Sam Walton: From Milking Cows to Founding Retail Giant Walmart

Sam Walton: From Milking Cows to Founding Retail Giant Walmart

You probably don’t know Sam Walton. But you sure do know Wal-Mart. Right?

Well, he’s the man behind it. Sam Walton was an American retail tycoon and entrepreneur who founded Wal-Mart Stores Inc. (WMT) and Sam’s Club big-box discount stores that have changed the way Americans buy goods, as well as the American business landscape.

Born to a poor farming family, Sam Walton, the founder of Wal-Mart Inc., grew up dreaming not of fabulous wealth, but of a simple middle class life with just a modest amount of security and comfort.

Yes he attended college, but fought in World War II in the 1940s. He also worked several retail jobs between other obligations.

He may have done a lot on the side lines but none of Walton’s pursuits could give him the security and income that he needed to fulfill his dream. He was not satisfied of being simply an employee.

He finally applied his knowledge of the retail business and solid work ethic to a small business of his own.

Walton bought a five-and-dime store, and soon owned several. While his stores were afloat, they still did not give him the success he desired.

He wanted more. And he got what he wanted. When he died of cancer in 1992, Walton had amassed a fortune in excess of $100 billion. His heirs are now the wealthiest family in America, with a combined net worth of roughly $149 billion as of 2015.

But this story of success, is not an easy one. Walton travailed a course that is long and is winding. Find out!

 

Walton’s Story of Success

 

In the late 1940s, Sam Walton opened his second Ben Franklin variety store franchise. This was after he fought the Second World War.

The first, in Newport, Arkansas, had been a victim of its own success. It had drawn so many customers that the landlord had drastically increased its rent, forcing Walton out.

Walton’s second store, in Bentonville, Arkansas, was in a building he owned. Furthermore, he had secured a 99-year option to lease the space next door.

The Bentonville store did $72,000 in sales the year before Walton bought it. After he took over, its sales grew steadily in each of the first three years, to $105,000 in the first year, $140,000 in the second, and $175,000 in the third. Terrific growth rates, right?

Walton is obsessed with even expanding his business even more. Of course he would want that given the successes of his stores in Newport and in Bentonville!

So, Walton and his brother James hopped in the car to scout for locations. James, a pilot in the war, even bought a second-hand airplane to expand their search.

At 36, in 1954, Walton expanded his retail business again, opening a store with his brother in Ruskin Heights, just outside of Kansas City, Missouri. The opening was the beginning of a nationwide strategy. To get his store managers’ on board with his aggressive expansion plan, Walton would often offer managers a chance to buy into the business.

By 1962, with help from his brother, father-in-law, and brother-in-law, Walton owned 16 stores in three states! Fifteen of those stores were Ben Franklin franchises.

And Walton wanted to expand even faster! He wanted to expand in rural communities, especially in some remote places that, thanks to the baby boom, weren’t so remote anymore. Nevertheless, the management of Ben Franklin wasn’t as confident in his expansion plans.

Too bad.

 

The Beginnings of Wal-Mart

So Walton struck out on his own in July of 1962, opening the first ever Wal-Mart Discount City store in the small Ozarks city of Rogers, Arkansas.

As he worked on developing Wal-Mart, Walton took note of a competitor: Michigan-based chain store Meijer.

Meijer is a one-stop-shopping supercenter was unique in the early 1960s. And it seemed to be a natural fit for Walton’s geographic strategy.

Note that during this time, most American discount stores fought over the same cities. But as noted earlier Walton saw the real growth opportunity in small towns. He was selling cheaply to smaller markets, every possible expense had to be trimmed.

“You can make a lot of mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient,” he would say of his philosophy.

One of the largest costs his operation faced was transportation.

As Wal-Mart expanded, one tactic was to make sure that all stores were within a day’s drive of a Wal-Mart warehouse.

He also saved money by maintaining his own fleet of trucks.

Walton’s strategy paid off.

By 1969, Wal-Mart consisted of 38 stores that rang up $44.2 million in sales. In 1969, the company officially incorporated as Wal-Mart Stores, and the year after it opened a company headquarters and distribution center in Bentonville, Arkansas.

In 1970, the company went public, trading on the New York Stock Exchange. Wall Street liked Wal-Mart, whose stock split just months after its IPO. And Walton was not about to part with the stock that he and his family owned, keeping it in a partnership set up by his mentor and father-in-law, Leland Stanford Robson.

“Over the years our Wal-Mart stock has gone into that partnership. Then the board of Walton Enterprises, which is us, the family, makes decisions on a consensus basis. Sometimes we argue, and sometimes we don’t. But we control the amount we pay out to each of us, and everybody gets the same… That way, we accumulated funds in Enterprises rather than throwing it all over the place to live high” Walton writes.

In the 1970s, Wal-Mart kept expanding, adding stores in Kansas, Louisiana, Tennessee, Kentucky, Mississippi and Texas by 1975. By 1977, just 15 years after Walton had opened the first Wal-Mart, there were 190 such stores all around the country. But its real growth hadn’t yet begun. In 1985, Wal-Mart would open its 800th store.

Walton turned 69 in 1987, and Wal-Mart celebrated its 25th anniversary. At the time, Wal-Mart boasted a staggering 1,198 locations around the country, and annual sales of $15.9 billion. Its army of employees numbered 200,000.

The year also marked the completion of one of Walton’s most ambitious logistics projects: a proprietary satellite network connecting every store, warehouse and office to the Bentonville headquarters. The network allowed headquarters to track inventory and sales in real time. It was, at the time, the largest private satellite network in the world.

These investments paid off, as Wal-Mart became more profitable than well-entrenched retail rivals Kmart and Sears by 1988. Two years later, it would outstrip them both to become the largest U.S. retailer by revenue.

By the early ‘80s, all those stores and all those sales made Walton the richest person in the United States, according to Forbes. From 1982 to 1988, he held the top spot on that list, losing it in 1989, when the editors recorded Walton’s fortune as belonging jointly to him and his four children.

In 1988, at the age of 70, Walton retired as CEO, handing the reins to Wal-Mart veteran executive David Glass. Walton would stay on as Chairman of the Board until his death four years later.

Those were years that proved out the practices he’d spent the bulk of his adult life developing, as Wal-Mart grew to become the largest retailer in the United States, opening stores in California, Pennsylvania and even Mexico, where it debuted in 1991.

In the last year of his life, President George H. W. Bush awarded Walton with the Presidential Medal of Freedom. And the University of Arkansas Business College was renamed the Sam M. Walton College of Business in his honor.

“Maybe I was born to be a merchant, maybe it was fate. I don’t know about that. But I know this for sure: I loved retail from the very beginning,” Walton said of his vocation.

By the time of his death in 1992, Walton bequeathed a fortune of more than $100 billion on to his heirs. Today, the Walton family is the wealthiest in America, with a combined net worth of roughly $149 billion as of 2015.

 

Sources

Harvard Business School Working Knowledge. (2001). Sam Walton: Great From the Start. [online] Available at: http://hbswk.hbs.edu/item/sam-walton-great-from-the-start [Accessed 21 May 2017].

Entrepreneur. (2008). Sam Walton. [online] Available at: https://www.entrepreneur.com/article/197560 [Accessed 21 May 2017].

En.wikipedia.org. (2017). Sam Walton. [online] Available at: https://en.wikipedia.org/wiki/Sam_Walton [Accessed 21 May 2017].

HAYES, T. (2017). Sam Walton Is Dead At 74; the Founder Of Wal-Mart Stores. [online] Nytimes.com. Available at: http://www.nytimes.com/1992/04/06/us/sam-walton-is-dead-at-74-the-founder-of-wal-mart-stores.html?pagewanted=all [Accessed 21 May 2017].

Biography.com. (2017). Sam Walton. [online] Available at: http://www.biography.com/people/sam-walton-9523270 [Accessed 21 May 2017].

OPEN Forum. (2011). 5 Lessons From Sam Walton. [online] Available at: https://www.americanexpress.com/us/small-business/openforum/articles/5-lessons-from-sam-walton/ [Accessed 21 May 2017].

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