"There is only one boss - the customer. And he can fire everyone in the enterprise from the chairman on down, plainly by spending his money somewhere else."
Retained Profits
Growing Up
Sam Walton's career in retail began in 1940 when he become a sales student 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 holding 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 department of the Army brain 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 enterprise to sustain his new family. With the ,000 that he had saved along with a ,000 loan from his wife's father, he purchased a Ben Franklin collection 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 enterprise 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 enterprise 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) describe all you maybe can to your partners.
5) Appreciate all 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 best than your competition.
10) Blaze your own path.
Determined as ever to supervene 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 reduction their prices and Walton's enterprise began to flourish.
Realizing he had a method for success, Walton began seeing for other areas of expansion. He borrowed money and used the profits from his first stores to obtain more. By 1960, he owned 15 stores but he was not getting the kind of return on speculation that he idea he would be making. He then made the decision to supervene a heavy price cutting strategy and hope to get much higher volume to turn a larger profit. This was not a new idea. The question at the time was that most reduction stores were small,located in urban areas, and focused on specialty items. Walton's plan was to turn 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 collection of products. His preliminary arrival was to Ben Franklin. They turned him down as they did not like the idea of operating with lower margins. Without a large enterprise behind him, Walton opted to go it alone. In 1962, he mortgaged his home and borrowed against all he owned to open his first Wal-Mart in Rogers, Arkansas, a neighboring town of Bentonville.
Excited about the prospects of getting discounts and option 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 develop and by 1969 he had 18 Wal-Marts in Arkansas and Missouri.
Funded solely straight through debt and reinvested profits, Walton decided that in 1970 he would take the enterprise public. The Ipo raised million and Walton retained 61 percent of the company. The money was used to decree the company's debts and fuel added 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 enterprise 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 list control principles 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 other idea - Sam's Wholesale Clubs. These would be reduction stores that sold to small enterprise owners in bulk. The idea was other big hit for Walton and by 1985 he was considered by Forbes magazine to be the richest man in America with an estimated net worth of .8 billion.
Similar to Ray Kroc, Sam Walton did not found retailing, he plainly changed the enterprise model and way of doing enterprise to make it a much more profitable venture.
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