Time - Man of the Year/Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso/moy/061592/06159932.000

Text File | 1992-09-22 | 27KB | 578 lines

                                                                                COVER STORY, Page 52

SAM WALTON RECOUNTS THE LIFE OF A SALESMAN

A Passion to Win


By Sam Walton

[From Sam Walton: Made in America by Sam Walton with John
Huey, Copyright (c) 1992 by the estate of Samuel Moore Walton,
to be published by Doubleday on June 12, 1992.]


    "I was awake one night and turned on my radio, and I heard
that Sam Walton was the richest man in America. And I thought,
'Sam Walton. Why, he was in my class.' And I got so excited."

    -- Helen Williams, former History and Speech teacher at
Hickman High School in Columbia, MO.


    I'm not sure I ever really figured out this celebrity
business. Why in the world, for example, would I get an
invitation to Elizabeth Taylor's wedding out in Hollywood? And
I still can't believe it was news that I get my hair cut at the
barber shop in Bentonville. Where else would I get it cut? Why
do I drive a pickup truck? What am I supposed to haul my dogs
around in, a Rolls-Royce?

    Our somewhat unorthodox style at Wal-Mart has confused
people sometimes. I believe Saturday work is part of the
commitment that comes with choosing a career in retail. I guess
not many companies out there gather several hundred of their
executives, managers and associates together every Saturday
morning at 7:30 to talk about business. Even fewer would begin
such a meeting by having their chairman call the Hogs. That's
one of my favorite ways to wake everybody up, by doing the
University of Arkansas' Razorback cheer. You probably have to
be there to appreciate the full effect, but it goes like this:

    Whooooooooooooooooooo Pig. Sooey!

    Whooooooooooooooooooooooooooo Pig. Sooey!

    Whooooooooooooooooooooooooooooooooooooo Pig. Sooey!

    RAZORBACKS!!!!!

    My feeling is that just because we work so hard, we don't
have to go around with long faces all the time, taking
ourselves seriously, pretending we're lost in thought over
weighty problems. I have another cheer I lead whenever I visit
a store, our own Wal-Mart cheer: Give me a W! Give me an A! Give
me an L! Give me a squiggly! (Here, everybody sort of does the
twist.) Give me an M! Give me an A! Give me an R! Give me a T!
What's that spell? Wal-Mart! What's that spell? Wal-Mart! Who's
No. 1? THE CUSTOMER!

    We know that our antics can sometimes be pretty hokey. We
couldn't care less. It's part of what you might call our company
culture. Some of this culture grew naturally out of our
small-town beginnings. Back then, we tried literally to create
a carnival atmosphere in our stores. We were only in small towns
then, and often there wasn't a whole lot else to do that could
beat going to the Wal-Mart. We'd have these huge sidewalk sales,
and we'd have bands and little circuses in our parking lots to
get folks to those sales. We'd play shopping-cart bingo -- where
each shopping cart has a number, and if your number is called,
you get a discount on whatever you have in the cart. As long as
it was fun, we'd try it. As long as it would bring folks into
the stores, and keep them coming back.

    I have occasionally heard myself compared to P.T. Barnum.
There's no question that I have the personality of a promoter.
But underneath that personality, I have always had the soul of
an operator, somebody who wants to make things work well, then
better, then the best they possibly can.

    I don't know what causes a person to be ambitious, but it
is a fact that I have been overblessed with drive and ambition
from the time I hit the ground. I have always pursued
everything I was interested in with a true passion -- some would
say obsession -- to win.

    I was born in Kingfisher, Okla., in 1918. My dad, Thomas
Gibson Walton, was an awfully hard worker. He was also a bit of
a character, who loved to trade, loved to make a deal for just
about anything: horses, mules, cattle, houses, farms, cars. Once
he traded our farm in Kingfisher for another one, near Omega,
Okla. Another time, he traded his wristwatch for a hog, so we'd
have meat on the table.

    One thing I picked up from my mother and dad was their
approach to money: they just didn't spend it. I found out early
that I could sell. I started out selling magazine
subscriptions, at seven or eight years old. I raised and sold
rabbits and pigeons too.

    At Hickman High School I got involved in just about
everything. I wasn't what you'd call a gifted student, but I
worked really hard and made the honor roll. I was president of
the student body and active in a lot of clubs. When I was a
senior, they drafted me for the basketball team, even though I
was only 5-ft. 9-in. tall. I wasn't a great shot, but I was a
real good floor leader. We went undefeated and, in one of my
biggest thrills, won the state championship.

    My high school athletic experience was really unbelievable
because I was also the quarterback on the football team, which
went undefeated too -- and also won the state championship. In
my whole life I never played in a losing football game. It
taught me to expect to win. Later on in life, I think K Mart,
or whatever competition we were facing, just became Jeff City
High School, the team we played for the state championship in
1935.

    After high school, I started working my way through the
University of Missouri. I had thrown a newspaper route all
through high school. I added a few more routes, hired a few
helpers, and turned it into a pretty good business. I made about
$4,000 to $5,000 a year, which at the end of the Depression was
fairly serious money.

    At the end of my senior year, I visited with two company
recruiters who had come to the Missouri campus. Both made me job
offers. I accepted the one from JC Penney, and turned down Sears
Roebuck. Three days after graduation -- June 3, 1940 -- I
reported to the JC Penney store in Des Moines. I loved retail
from the beginning. The icing on the cake was when James Cash
Penney himself visited the store one day. I still remember him
showing me how to tie and package merchandise, how to wrap it
with very little twine and very little paper but still make it
look nice.

    By early 1942, the war was on, and as an ROTC graduate I
was gung-ho to go. But because of a minor heart irregularity,
I flunked the physical for combat duty. Unlike my brother Bud,
who was a Navy bomber pilot on a carrier in the Pacific, I
spent my service in a fairly ordinary fashion, supervising
security at aircraft plants and POW camps in California. Just
before I was called up for duty, I met Helen Robson one April
night in a bowling alley. I just fell right in love with her.
She was pretty and smart, ambitious and strong willed. Also,
like me, she was an athlete who loved the outdoors. Helen and
I were married on Valentine's Day, 1943, in her hometown of
Claremore, Okla.

    When I got out of the Army, my friend Tom Bates and I were
going to buy a Federated department store on Del Mar Avenue in
St. Louis. That's when Helen spoke up and laid down the law.
She told me, "Sam, we've been married two years, and we've
moved 16 times. Now, I'll go with you any place you want so long
as you don't ask me to live in a big city. Ten thousand people
is enough for me."

    So any town with a population over 10,000 was off limits
to the Waltons. If you know anything at all about the initial
small-town strategy that got Wal-Mart going almost two decades
later, you can see that this pretty much set the course for what
was to come.


    STORE FEVER

    "Bentonville really was just a sad-lookign country town,
even though it had a railroad track to it. It was mostly known
for apples, but at the time chickens were beginning to come on. I
couldn't believe this was where we were going to live."

    -- Helen Walton

    Helen and I started looking for a new town. One day I
drove into Bentonville and had a look around the square. It was
the smallest of the towns we were considering, and it already
had three variety stores, when one would have been enough.
Still, it just struck me as the right place. Northwest Arkansas
appealed to us. It was close to Helen's folks in Claremore. It
was good for me because with Oklahoma, Kansas, Arkansas and
Missouri all coming together right there it gave me easy access
to four different quail seasons in four states.

    By this time, I was reading everything I could get my
hands on about retailing, and I read this article about these
two Ben Franklin variety stores up in Minnesota that had gone
to self-service -- a brand new concept at the time. I rode the
bus all night long to two little towns up there, Pipestone and
Worthington. They had shelves and counters all the way back, and
check-out registers up front.

    So our Ben Franklin's franchise in Bentonville became only
the third self-service variety store in the whole country.
Maybe nobody here knew it, but it was a big deal. Our first ad,
in the July 29, 1950, Benton County Democrat, promised a whole
bunch of good stuff: free balloons for the kids, a dozen
clothespins for 9 cents, ice tea glasses for 10 cents apiece.
The folks turned out, and they kept coming. We called it
Walton's Five and Dime, and that store just took off.

    Right away I started looking around for opportunities in
other towns. By 1952 I opened the second Walton's Five and Dime,
this one in Fayetteville, Ark. There was a Woolworth on one
side of the square, and a Scott Store on the other side. I
remember right after I bought it, listening to a couple of the
local codgers say, "Well, we'll give that guy 60 days, maybe 90.
He won't be there long."

    In those days, I was always looking for offbeat suppliers.
I found some fellows in Tennessee who would give me all kinds of
special buys. I'd work all day, then take off around closing and
drive into Tennessee with an old homemade trailer hitched to my
car. I'd stuff that car and trailer with whatever I could get
good deals on, and I'd price them low and just blow that stuff
out the store.

    By 1957 our stores were spread out so far that with all
the places I had to visit, I was driving too much to have time
for anything else. I began to wonder if maybe flying wouldn't
be the way to go. I bought this Air Coupe in Oklahoma City that
Bud remembers as "a plane with a washing machine motor in it
that would put-put, and then miss a lick, then put-put again."
He says it didn't even look like an airplane.

    But once I took to the air, I caught store fever. We
opened variety stores in Little Rock, Springdale and Siloam
Springs, Ark., and in Neodesha and Coffeyville, Kans. All these
stores were organized as separate partnerships between Bud and
me, along with other partners, including my dad, Helen's two
brothers -- Nick and Frank -- and even the kids, who invested
their paper-route money.

    After 15 years, by 1960, we were doing $1.4 million in 15
stores. Herb Gibson, a barber from over at Berryville, had
started a chain of discount stores with a simple philosophy:
"Buy it low, stack it high, sell it cheap." He sold it cheaper
than anybody ever had before, and he sold more of it. He did it
in Abilene, he did it in Amarillo, and he surrounded Dallas with
stores. Then in 1959 he came to northwest Arkansas and started
competing with our variety stores. I knew we had to act.

    The discount idea was the future. We really had only two
choices: stay in the variety store business and be hit hard by
the discounting wave, or open a discount store. So I started
running all over the country, studying the concept, from the
mill stores in the East to California, where Sol Price had
started his Fed-Mart in 1955. I liked Sol's Fed-Mart name, so
I latched right on to Wal-Mart. On July 2, 1962, we opened
Wal-Mart No. 1 in Rogers, Ark., right down the road from
Bentonville. We did a million dollars in a year.

    That same year, S.S. Kresge -- a big, 800-store variety
chain -- opened a discount store in Garden City, Mich., and
called it K Mart. F.W. Woolworth, the granddaddy of them all,
started Woolco. Dayton's out of Minneapolis opened its first
Target store. Once we opened in Rogers, though, we held our
breath for two years. Then we put stores up in Harrison, a
smaller town near Rogers, and Springdale, a bigger town.

    Still, I can guarantee you that for quite a while hardly
anybody noticed Wal-Mart. Heck, within five years, K Mart had
250 stores to our 19, and sales of almost $800 million to our
$9 million. We simply weren't viewed as competitive. That helped
me get access to a lot of information about how the bigger
companies were doing things. I would show up at the headquarters
offices of discounters and say, "Hi, I'm Sam Walton from
Bentonville, Ark. We've got a few stores out there, and I'd like
to visit with Mr. So-and-So" -- whoever the head of the company
was. And as often as not, they'd let me in.

    You can always learn something from the competition. When
Gibson's came into Rogers, John Jacobs and Larry English would
go over there from our store and walk through, trying to
memorize prices. Then they would come out and write them all
down. There was a big open trash bin out behind Gibson's. At
night, after the store closed, John and Larry would get down in
their trash and check as many prices as they could find.

    We used to make buying trips to New York City, five or six
of us at a time. We had a tight budget. We tried to keep the
trips as short as possible, and we doubled up in little hotel
rooms down around Madison Square Garden. We never took cabs. We
walked everywhere. We'd work until around midnight and then
start again at 6 in the morning. Most places weren't open that
early, but we'd find a janitor or somebody to let us in, and
we'd be sitting there outside the showroom when those folks
started coming in to work.

    They'd say, "Who are you with?"

    And we'd say, "We're with Walton's."

    "Oh yeah, where are you located?"

    "Arkansas."

    "What town?"

    "Bentonville, Ark."

    Then they'd say, "Where in the world is Bentonville,
Ark.?" And Don Whitaker would say, "Next to Rogers."

    By 1966 our first Wal-Marts were showing just spectacular
results. We felt like we were headed in the right direction, but
we were growing so fast that we were beginning to feel a little
out of control. I knew we had to get better organized in
planning and distribution.

    We had lists of items we were supposed to carry, for
example, but the people in the stores had to keep good records
of everything manually. We also needed timely information from
our stores, on what was selling and what was not, what needed
replacing, or marking down.This was at a time when quite a few
people were beginning to go into computerization. I made up my
mind to learn something about computers.

    We needed better delivery systems. Here we were, out in
the sticks with nobody to distribute to our stores, which meant
basically that when our managers needed something, they would
order from salesmen and then some day or other a truck from
somewhere would come along and drop off the merchandise. It was
expensive and inefficient.

    So we started investing in computers and other technology,
and we built our first distribution center here in Bentonville.
Finally we could order in bulk and distribute efficiently to our
stores. I was nervous about spending the money, even though I
knew we needed these things. We were generating as much
financing for growth as we could from the profits of the stores,
but we were also borrowing everything we could. The debt was
beginning to weigh on me.

    Bud and I went quail hunting up in Oklahoma one day and
talked about our options. We were really well positioned for
serious growth. We had 14 variety stores and 18 Wal-Marts. We
had a retail concept we believed in and the core of a
professional management team. But money was getting tight, and
some of our creditors were pressuring us. Even though my family
owned the lion's share of every store, Helen and I were also in
debt up to our eyeballs -- several million dollars worth. Going
public would help, but we were concerned about losing control
of the company.

    I flew to Dallas and tried to borrow some more from
Republic Bank. They made it clear we already had all of their
money we were likely to see. I went to Prudential. I had my
predictions all spelled out on my yellow legal pad, but the loan
officer told us he didn't think a company like the Prudential
could afford to gamble with us. We went to see Mass Mutual. They
agreed to lend us a million dollars, and, in turn, we agreed to
give them our right arm and our left leg. We had to give them
all sorts of stock options in case we went public. I had no
choice. We had to have the money. I was tired of owing money to
people I knew, and I was even more tired of begging money from
strangers. I decided to take the company public.

    On Oct. 1, 1970, we did. That day I experienced one of the
greatest feelings of my life, knowing that all our debts were
paid off. Going public really turned the company loose to grow,
and it took a huge load off me.

    Wal-Mart's stock performance, and the wealth it has
created, is a story in itself. Let's say you bought 100 shares
back in that original offering for $1,650. Since then, we've had
nine two-for-one splits, so you would have 51,200 shares today.
At about $60 a share, your investment would be worth right
around $3 million.

    The Walton family owned only 61% of Wal-Mart after that
day, but that's the source of our net worth. We just kept that
stock.


    LOOKING THE CUSTOMER IN THE EYE

    "We learned that there was much, much more business out
there in small-town America than anybody, including me, had ever
dreamed of."

    -- Sam Walton

    Now we could really do something with our key strategy,
which was simply to put good-sized discount stores into little
one-horse towns, which everybody else was ignoring. In those
days K Mart wasn't going to towns below 50,000. We knew our
formula was working even in towns smaller than 5,000 people, and
there were plenty of those towns out there. Our method was to
saturate a market area by spreading out, then filling in. In the
early growth years of discounting, a lot of national companies
with distribution systems already in place -- K Mart, for
example -- were growing by sticking stores all over the country.
We couldn't support anything like that.

    We figured we had to build our stores so that our
distribution centers, or warehouses, could take care of them.
Each store had to be within a day's drive of a distribution
center. So we would go as far as we could from a warehouse and
put in a store. Then we would fill in the map of that territory,
state by state, county seat by county seat, until we had
saturated that market area. We just started stamping out stores
cookie-cutter style. We saturated northwest Arkansas. We
saturated Oklahoma. We saturated Missouri. We went from Neosho
to Joplin, to Monett and Aurora, to Nevada and Belton, to
Harrisonville and then on to Fort Scott and Olathe in Kansas,
and so on.

    We never planned on going into the cities. What we did
instead was build our stores in a ring around a city -- pretty
far out -- and wait for the growth to come to us. We started
early with Tulsa, putting stores in Broken Arrow and Sand
Springs. We did the same thing in Dallas. We became our own
competitors. In the Springfield, Mo., area, for example, we had
40 stores within 100 miles. When K Mart finally came in there
with three stores, they had a rough time going up against our
strength.

    We could not have done what we did back then if I hadn't
had my airplanes. They made it possible for our top managers to
travel a few days every week to check the stores. And once we
started really rolling out the stores, the airplanes turned into
a great tool for scouting real estate. From up in the air we
could check out traffic flows, see which way cities and towns
were growing, and evaluate the location of the competition -- if
there was any. I'd get down low, turn my plane up on its side,
and fly right over a town. Once we had a spot picked out, we'd
land, go find out who owned the property and try to negotiate
the deal right then. That's another reason I don't like jets.
You can't get down low enough to really tell what's going on,
the way I could in my little planes.

    Managing that whole period of growth was the most exciting
time of all. We worked untold hours trying to keep up. It was
the retail equivalent of an oil gusher: as they say in
Oklahoma, the whole thing just sort of blowed. In 1970 we had
32 stores, generating $31 million in sales. By 1980 we had 276
stores and $1.2 billion in sales. Last year we became America's
largest retailer with almost 2,000 stores and $44 billion in
sales.

    We made those sales and profits one store at a time,
mostly thanks to the hard work, good attitude and teamwork of
our associates -- our hourly employees. It wasn't something we
could command from the executive offices. We always ran a tight
organization, so we relied heavily on every member of our team,
especially when we were growing so fast.

    Wal-Mart is a spectacular example of what happens when
almost 400,000 people come together with a feeling of
partnership. The decision to give the associates more equitable
treatment in the company, through our profit-sharing and other
incentive plans, was without a doubt the single smartest move
we ever made at Wal-Mart. We're always encouraging them to push
their good ideas up through the system.

    Because of their efforts, nearly 40 million people shop in
Wal-Mart every week. Last year we sold enough men's and women's
underwear and socks to put a pair on every person in America,
with some to spare. We sold one-quarter of all the fishing line
purchased in the U.S., or enough to go around the earth 24
times. We sold 55 million sweat suits and 27 million pairs of
jeans, and almost 20% of all the telephones bought in the U.S.

    We're big. Size, of course, has its advantages. A lot of
suppliers and vendors used to ignore us way out here in the
Arkansas outback. But being big also poses dangers. The bigger
Wal-Mart gets, the more essential it is that we think like
small-town merchants. Because that's exactly how we have become
a huge corporation -- by not acting like one. If we ever get
carried away with how important we are because we're a great big
$50 billion chain -- instead of one store in Blytheville, Ark.,
or McComb, Miss., or Oak Ridge, Tenn. -- then you probably can
close the book on us. If we ever forget that looking a customer
in the eye and asking politely if we can be of help is just as
important in every Wal-Mart today as it was in that little Ben
Franklin in Newport, Ark., then we just ought to go into a
different business.

    I've devoted most of my life to building Wal-Mart, and I
had the time of my life. If I wasn't in the stores, or in the
office looking over numbers, I was probably at the stick of my
airplane, checking out the number of cars in those K Mart
parking lots.

    All that has wound down for me now. I've been fighting
cancer for a while, which is one of the reasons I'm taking this
opportunity to share with you how I feel about some things that
seem important to me. More than anything, I want to get across
once and for all just how important Wal-Mart's associates have
been to its success. I think our story proves there's absolutely
no limit to what plain, ordinary, working people can accomplish
if they're given the opportunity and the encouragement and the
incentive to do their best.

    Quite a few smaller stores have gone out of business
during the time of Wal-Mart's growth. Some people have tried to
turn it into this big controversy, sort of a "Save the Small
Town Merchants" deal, like they were whales or whooping cranes
or something that has the right to be protected.

    Of all the notions I've heard about Wal-Mart, none has
ever baffled me more than this idea that we are somehow the
enemy of small-town America. Nothing could be further from the
truth: Wal-Mart has actually kept quite a number of small towns
from becoming extinct by saving literally billions of dollars
for the people who live in them, as well as by creating
hundreds of thousands of jobs in our stores. I believe millions
of people are better off today than they would have been if
Wal-Mart had never existed.

    I don't want to be too critical of small-town merchants,
but the truth is that a lot of these folks just weren't doing
a very good job of taking care of their customers. Whenever we
put a Wal-Mart store into a town, customers would just flock to
us from the variety stores. With our low prices, we ended an era
of 45% markups and limited selection. We shut the door on
variety-store thinking.

    But I can also tell you this: if we had ever gotten smug
about our early success and stopped where we were, somebody else
would have come along and given our customers what they wanted,
and we would be out of business today. After all, none of this
was taking place in a vacuum. In the 50s and 60s, everything
about America was changing rapidly. All the kids who had grown
up on farms and in small towns had come home from World War II
or Korea and moved to the cities where all the jobs were.

    Except they weren't really moving to the cities; they were
moving to the suburbs and commuting into the cities to work. It
seemed like every family had at least one car, and the country
was building its Interstate Highway system, all of which
changed a lot of the traditional ways Americans were accustomed
to doing business. Traditional diners and cafes suffered because
of the new car-oriented chains, such as McDonald's and Burger
King, and the old city variety stores just got smashed by K Mart
and some of the other big urban discounters. What happened out
in the small towns was inevitable, because the whole thing is
driven by the customers, who are free to choose where to shop.

    A lot of folks ask me, Could a Wal-Mart type story still
occur in this day and age? 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
take it all the way. So the next time some overeager, slightly
eccentric shopkeeper opens up a business in your neck of the
woods, before you write him off too quickly, remember those two
old codgers who gave me 60 days to last in my dime store down
in Fayetteville. Go check the new store out. See what they've
got to offer, see how they treat you, and decide for yourself
if you ever want to go back. Because this is what it's really
all about. That shopkeeper's success is entirely up to you.


    Sam Walton died on April 5 in Little Rock, Ark.