*Sam Walton: Made in America

**- Sam Walton (1918-1992) with John Huey * *

**(The Story of Walmart)*

Recently read Sam Walton's biography about the story of Sam Walton and

Wal-Mart. Was wanting to do it for long time and having read it, am totally

fascinated with the story of the biggest retail chain in world and also THE

biggest company in the world today. A company whose sales top 220b$ sales

today (Microsoft ~28b$; India's GDP: ~400b$), has the most interesting

origins and journey to the top.

Here, I am noting down excerpts and general insights from the book. The

figures in brackets are page numbers, in case I need to refer the book again

(DoubleDay, NY. First Edition, HardCover, 269 pages).

*Some Setbacks*

- After highly successful first store in Newport (started in 1945), he

had to give it up five years later and start all over again because he

hadn't included the option to renew the store lease from the landlord in the

contract. (30)

- His first store in a shopping centre, the highly successful Ruskin

Heights store was leveled by a typhoon in 1957. (39)

- Waltons' current home is built on the site of the earlier home which

burned down in 1972 after being struck by lightning. (photo)

*On/About Competition*
- Acknowldeges competitors: "Wal-Mart wouldn't be what it is today

without a host of fine competition, most especially Harry Cunningham of

Kmart, who really designed the first discount store, and who in my opinion,

should be remembered as one of the leading retailers of all time."

(Acknowledgement at the beginning)

- Competition that led him to move from being a franchisee to opening up

of first Wal-Mart discount store on July 2, 1962, was this barber, Herb

Gibson who had started his stores with simple philosophy: "Buy it low, stack

it high, sell it cheap". (42)

- Marty Chase of Ann & Hope acknowledged as the father of discounting.

(42)

*Personal*

- Wanted to be a big insurance salesman, like his dad. (9)

- Wanted to join the Wharton School of Finance, but decided to take up a

campus interview job (at University of Missouri) with J C Penny's due to

Wharton course being very expensive. (17)

- Always used to carry yellow notepad and a tape-recorder, taking notes

and recording conversations with people.

- Helen Walton, Sam Walton's wife, laid down the law that she didn't want

to move to any town bigger than 10,000 people. (21)

*Interesting Points*

- Took an old dirt road to bypass a weigh station because he knew the

load was illegal several different ways! (33)

- Charlie Baum recalls: "We had a nice big sale, and we put barrels full

of stuff all around the floor. Elderly ladies would come and bend way down

over into those barrels. I'll never forget this. Same takes a look, frowns,

and says: 'One thing for we gotta do, Charlie. We gotta be real strong in

lingerie.' (33)

- In Fayetteville, while booting up second Walton's Five and a Dime, 'two

local codgers' gave him 'sixty days, maybe ninety. He won't be there too

long.' (34)

- Name WalMart was suggested by Bob Bogle, first manageer, Walton's Five

and a Dime, Bentoville on a flying trip. To start with, his reason was that

Walmart has just 7 letters as against earlier 'Ben Franklin' 11 letters.

Hence it could save a lot of money in neon letters!! Sam didn't say anything

at that time but later when Bob went by the new store's building he saw

worker putting up neon signs of W-A-L and was headed up the ladder with an

'M'. He smiled and went on. (44)

- Amongst other reasons for going for his own stores, one was that Butler

Brothers (Chicago) denied him for opening their franchised stores.

- Nobody wanted to gamble on first Wal-Mart. His brother Bud put in 3%.

Sam put in 95% of the dollars. (43)

- Don Whitaker, first manager at WalMart had barely finished high school.

(53)

- As against today's fancy LIFO and FIFO accounting methods, back then

they used ESP method: Error Some Place! (53)

- While landing at Carthage, Missouri, almost crashed his plane into

another one sitting on the runway. He was coming back from showing Ron Mayer

around (making a recruitment pitch to Ron to join WalMart). Ron joined in

1968 as VP, Finance & Distribution. Later, he would be instrumental in

putting up the first computer systems in place. (90)

- In 1969, Prudential said 'they couldn't afford to gamble with WalMart'

to a loan pitch by WalMart. (95)

Walmart went public on Oct 1, 1970, traded over the counter. They offered

approx. 20% of the company - 300,000 shares - @ $15, but it sold for $16.50.

Approx. 800 shareholders after the issue. By June 1990, they had nine

two-for-one splits. If someone bought 100 shares at IPO, his investment in

1990 would have been worth right around $3million! While going back to

Arkansasa after IPO, A guy from T. Rowe Price - a money management firm in

Baltimore - caught up with Sam and Ron at NY airport. Sam/Ron made him

believe that they were going to do very well. This guy went back and bought

huge amount of WalMart stock for his firm. They held it for 10-15 years and

became the star of the industry. (97)

- About a French investor Pierre: "We almost drowned him that first year

we floated down Sugar Creek (at AGM), and I was afraid we'd never see him

again. But Pierre started believeing, and he started acquiring our stock...

He's been with us for about 15 years, and he's had exceptionally good

success with our company." (105)

- Did the Hawaiian shirt and grass skirt hula on Wall Street in 1984.

Hula was a result of his losing bet to David Glass that 'we couldn't

possibly produce a pretax profit of more than 8 percent'. (159)

- Ron Loveless, an ex-WalMart executive, after retirement would come at

every year-end meeting and present his LEIR report, the Loveless Economic

Indicator Report, based on the number of edible dead chickens foudn on the

roadside - with charts and graphs and the whole bit. (The harder times are,

the fewer edibles you find on the roadside.) (160)

- He was caught taping conversation with staff in his competitior Sol

Price's store by a manager/staff. As his tape had stuff from other places

also, he didn't want to loose it. Hence Sam submitted the tape to the

manager with a note to Robert Price, son of Sol Price. In about four days he

got the tape back untouched from Robert! Sam says he was treated by Robert

"better than I deserved". (202)

- Sam Walton wanted to be the BEST retailer and NOT the BIGGEST! (217)

*Management fundas/gyaan*

- Promised stock/equity/ percentage of profit to lure good managers.

- Sam's equation for merchandise sourcing trips "to NYC: Trip's Expense

should be less than one percent of purchases made. (65)

- "If you don't want to work weekends, you shouldn't be in retail." (75)

- "In Retail, you are either operations driven - where your main thrust

is towards reducing expenses and improving efficiency - or you are

merchandise driven. The ones that are truly merchandise driven can always

work on improving operations. But the ones that are operations driven tend

to level off and begin to deteriorate. " (61-62)

- Flying was very important in scouting for store locations. "I'd get

down low, turn my plane up on its side, and fly right over a town... There's

another good reason I don't like jets. You can'r get down low enough to

really tell what's going on, the way I could in my little planes. Until we

had 500 stores, or at least 400 or so, I kept up with every real estate deal

we made and got to view most locations before we signed any kind of

commitment" (112)

- Calls this style of his "Management by walking and flying around".

(115)
 - Another management style of his: "Management by wearing you down".

This is said of Sam by David Glass ("When Sam feels a certain way, he is

relentless. He will just wear you out.... I guess it could be called

management by wearing you out.") (117)

- Yet another management style of his: ""Management by looking over your

shoulder". This is said by A.L.Johnson, Vice Chairman, Walmart ("As famous

as Sam is for being a great motivator... . he's equally good at checking on

the people he has motivated. You might call his style: management by looking

over your shoulder.") (118)

- Did not emphasize much on formal education/training of employees.

Ferold Arend: "He'd take people with hardly any retail experience, give them

six months with us, and if he thought they showed any real potential to

merchandise a store and manage people, he'd give them a chance." (120)

- P&G didn't pay any attention to WalMart until 1987 when WalMart began

to "turn a basically adversarial vendor/retailer relationship into one that

we think is the wave of the future: a win-win partnership between two big

companies trying to serve the same customer." At the time biography was

written, WalMart was P&G's biggest single customer! (186)

*General*

- Blasts American CEOs for their spendthrift ways. (9)

- Offers greatest insight into retailing and discounting with this story:

Selling more panties by pricing them a bit lower than the usual price, and

hence still managing to have greater overall profit. (25)

- Bought an 1800$ ice-cream machine as a prop for his first store (Ben

Franklin franchise) (26). His brother Bud Walton says Sam gave him the job
to clean the machine because Same knew that he hated milk. (27)

- Bought his first 'aircraft', a two-seater Air Coupe for $1850, whose

engine once failed just after take-off from Fort Smith. (40)

- "First lesson we learned was that there was much, much more business

out there in small-town America that anybody, including me, had ever dreamed

of." (50) *(Comment - Does it have any implications for India?)*

- "Maybe its time for a Walton to .... become missionary for free

enterprise in the Third World." (77)

- The IPO stock got very little support from folks right there in

northwest Arkansas, home of WalMart. "I always thought people around here

thought that.. we were doing it with mirrors. They couldn't help but think

we were just lucky... I think it must be human nature that when somebody

homegrown gets on to something, the folks around them sometimes are the last

to recognize it." (100)

- He had semi-retired in 1974 when Ron Mayer became CEO. (150-151)

- But he was too much of a hands-on a guy to stay away and hence came

back in June of 1976 as CEO. He had given Ron Mayer an option of becoming

Vice Chairman and CFO but Ron chose to leave instead and that Saturday's

meeting is known as "Saturday night massacre" in WalMart lore. (152)

- He's been accused of pitting people against each other, but he doesn't

see it that way. He says he's always 'cross-pollinated folks'.(155)

- WalMart had (has?) a gospel group The Singing Truck Drivers and a

management singing group called "Jimmy Walker and the Accountants" . (157)

- Phil Green, who once made the world's largest Tide display at one of

the oldest WalMart stores, promised a TV for 22 cents in a promotion to

celebrate George Washington's birthday, which was on February 22nd. The only

hitch was customers had to find the TV set. It was hidden in the store! The
crowd brought the house down! He admitted that "playing hide-and-seek with

merchandise was a terrible idea."! (161)

- Walmart's cheerleading squad Shrinkettes ("WHAT DO YOU DO ABOUT

SHRINKAGE? CRUSH IT! CRUSH IT!") stole the show at one of the annual

meetings with "CALIFORNIA ORANGES, TEXAS CACTUS, WE THINK KMART COULD USE

SOME PRACTICE!" (162)

- While talking about culture of the company, Sam Walton says that

company thrives on the traditions of small-town America and especially

because it is more fun when you're an adult who usually spends all your time

working. (162)

- Sam says that the outcry by the towners that ensues at closing down a

store because Walmart couldn't make it profitable is "something awful" and

that "its a price you pay for success". (182)

Negotiate hard with your vendors/suppliers 'cause if you pay higher than

he deserves, you are buying someone else's inefficiency! (185)

- Whoever said 'Retail is Detail' is absolutely 100 percent right. (188)

- Even though WalMart is known for best and innovative applications of

Information Technology, Sam never appreciated investment in computers much.

His reason: " A computer can tell you down to the dime what you've sold. But

it can never tell you how much you could have sold." ! Computer, he says,

will never be a substitute for getting out in your stores and learning

what's going on. (224)

- A lot of folks used to ask Sam Walton: "Could a Wal-Mart-type story

still occur in this day and age? My answer is of course it could happen

again. Somewhere out there right now there's someone - probably hundreds of

thousands of someones - with good enough ideas to go it all the way. It will

be done again, over and over, providing that someone wants it badly enough
to do what it takes to get there. It's all a matter of attitude and the

capacity to constantly study and question the management of the business."

(256)