story serves as an inspiration to entrepreneurs and business leaders, showing that with the right values, hard work, and innovative thinking, it's possible to build a successful business that also makes a positive impact on the world.
In conclusion, "Sam Walton: Made in America" offers valuable insights into the mind of one of America's most successful businessmen. It's a story of perseverance, innovation, and the power of putting people first. Whether you're an aspiring entrepreneur, a business leader, or simply interested in the story behind one of the world's largest companies, Walton's autobiography provides lessons and inspiration that remain relevant in today's business world.