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Wal Mart - Sam Waltons
Success Story
"There is only one boss - the customer.
And he can fire everybody in the company from the chairman on down, simply by
spending his money somewhere else."
Growing
Up
Sam Walton's career in retail began in 1940 when he become a sales trainee in
Des Moines, Iowa at a J.C. Penney store. Despite his enthusiasm to serve the
customers, Walton was not a model employee. His desire to make his customers
happy was so great that he often let other responsibilities like paperwork
and keeping the books fall by the wayside. He was almost fired by his boss
who told him that he was not cut out for a career in retail. Walton kept his
job, however, because of his ability as a great salesman.
In 1942, Walton was drafted into the United States army. He
worked in the communications division of the Army Intelligence Corps and
remained on home soil throughout the Second World War. When he left the army
three years later, Walton was married, had a child, and decided to start his
own business to support his new family. With the $5,000 that he had saved
along with a $20,000 loan from his wife's father, he purchased a Ben Franklin
variety store in Newport, Arkansas. Walton was 27 years old.
Starting
The Business
By putting in many
hours at the store and implementing a pricing strategy far below what his
competitors were charging, Walton's new business took off. By 1950 he had the
top performing Ben Franklin store in the area. Walton's landlord, seeing his
success, decided that he wanted Walton to sell the store to his son. When Walton
refused, the landlord decided not to renew Walton's lease and he was forced
to shut down.
Walton's
10 commandments for business success were: 1)
Commit to your business. 2) Share your profits with your associates and
treat them like your partners. 3) Energize your colleagues. 4) Communicate
everything you possibly can to your partners. 5) Appreciate everything your
associates do for the business. 6) Celebrate your success. 7) Listen to
everyone in your company. 8) Exceed your customers' expectations. 9) Control
your expenses better than your competition. 10) Blaze your own path.
Determined as ever to
succeed in his venture, Walton looked for other rural Arkansas towns for a
new place to set up shop. He came across a small village called Bentonville
and opened the Walton's Five and Dime in 1950. He made sure to get a 99-year
lease this time on the property. The two local competitors in Bentonville did
not want to discount their prices and Walton's business began to flourish.
Realizing he had a
recipe for success, Walton began looking for other areas of expansion. He
borrowed money and used the profits from his first stores to acquire more. By
1960, he owned 15 stores but he was not getting the kind of return on
investment that he thought he would be making. He then made the decision to
follow a heavy price cutting strategy and hope to get much higher volume to
turn a larger profit. This was not a new idea. The problem at the time was
that most discount stores were small,located in urban areas, and focused on
specialty items. Walton's plan was to change the way retailing was done
across the country.
Building
An Empire
Walton's revolutionary
plan was to have large superstores in rural towns that discounted a wide
variety of products. His initial approach was to Ben Franklin. They turned
him down as they did not like the idea of operating with lower margins.
Without a large company behind him, Walton opted to go it alone. In 1962, he
mortgaged his home and borrowed against everything he owned to open his first
Wal-Mart in Rogers, Arkansas, a neighboring town of Bentonville.
Excited about the
prospects of getting discounts and selection that were previously only
obtainable in the cities, rural customers came out in droves to his store.
The success of his first store allowed him to expand and by 1969 he had 18
Wal-Marts in Arkansas and Missouri.
Funded solely through
debt and reinvested profits, Walton decided that in 1970 he would take the
company public. The IPO raised $5 million and Walton retained 61 percent of
the company. The money was used to settle the company's debts and fuel
further expansion. By 1980, 276 Wal-Marts were operating.
An
integral component of Wal-Mart's success was its leveraging
of new technologies to improve efficiencies and save costs. Walton knew that
the key to success in a low margin business was to rigidly control his costs.
Wal-Mart was, for example, one of the first major retailers to use electronic
scanners at the registers which tied to an inventory control system so they
could know immediately which items were selling well and needed to be
re-ordered.
The
success of his Wal-Mart stores led Sam to another idea
- Sam's Wholesale Clubs. These would be discount stores that sold to small
business owners in bulk. The idea was another big hit for Walton and by 1985
itself he was considered by Forbes magazine to be the richest man in
America with an estimated net worth of $2.8 billion.
Similar to Ray Kroc,
Sam Walton did not invent retailing, he simply changed the business model and
way of doing business to make it a much more profitable venture
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