He Learned From Competitors And Then Went His Own Way 

Sam Walton felt sick to his stomach. It was 1950, and he’s just spent five years turning his first store – a five-and-dime Ben Franklin franchise in Newport, Ark. – from a dying money-loser into the most profitable Ben Franklin in the six-state region.

Now he had to sell it.

His landlord refused to renew his five-year lease, because he wanted to give the now-thriving business to his son. Walton had nowhere else to move the store in Newport. So he sold it.

“It really was like a nightmare,” Walton wrote in his 1992 auto-biography, Sam Walton: Made in America, “I had built the best variety store in the whole region and worked hard in the community – done everything right – and now I was being kicked out of town.”

Walton (1918-92) called it the low point of his business life. But he didn’t dwell on his misfortune. Instead, he moved his wife, Helen, and their four small children to Bentonville, Ark., and bought a new store (this time with a 99-year lease).

“I had to pick myself up and get on with it, do it all over again, only even better this time,” he wrote.

Do it better he did. That new store was the start of what became the biggest retailer in the world – Wal-Mart Stores Inc.

Walton’s will to turn setbacks into opportunities was just one of the secrets behind the building of his venture, which reached the $100 billion annual-sales mark in 1997. In five years, that number more than doubled to $218 billion. Wal-Mart made Walton rich, and it changed the face of retailing. As of 2003, the company operates more than 4,000 stores worldwide. In 1999, with 1,140,000 associates, Wal-Mart became the largest private employer in the world.

Here are some of Walton’s other secrets:

SAM WALTON - 01Keep trying to improve. “If you ask Sam, ‘How’s business?’ he’s never satisfied,” said Bernie Marcus, co-founder of Home Depot, in Made in America.

For example, in 1966, Walton had five Wal-Mart stores in tiny towns, and they were doing a booming $10 million in annual sales. But he kept looking for ways to improve and expand his business and make it more efficient.

He began reading about computers and became so excited about the possibilities that he enrolled in an IBM Corp. school and hired some computer experts.

That early emphasis on technology turned out to be one of the keys to Wal-Mart’s huge expansion.

His constant quest for improvement and growth also led him to create Wal-Mart Supercenters, which have both groceries and general merchandise, and Sam’s Club warehouse stores.

SAM WALTON - 04Happy employees mean happy customers. “In the beginning. I was so chintzy I really didn’t pay my employees well,” Walton said.

But soon he realized he had to give more to workers, whom he called “associates.”

“The way management treats associates is exactly how the associates will treat the customers,” he said. “If the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies.”

Although Walton continued to pay lower wages than the industry average, he started a profit-sharing program and let workers buy stock at a discount.

He also shared information and responsibility. Even clerks knew their store’s purchases, profits, sales and markdowns.

He listened to the associates, too. He often visited stores and asked them for their suggestions.

“The folks on the front lines – the ones who actually talk to the customer – are the ones who really know what’s going on out there,” he said. “You’d better find out what they know.”

SamWalton3Learn from the competition. Walton was relentless about scrutinizing competitors. He’d walk into Kmart with a yellow legal pad or tape recorder, quizzing clerks about what and how much they ordered.

But he didn’t study rivals just so he could underprice them. He learned from them.

Even at his first Ben Franklin store in Newport, Walton constantly visited the competing store across the street. He looked at prices, displays and the way it did business.

And when he began discounting, he visited every discount store and company headquarters he knew of to learn more about how it worked.

“We’re really not concerned with what [competitors] are doing wrong; we’re concerned with what they’re doing right,” he told managers. “Everyone is doing something right.”

SAM WALTON - 02Do things your own way. Although you should learn from competitors, don’t follow them blindly, Walter advised.

“ignore the conventional wisdom,” he said. “If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction.

“But be prepared for a lot of folks to wave you down and tell you you’re headed the wrong way.”

For example, Walton ignored the conventional wisdom of his time – that towns with populations under 50,000 couldn’t support a discount store for too long. Big retailers like Target and Kmart ignored these towns.

That let Wal-Mart grow for years without competition from any giant national discounters.

Be your own worst critic.  Walton knew that Wal-Mart had serious problems with merchandising and buying in its early days. One of the reasons the company survived, he said, is that he and the store managers constantly critiqued themselves.

“When somebody made a bad mistake – whether it was myself or anybody else – we talked about it, admitted it, tried to figure out how to correct it, and then moved on to the next day’s work,” he wrote.

SAM WALTON - 07Lighten up. Walton took his business seriously, but he wasn’t afraid to laugh at himself. A little fun once in a while also kept customers, associates and shareholders happy.

For example, to keep managers from revolting against his required Saturday morning meetings, he’d try to make them fun. Sometimes he’d have surprise visitors, such as (General Electric Chief Executive) Jack Welch or singer Garth Brooks. Another time he had an executive sing “Red RiverValley.”

The tactic worked – he kept managers’ interest, and business still got done.

When Wal-Mart first came public, few shareholders – institutional or individual – would attend the annual shareholder meetings. But when the company turned the meetings into events, featuring golf and tennis and river float outings, attendance soared.

“Loosen up, and everybody around you will loosen up,” Walton said. “Have fun. Show enthusiasm – always.”

SAM WALTONDo what you love. Showing enthusiasm is easy if you love your work. And Walton loved retailing.

“I really love to pick an item – maybe the most basic merchandise – and then call attention to it,” he wrote. “We would buy huge quantities of something and dramatize it. We used to say you could sell anything if you hung it from the ceiling.”

Because Walton loved his work, long hours weren’t drudgery. He often started his day at the office at 4:30 a.m. When his family traveled on vacations, he insisted on stopping at all the local discount stores, so he could see what they were up to.

“If you love your work, you’ll be out there every day trying to do it the best you possibly can, and pretty soon everybody around will catch the passion from you – like a fever,” he said.

That passion also gives you energy to recover from setbacks. Remember Walton’s first store in Newport, Ark., which he was forced to sell?

In 1969, he opened a Wal-Mart in Newport and competed with the Ben Franklin store, run by his former landlord’s son. The Wal-Mart thrived. The Ben Franklin went out of business.

Source: “BUSINESS LEADERS & SUCCESS – 55 TOP BUSINESS LEADERS & HOW THEY ACHIEVED GREATNESS” (With an introduction from William J. O’Neil, founder of INVESTOR’S BUSINESS DAILY, New York: McGraw-Hill, 2004, pages 45-49. 

Jakarta, 19 March 2014 

Frans Indrapradja

This entry was posted in GREAT BUSINESS LEADERS - IN ENGLISH and tagged , , . Bookmark the permalink.

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