Have you ever wondered how a small-town entrepreneur transformed the retail landscape into what we know today? The story of Sam Walton, the founder of Walmart, is one of grit, innovation, and resilience. From humble beginnings to creating the world’s largest retail empire, Walton’s journey is filled with lessons for aspiring entrepreneurs and seasoned business owners. Let’s dive into his incredible story and explore the strategies that fueled his success.
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The Birth of Walmart
$572 billion. That’s how much revenue Walmart generated in 2021. With over 2 million people working for the company, it is the largest employer in the world and the biggest retailer in terms of sales. But building such an empire was a challenging feat. It all started when a poor farmer, who was told he had no career in the retail business, decided to open his store.
Sam Walton’s Early Life
Sam Walton was born on the 28th of March, 1918, in Kingfisher, Oklahoma. His father, Thomas Walton, was a farmer, but the farm needed to generate more money to provide for his family. Because of this, the family travelled around the country looking for greener pastures, moving from one state to another until they finally settled in Columbia, Missouri. Around this time, Sam had become a teenager. He helped the family by working various small jobs and watched how his father survived by turning a small profit on each business deal he made.
He also watched his mother start a moderately successful milk business that involved him milking cows and delivering the milk to customers in the neighbourhood after his football practice. His parents taught him the value of hard work and how much effort it took to make a single dollar.
Family Struggles of Sam Walton
But things could have been better at home for Sam. His father, Thomas, was rarely with the family, as he was always on the road trying to make extra money where he could. Because of this, Thomas’s relationship with his wife worsened every year. In his autobiography, Sam describes his parents as the two quarrelsome people ever to live together.
Education and Early Career
Sam engaged in sports to relieve his troubles at home; Sam ed the Boy Scouts and took several leadership roles that kept him busy. Sam graduated from David H. Hickman High School in 1935 and decided to attend the University of Missouri to take his first steps into the business world. While in school, he worked many odd jobs to support himself, including delivering newspapers and waiting tables in exchange for meals.
First Steps in Retail
Upon graduating in the spring of 1940, Sam got his first taste of the retail industry. He got a job as a sales trainee at JCPenney, a tiny shop in Des Moines, Iowa, back then. His starting pay was $75 a week, but this job did not go smoothly for Sam, and he was seen as one of JCPenney’s worst employees. One thing counting against him was that his bookkeeping was terrible because he hated making his customers wait while he fussed with paperwork.
Sam’s boss threatened to fire him and even told him he had no retail business career. The only thing that saved Walton was his gift for salesmanship, which earned him an extra $25 monthly in sales commissions.
Sam Walton in Military Services
When the Second World War reached America in 1941, Walton was eager to play a role in it. He quit his job the following year and joined the U.S. Army. The Army recognized Sam’s natural leadership skills and selected him to become a member of the military’s intelligence corps, where he rose to the position of captain. The military stationed Sam in Oklahoma in April of 1942, where he met his future wife, Helen. After a short dating period, they married on Valentine’s Day in 1943.
Entering Retail
By the time the war was over in 1945, Walton had a wife and child to support. So, he decided to start his own retail business with a $20,000 loan from his father-in-law and $5,000 from his savings. Sam bought a Ben Franklin store in Newport, Arkansas. It’s important to note that millions of small stores had failed during the 20th century in America.
When Sam bought this particular store, it lost a lot of money. Not only did Sam invest in a store that wasn’t bringing in much money, but he was also paying far too much for it. The rent for the store was 5% of the sales, and initially, this sounded fine to Walton. But after signing the lease, he discovered it was the highest rate anybody had ever paid for a variety store business.
Overcoming Challenges
Despite all of his obstacles, Sam succeeded beyond everyone’s expectations. He studied all the typical rules of retail and then broke the ones he thought didn’t make sense, which for him was nearly all. When Sam bought the Ben Franklin store, he was required to buy all his goods from company outlets, but he knew he could find cheaper merchandise elsewhere.
So, he saw a clause in his contract that allowed him to buy his merchandise from somewhere else, and then he would reduce the cost of his goods way below what other shops were selling them for. He made his profit on volume rather than margin, but it took him nearly a decade to fully appreciate the power of that idea.
Customer-Centric Approach
Nothing Sam did was extraordinary; neither was he a genius. While there’s no question that he was business innovative, the real reason for his success was his central policy: to make the lives of his customers easier. Because he did that, more and more people bought from him. Once things were going great for Sam and his business, he asked his brother Bud to join him in running the store more smoothly. The Butler brothers, who owned the store Sam had leased, were unhappy that the Waltons were getting their merchandise elsewhere. Still, they could only say a little about it because the numbers Sam was generating were unmatched anywhere.
Early Success
His sales had increased by more than 45 per cent, reaching $105,000 in his first full year of ownership. The following year, the number increased again to $140,000, and by the third year, his sales increased by another 25 per cent, reaching $175,000. After only three years in the business, Sam could repay the $20,000 loan his father-in-law gave him in full. Two years later, Sam had become Arkansas’s leading variety store owner and likely in the neighbouring states. But the truth is, it wouldn’t matter anyway because the business was destined to fail.
The Lease Dilemma
When Sam Walton signed the lease for his store in 1945, it contained no renewal clause. Options to renew were typically standard features of leases. So, when Walton’s father-in-law discovered this oversight, he was shocked that Sam could have made such a mistake. Walton had not only built one of the most successful businesses in Newport but had invested his body and soul into the business and the town. His wife, Helen, equally loved the city, as three of their four children were born there.
In his autobiography, Sam Walton says, “It was the lowest point of my life. I felt sick to my stomach. I had built the best variety store in the whole region, worked hard in the community, done everything right, and now I was being kicked out of town.”
A Fresh Start in Bentonville
After being kicked out of his store, Sam Walton was eager to start again, but this time, he was determined to do it the right way and better than ever. He began to search for a new destination to buy another store until he found one in the tiny community of Bentonville, Arkansas. It was here where Walton set up his second shop in the town square, and this time, he insisted on a 99-year lease. Sam opened his new store in the summer of 1950 and called it Walton’s Five and Dime.
Community Impact
The Walton family often heard people whisper, saying, “Well, we’ll give this guy 60 days, maybe 90. He won’t last that long.” But Sam would prove them wrong. At the time, there were two other variety stores in town, but neither offered the consistently low prices that Walton did. So, when Walton finally opened his store, the lives of the people in the Bentonville community changed.
Innovative Strategies
During the ’50s, America’s economy looked great, and Sam took advantage of it. He kept finding new ways to reduce the prices of his goods and keep his customers happy. One day, Walton learned about self-service in the retail industry. The concept was simple: rather than have his sales clerks get goods for his customers, customers could walk into the store, get the goods themselves, and pay at the entrance. Walton immediately fell in love with the idea.
This meant he could have fewer employees and further reduce the cost of his goods. Not only did this new trick work perfectly, but it also tripled his income in less than a year. With more money, Sam had the funds and resources to expand his business further.
Expansion and Growth
For the next few years, Sam opened one store after another, and by the end of the 1950s, Walton was a proud owner of 15 stores, which he had acquired using borrowed money and profits from his stores. But Sam still felt that he needed to profit more from the work he had put into his business. So, he decided to adopt a new strategy, which would change everything.
The Vision for Walmart
Sam realized that he could make up the difference in price through a higher sales volume. This idea was already being practised across the country, but the difference was that the discount stores tended to be small and located in the cities. Most of them only offered discounts for specific items, not their entire stock. It was risky, and he needed much money to make it work.
Taking a Gamble
Sam initially approached the company that franchised Ben Franklin stores with his idea. Still, they refused to back him, mainly because his idea meant they would have to cut their standard wholesale margin in half to accommodate the low prices he wanted to charge. With nowhere else to go, Walton decided to take a big gamble. He mortgaged his home, borrowed a lot of money, and opened his first Walmart store in Rogers, Arkansas, in 1962.
The Walmart Phenomenon
Customers were thrilled that they didn’t have to travel to the city to get discount prices on goods. They flocked to Walmart’s stores in droves, and their sales rose tremendously. In those years, Sam kept learning from his competitors and developed new ways to reduce the prices of his goods further. He replaced the wooden shelves in his stores with metal ones, which were cheaper and more durable. Another strategy he devised was to keep his stores open for longer hours than his competitors. Only Walmart was doing this, and it helped him generate more money. He also made sure his customers had big parking lots, and unlike his competitors, he never collected a dime for parking spaces.
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Going Public
Until 1969, Sam Walton had funded the expansion of his business through profits and borrowing money. But in 1970, he decided to take the company public. The initial offering generated about $5 million and allowed Walton and his family to retain about 61% of stock ownership. The money allowed Walton to pay off the debts he owed to banks, repay friends’ loans, and move forward with his ambitious plans for the company.
Rapid Expansion
Between 1970 and 1971, Walmart added six more stores, followed by another 13 stores each of the next two years, then 14, and then 26. By the end of 1980, Walmart had 276 stores; from then on, it opened about a hundred stores per year. Sam believed that the rapid growth of Walmart didn’t just come down to the low costs that attracted customers but was also due to the work of his close associates.
Empowering Associates
Sam made his associates partners and ensured they benefited from cash bonuses and stock options. This gave them a chance to participate in his business’s growth. Walton also ensured that his stores were close to warehouses to permit one-day delivery of goods while minimizing advertisement costs. Another innovation was the decision to buy directly from manufacturers rather than through wholesalers, which allowed him to lower his prices even more. By the end of the 1970s, Walton had built his store into the fastest-growing and most influential force in the retail industry.
Investor Success
Things were going so great for the company that one investor who bought $1,650 worth of Walmart shares in 1970 saw his shares rise over $700,000 by 1987. In 1983, Walton made another terrific business move. He launched the first of his Sam’s wholesale clubs aimed at small business owners and others who wished to buy goods in bulk. Once again, Walton had struck gold, and by 1990, Walmart had more than 1,000 stores and 150,000 employees working for the company.
Criticism and Controversy
But Sam had his fair share of people and groups who disliked him and his retail business. He was often criticized for competing with small retailers and putting them out of business. Sam Walton acknowledged this by saying, “The small stores were destined to disappear, at least in the numbers they once existed, because the whole thing is driven by the customers who are free to choose where to shop.”
Legacy
Sam Walton died on the 5th of April, 1992. He was 74 years old, and at the time of his death, Walmart had annual revenues exceeding $104 billion. Today, Walmart has grown to over 10,500 stores and generates over half a trillion dollars in revenue annually.
Sam Walton’s legacy continues to shape the retail industry, reminding us of the power of customer-centric strategies and relentless determination. Whether you’re a business owner or simply interested in entrepreneurship, there’s much to learn from Walton’s journey. What aspects of his story resonate with you the most? How do you think his approach can apply to your endeavours? Please share your thoughts in the comments below, and let’s discuss how we can all draw inspiration from his remarkable life.
