From the time we were kids, Sam could excel at anything he set his mind to. I guess it's just the way hewas born. Back when he carried newspapers, they had a contest. I've forgotten what the prizesweremaybe $10, who knows. He won that contest, going out selling new subscriptions door to door.
And he knew he was going to win. It's just the makeup of the man. My only explanation is that Sam has alot of our mother's characteristics."BUD WALTONI don't know what causes a person to be ambitious, but it is a fact that I have been overblessed withdrive and ambition from the time I hit the ground, and I expect my brother's probably right. Our motherwas extremely ambitious for her kids. She read a lot and loved education, although she didn't have toomuch herself. She went to college for a year before she quit to get married, and maybe to compensate forthat, she just ordained from the beginning that I would go to college and make something of myself. Oneof the great sadnesses in my life is that she died young, of cancer, just as we were beginning to do well inbusiness.
Mother must have been a pretty special motivator, because I took her seriously when she told me Ishould always try to be the best I could at whatever I took on. So, I have always pursued everything Iwas interested in with a true passionsome would say obsessionto win. I've always held the bar prettyhigh for myself: I've set extremely high personal goals.
Even when I was a little kid inMarshall,Missouri, I remember being ambitious. I was a class officerseveral years. I played football and baseball and basketball with the other kids, and I swam in thesummers. I was so competitive that when I started Boy Scouts inMarshallI made a bet with the otherguys about which one of us would be the first to reach the rank of Eagle. Before I made Eagle inMarshall, we had moved to the little town of Shelbina, Missouripopulation maybe 1,500but I won thebet; I got my Eagle at age thirteenthe youngest Eagle Scout in the history of the state of Missouri at thattime.
FROM THESHELBINA DEMOCRAT, SUMMER 1932:
"Because of his training in Boy Scout work, Sammy Walton, 14-year-old son of Mr. and Mrs. TomWalton of Shelbina, rescued Donald Peterson, little son of Prof. and Mrs. K.R. Peterson, from drowningin Salt River Thursday afternoon...
"Donald got into water too deep for him and called for help. Loy Jones, who had accompanied theboys, made an effort to get him out, but Donald's struggles pulled Mr. Jones down several times. YoungWalton, who was some distance away, got to the pair just as Donald went down a fifth time. He graspedhim from behind, as he had been taught to do, pulled him to shore and applied artificial respiration thatscouts must become proficient in.
"Donald was unconscious and his whole body had turned blue. It took quite a while to bring himaround."They said I saved his lifemaybe yes, maybe no. Newspapers tend to exaggerate these things. But atleast I got him out of the water. Looking back on such boyhood episodes helps me to realize now thatI've always had a strong bias toward actiona trait that has been a big part of the Wal-Mart story.
Truthfully, though, talking about this embarrasses me a good bit because I worry that it seems like I'mbragging or trying to make myself out to be some big hero. It particularly bothers me because I learned along time ago that exercising your ego in public is definitely not the way to build an effective organization.
One person seeking glory doesn't accomplish much; at Wal-Mart, everything we've done has been theresult of people pulling together to meet one common goalteamworksomething I also picked up at anearly age.
Team play began for me when I was in the fifth grade, and a friend of mine's dad organized a bunch ofus into a peewee football team. We competed against other towns, likeOdessaandSedaliaandRichmond.
Iplayed end, but I wanted to throw the ball or be a running back, even though I was a little guy andcouldn't squeeze my way in yet. Team athletics remained a big part of my life all through high school andat the intramural levelin college too. By the time we moved to Shelbina, I had more football experiencethan most of the other kids in the ninth grade, so I was able to make the team as a second-stringquarterback. I was still smallonly about 130 poundsbut I knew a lot about blocking and tackling andthrowing the ball, and by being extremely competitive I got my letter.
Then we moved on againthis time toColumbia,Missouri. There, atHickmanHigh School, I got involvedin just about everything. I wasn't what you'd call a gifted student, but I worked really hard and made thehonor roll. I was president of the student body and active in a lot of clubsI remember the speech club inparticularand I was voted Most Versatile Boy. I was really a gym rat. I loved hanging around that gymplaying basketball, but I didn't go out for the teammaybe because I was only five nine. When I was asenior, though, they drafted me for the team, and I became a guard, sometimes a starter. I wasn't a greatshot, but I was a pretty good ball handler and a real good floor leader. I liked running the team, I guess.
We went undefeatedand in one of my biggest thrillswon the state championship.
My high school athletic experience was really unbelievable, because I was also the quarterback on thefootball team, which went undefeated tooand won the state championship as well. I didn't throwparticularly well, but we were mostly a running team. And I was fairly slow for a back, but I was shifty,sometimes so shifty that I would fall down with a bunch of daylight in front of me. On defense, myfavorite thing was when the coach would slip me in and let me play linebacker. I had a good sense forwhere the ball was going to go, and I really loved to hit. I guess I was just totally competitive as anathlete, and my main talent was probably the same as my best talent as a retailerI was a good motivator.
This is hard to believe, but it's true: in my whole life I never played in a losing football game. I certainlycan't take much of the credit for that, and, in fact, there was definitely some luck involved. I was sick orinjured for a couple of games that we wouldn't have won with or without meso I dodged the bullet on afew losses that I could have played in. But I think that record had an important effect on me. It taught meto expect to win, to go into tough challenges always planning to come out victorious. Later on in life, Ithink Kmart, or whatever competition we were facing, just becameJeffCityHigh School, the team weplayed for the state championship in 1935. It never occurred to me that I might lose; to me, it was almostas if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy.
Having been the quarterback for the Hickman Kewpiesthe undefeated state championsI was alreadypretty well known aroundColumbia, where theUniversityofMissouriis located. So my high school careerjust merged right on into college. Most of the fraternities were really for the more well-to-do kids, and Iordinarily wouldn't have qualified for membership. But they rushed me even as a town boy, and I had mypick of the best. I chose Beta Theta Pi because they were the top scholastic fraternity and had led theintramural athletic league for a number of years.
When I was a sophomore, the Betas made me rush captain. So I bought a real old Ford, and I traveledthe whole state that summer, interviewing potential Beta candidates. With all this competitive spirit andambition I had back then, I even entertained thoughts of one day becoming President of theUnited States.
Closer at hand, I had decided I wanted to be president of the university student body. I learned early onthat one of the secrets to campus leadership was the simplest thing of all: speak to people coming downthe sidewalk before they speak to you. I did that in college. I did it when I carried my papers. I wouldalways look ahead and speak to the person coming toward me. If I knew them, I would call them byname, but even if I didn't I would still speak to them. Before long, I probably knew more students thananybody in the university, and they recognized me and considered me their friend. I ran for every officethat came along. I was elected president of the senior men's honor society, QEBH, an officer in myfraternity, and president of the senior class. I was captain and president of Scabbard and Blade, the elitemilitary organization of ROTC.
FROM AN ARTICLE CALLED "HUSTLER WALTON" IN FRATERNITY NEWSPAPER, 1940:
"Sam is one of those rare people who knows every janitor by name, passes plates in church, loves tojoin organizations . . . Sam's ability to lead has been the cause of much ribbing. His military uniform haslet him be called 'Little Caesar.' For his presidency of the Bible class he suffered the nickname 'Deacon.'"Also while I was atMissouri, I was elected president of the Burall Bible Classa huge class made up ofstudents from bothMissouriandStephensCollege. Growing up, I had always gone to church and Sundayschool every Sunday; it was an important part of my life. I don't know that I was that religious, per se,but I always felt like the church was important. Obviously, I enjoyed running for office during my collegeyears. But aside from dabbling in some city council politics years later, I really left my ambitions forelected office on the college campus.
I was about to graduate from the University of Missouri in June of 1940 with a business degree, and Ihad been working probably as hard as I ever worked in my life. I've always had lots of energy, but I wastired. Ever since high school, I had made all my own money and paid for all my own clothes. Thatcontinued in college except I had to add tuition and food and fraternity dues and date money to myexpenses. Dad and Mother would have been glad to help if they could have, but it was the Depressionand they had no extra money at all. I had continued to throw a newspaper route all through high school,and in college I added a few more routes, hired a few helpers, and turned it into a pretty good business. Imade about $4,000 to $5,000 a year, which at the end of the Depression was fairly serious money.
EZRA ENTREKIN, FORMER CIRCULATION MANAGER OF THECOLUMBIAMISSOURIAN:
"We hired Sam to deliver newspapers, and he really became our chief salesman. When school started,we had a drive to get the kids in the fraternities and sororities to subscribe. And Sam was the boy wehad do that because he could sell more than anybody else. He was good. He was really good. Anddedicated. And he did a lot of other things besides deliver newspapers. In fact, he was a little bitscatterbrained at times. He'd have so many things going, he'd almost forget one. But, boy, when hefocused on something, that was it."In addition to the newspapers, I waited tables in exchange for meals, and I was also the head lifeguard incharge of the swimming pool. You can see that I was a pretty busy fellow, and you can see why mynotorious respect for the value of a dollar continued. But now that I was about to become a collegegraduate, I was ready to give up this routine, really eager to get out in the world and make something ofmyself in a real job.
My first exposure to the possibilities of retail had come in 1939, when our family happened to move nextdoor to a guy named Hugh Mattingly. He had been a barber inOdessa,Missouri, before he and hisbrothers started a variety store chain which had grown to around sixty stores by that time. I would talkwith him about merchandising, how to do it, and how well it was working out for him. He took an interestin me, and later even offered me a job.
But I never seriously considered retail in those days. In fact, I was sure I was going to be an insurancesalesman. I had a high school girlfriend whose father was a very successful salesman for GeneralAmerican Life Insurance Company, and I had talked to him about his business. It appeared to me that hewas making all the money in the world. Insurance seemed like a natural for me because I thought I couldsell. I had always sold things. As a little kid I soldLibertymagazines for a nickel, and then switched toWoman's Home Companion when it came along for a dime, figuring I could make twice as muchmoney. The girl and I broke up, but I still had big plans. I figured I would get my degree and go on to theWharton School of Finance inPennsylvania. But as college wound down, I realized that even if I kept upthe same kind of work routine I'd had all through college, I still wouldn't have the money to go toWharton. So I decided to cash in what chips I already had, and I visited with two company recruiterswho had come to theMissouricampus. Both of them made me job offers. I accepted the one from JCPenney; I turned down the one from Sears Roebuck. Now I realize the simple truth: I got into retailingbecause I was tired and I wanted a real job.
The deal was pretty straightforwardreport to the JC Penney store inDes Moines,Iowa, three days aftergraduation,June 3, 1940, and begin work as a management trainee. Salary: $75 a month. That's the day Iwent into retail, andexcept for a little time out as an Army officerthat's where I've stayed for the lastfifty-two years. Maybe I was born to be a merchant, maybe it was fate. I don't know about that kind ofstuff. But I know this for sure: I loved retail from the very beginning, and I still love it today. Not that itwent all that smooth right off the bat.
Like I said, I could sell. And I loved that part. Unfortunately, I never learned handwriting all that well.
Helen says there're only about five people in the world who can read my chicken scratchshe's not oneof themand this began to cause some problems for me at my new job. Penney's had a fellow out ofNewYorknamed Blake, who traveled around the country auditing stores and evaluating personnel andwhatnot, and he would come to see us pretty regularly. I remember him as a big fellow, over six feet,who always dressed to the nines, you know, Penney's best suits and shirts and ties. Anyway, he'd get allupset at the way I would screw up the sales slips and generally mishandle the cash register part of things.
I couldn't stand to leave a new customer waiting while I fiddled with paperwork on a sale I'd alreadymade, and I have to admit it did create some confusion.
"Walton," Blake would say to me when he came toDes Moines, "I'd fire you if you weren't such a goodsalesman. Maybe you're just not cut out for retail."Fortunately, I found a champion in my store manager, Duncan Majors, a great motivator, who wasproudest of having trained more Penney managers than anybody else in the country. He had his owntechniques and was a very successful manager. His secret was that he worked us from six-thirty in themorning until seven oreight o'clockat night. All of us wanted to become managers like him. On Sundays,when we weren't working, we would go out to his housethere were about eight of us, all menand wewould talk about retailing, of course, but we also played Ping-Pong or cards. It was a seven-day job. Iremember one Sunday Duncan Majors had just gotten his annual bonus check from Penney's and waswaving it around all over the place. It was for $65,000, which impressed the heck out of us boys.
Watching this guy is what got me excited about retail. He was really good. Then, of course, the icing onthe cake was when James Cash Penney himself visited the store one day. He didn't get around to hisstores as often as I would later on, but he did get around. I still remember him showing me how to tie andpackage merchandise, how to wrap it with very little twine and very little paper but still make it look nice.
I worked for Penney's about eighteen months, and they really were the Cadillac of the industry as far asI was concerned. But even back then I was checking out the competition. The intersection where Iworked inDes Moineshad three stores, so at lunch I would always go wander around the Sears and theYonkersstores to see what they were up to.
By early 1942, though, the war was on, and as an ROTC graduate I was gung-ho to go, ready to shipout overseas and see my share of the action. But the Army had a big surprise for me. Because of a minorheart irregularity, I flunked the physical for combat duty and was classified for limited duty. This kind ofgot me down in the dumps, and since I was just waiting around to be called up anyway I quit myPenney's job and wandered south, towardTulsa, with some vague idea of seeing what the oil businesswas like. Instead, I got a job at a big Du Pont gunpowder plant in the town ofPryor, outsideTulsa. Theonly room I could find to stay in was nearby, over in Claremore. That's where I met Helen Robson oneApril night in a bowling alley.
HELEN WALTON:
"I was out on a date with another fellow, and it was the first time I'd ever been bowling. I had just rolledthe ball and when I came back to the seats they were those old wooden theater chairsSam had his legup over the armrest of one of them, and he smiled at me and said, corny as it was, "Haven't I met yousomewhere before" We discovered that he had dated a girl I knew in college. Later on, he called meand asked me for her number, and I think maybe he even went out with her. But pretty soon, he and Iwere going out together. My whole family just fell in love with him, and I always said he fell in love asmuch with my family as he did with me."When Helen and I met and I started courting her, I just fell right in love. She was pretty and smart andeducated, ambitious and opinionated and strong-willed with ideas and plans of her own. Also, like me,she was an athlete who loved the outdoors, and she had lots of energy.
HELEN WALTON:
"I always told my mother and dad that I was going to marry someone who had that special energy anddrive, that desire to be a success. I certainly found what I was looking for, but now I laugh sometimesand say maybe I overshot a little."At the same time Helen and I fell for each other, I was finally called up to the Army for active duty.
Because of my heart irregularity, I couldn't see combat, but I was still able to accept my ROTCcommission as a second lieutenant. By the time I went into the Army I had two things settled: I knew whoI wanted to marry, and I knew what I wanted to do for a livingretailing. About a year after I went intothe Army, Helen and I were married on Valentine's Day, 1943, in her hometown ofClaremore,Oklahoma.
I wish I could recount a valiant military careerlike my brother Bud, who was a Navy bomber pilot on acarrier in the Pacificbut my service stint was really fairly ordinary time spent as a lieutenant and then as acaptain doing things like supervising security at aircraft plants and POW camps in California and aroundthe country.
Helen and I spent two years living the Army life, and when I got out in 1945, I not only knew I wantedto go into retailing, I also knew I wanted to go into business for myself. My only experience was thePenney job, but I had a lot of confidence that I could be successful on my own. Our last Army postingwas inSalt Lake City, and I went to the library there and checked out every book on retailing. I alsospent a lot of my off-duty time studying ZCMI, the Mormon Church's department store out there, justfiguring that when I got back to civilian life I would somehow go into the department store business. Theonly question left was where we were going to set up housekeeping.
HELEN WALTON:
"My father wanted us to move to Claremore, but I told him, 'Dad, I want my husband to be himself, Idon't want him to be L. S. Robson's son-in-law. I want him to be Sam Walton."As I mentioned, Helen's father was a very prominent lawyer, banker, and rancher, and she felt weshould be independent. I agreed with her, and I thought our best opportunity might be inSt. Louis. As itturned out, an old friend of mine, Tom Bates, also wanted to go into the department store business. I'dknown Tom when we were kids in Shelbinahis father owned the biggest department store in townandTom and I were roommates in the Beta Theta Pi fraternity house atMissouri. When I got out of theArmy, I caught up with Tom inSt. Louis. He was working in the shoe department of Butler Brothers.
Butler Brothers was a regional retailer with two franchise operations: Federated Stores, a chain of smalldepartment stores, and Ben Franklin, a chain of variety stores, what we used to call "five and dimes" or"dime stores."Tom had a great idea, I thought. He and I would become partners, each putting up $20,000, and buy aFederated department store on Del Mar Avenue inSt. Louis. Helen and I had $5,000 or so, and I knewwe could borrow the rest from her father, who always had a lot of faith in me and was very supportive.
Man, I was all set to become a big-city department store owner. That's when Helen spoke up and laiddown the law.
Helen walton:
"Sam, we've been married two years and we've moved sixteen times. Now, I'll go with you any placeyou 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 allabout the initial small-town strategy that got Wal-Mart going almost two decades later, you can see thatthis pretty much set the course for what was to come. She also said no partnerships; they were too risky.
Her family had seen some partnerships go sour, and she was dead-set in the notion that the only way togo was to work for yourself. So I went back to Butler Brothers to see what else they might have for me.
What they had was a Ben Franklin variety store inNewport,Arkansasa cotton and railroad town ofabout 7,000 people, in the Mississippi River Delta country of easternArkansas. I remember riding downthere on the train from St. Louis, still wearing my Army uniform with the Sam Browne belt, and walkingdown Front Street to give this storemy dreamthe once-over. A guy fromSt. Louisowned it, and thingsweren't working out at all for him. He was losing money, and he wanted to unload the store as fast as hecould. I realize now that I was the sucker Butler Brothers sent to save him. I was twenty-seven years oldand full of confidence, but I didn't know the first thing about how to evaluate a proposition like this so Ijumped right in with both feet. I bought it for $25,000 $5,000 of our own money and $20,000borrowed from Helen's father. My naivet about contracts and such would later come back to haunt mein a big way.
But at the time I was sureNewportand the Ben Franklin had great potential, and I've always believed ingoals, so I set myself one: I wanted my littleNewportstore to be the best, most profitable variety store inArkansaswithin five years. I felt I had the talent to do it, that it could be done, and why not go for it Setthat as a goal and see if you can't achieve it. If it doesn't work, you've had fun trying.
Only after we closed the deal, of course, did I learn that the store was a real dog. It had sales of about$72,000 a year, but its rent was 5 percent of saleswhich I thought sounded finebut which, it turned out,was the highest rent anybody'd ever heard of in the variety store business. No one paid 5 percent of salesfor rent. And it had a strong competitora Sterling Store across the streetwhose excellent manager, JohnDunham, was doing more than $150,000 a year in sales, double mine.
For all my confidence, I hadn't had a day's experience in running a variety store, so Butler Brothers sentme for two weeks' training to the Ben Franklin inArkadelphia,Arkansas. After that, I was on my own,and we opened for business onSeptember 1, 1945. Our store was a typical old variety store, 50 feetwide and 100 feet deep, facingFront Street, in the heart of town, looking out on the railroad tracks. Backthen, those stores had cash registers and clerk aisles behind each counter throughout the store, and theclerks would wait on the customers. Self-service hadn't been thought of yet.
It was a real blessing for me to be so green and ignorant, because it was from that experience that Ilearned a lesson which has stuck with me all through the years: you can learn from everybody. I didn'tjust learn from reading every retail publication I could get my hands on, I probably learned the most fromstudying what John Dunham was doing across the street.
HELEN WALTON:
"It turned out there was a lot to learn about running a store. And, of course, what really drove Sam wasthat competition across the streetJohn Dunham over at the Sterling Store. Sam was always over therechecking on John. Always. Looking at his prices, looking at his displays, looking at what was going on.
He was always looking for a way to do a better job. I don't remember the details, but I remember somekind of panty price war they got into. Later on, long after we had leftNewport, and John had retired, wewould see him and he would laugh about Sam always being in his store. But I'm sure it aggravated himquite a bit early on. John had never had good competition before Sam."I learned a tremendous amount from running a store in the Ben Franklin franchise program. They had anexcellent operating program for their independent stores, sort of a canned course in how to run a store. Itwas an education in itself. They had their own accounting system, with manuals telling you what to do,when and how. They had merchandise statements, they had accounts-payable sheets, they hadprofit-and-loss sheets, they had little ledger books called Beat Yesterday books, in which you couldcompare this year's sales with last year's on a day-by-day basis. They had all the tools that anindependent merchant needed to run a controlled operation. I had no previous experience inaccountingand I wasn't all that great at accounting in collegeso I just did it according to their book. Infact, I used their accounting system long after I'd started breaking their rules on everything else. I evenused it for the first five or six Wal-Marts.
As helpful as that franchise program was to an eager-to-learn twenty-seven-year-old kid, ButlerBrothers wanted us to do things literally by the booktheir book. They really didn't allow their franchiseesmuch discretion. The merchandise was assembled inChicago,St. Louis, orKansas City. They told mewhat merchandise to sell, how much to sell it for, and how much they would sell it to me for. They toldme that their selection of merchandise was what the customers expected. They also told me I had to buyat least 80 percent of my merchandise from them, and if I did, I would get a rebate at year-end. If Iwanted to make a 6 or 7 percent net profit, they told me I would have to hire so much help and do somuch advertising. This is how most franchises work.
At the very beginning, I went along and ran my store by their book because I really didn't know anybetter. But it didn't take me long to start experimenting that's just the way I am and always have been.
Pretty soon I was laying on promotional programs of my own, and then I started buying merchandisedirectly from manufacturers. I had lots of arguments with manufacturers. I would say, "I want to buythese ribbons and bows direct. I don't want you to sell them to Butler Brothers and then I have to payButler Brothers 25 percent more for them. I want it direct." Most of the time, they didn't want to makeButler Brothers mad so they turned me down. Every now and then, though, I would find one who wouldcross over and do it my way.
That was the start of a lot of the practices and philosophies that still prevail at Wal-Mart today. I wasalways looking for offbeat suppliers or sources. I started driving over to Tennessee to some fellows Ifound who would give me special buys at prices way below what Ben Franklin was charging me. One Iremember was Wright Merchandising Co. inunion City, which would sell to small businesses like mine atgood wholesale prices. I'd work in the store all day, then take off around closing and drive that windyroad over to theMississippi Riverferry atCottonwood Point,Missouri, and then intoTennesseewith an oldhomemade trailer hitched to my car. I'd stuff that car and trailer with whatever I could get good dealsonusually on softlines: ladies' panties and nylons, men's shirts and I'd bring them back, price them low,and just blow that stuff out the store.
I've got to tell you, it drove the Ben Franklin folks crazy. Not only were they not getting theirpercentages, they couldn't compete with the prices I was buying at. Then I started branching out furtherthanTennessee. Somehow or another, I got in touch by letter with a manufacturer's agent out ofNewYorknamed Harry Weiner. He ran Weiner Buying Services at505 Seventh Avenue. That guy ran a verysimple business. He would go to all these different manufacturers and then list what they had for sale.
When somebody like me sent him an order, he would take maybe 5 percent for himself and then send theorder on to the factory, which would ship it to us. That 5 percent seemed like a pretty reasonable cut tome, compared to 25 percent for Ben Franklin.
I'll never forget one of Harry's deals, one of the best items I ever had and an early lesson in pricing. Itfirst got me thinking in the direction of what eventually became the foundation of Wal-Mart's philosophy.
If you're interested in "how Wal-Mart did it," this is one story you've got to sit up and pay close attentionto. Harry was selling ladies' pantiestwo-barred, tricot satin panties with an elastic waistfor $2.00 adozen. We'd been buying similar panties from Ben Franklin for $2.50 a dozen and selling them at threepair for $1.00. Well, at Harry's price of $2.00, we could put them out at four for $1.00 and make a greatpromotion for our store.
Here's the simple lesson we learnedwhich others were learning at the same time and which eventuallychanged the way retailers sell and customers buy all across America: say I bought an item for 80 cents. Ifound that by pricing it at $1.00 I could sell three times more of it than by pricing it at $1.20. I mightmake only half the profit per item, but because I was selling three times as many, the overall profit wasmuch greater. Simple enough. But this is really the essence of discounting: by cutting your price, you canboost your sales to a point where you earn far more at the cheaper retail price than you would have byselling the item at the higher price. In retailer language, you can lower your markup but earn morebecause of the increased volume.
I began to mull this idea inNewport, but it would be another ten years before I took it seriously. Icouldn't follow up on it inNewportbecause the Ben Franklin program was too cut-and-dried to permit it.
And despite my dealings with the likes of Harry Weiner, I still had that contract saying I was supposed tobuy at least 80 percent of my merchandise from Ben Franklin. If I missed that target, I didn't get myyear-end rebate. The fact of the matter is I stretched that contract every way I could. I would buy asmuch as I could on the outside and still try to meet the 80 percent. Charlie Baumwho was then one ofthe field men for Ben Franklinwould say we were only at 70 percent, and I would foam at the mouthand rant and rave about it. I guess the only reason Butler Brothers didn't give me a harder time about it allis that our store had quickly gone from being a laggard to one of the top performers in our district.
Things began to clip along pretty good inNewportin a very short time. After only two and a half yearswe had paid back the $20,000 Helen's father loaned us, and I felt mighty good about that. It meant thebusiness had taken off on its own, and I figured we were really on our way now.
We tried a lot of promotional things that worked really well. First, we put a popcorn machine out on thesidewalk, and we sold that stuff like crazy. So I thought and thought about it and finally decided what weneeded was a soft ice cream machine out there too. I screwed my courage up and went down to thebank and borrowed what at the time seemed like the astronomical sum of $1,800 to buy that thing. Thatwas the first money I ever borrowed from a bank. Then we rolled the ice cream machine out there on thesidewalk next to the popcorn machine, and I mean we attracted some attention with those two. It wasnew and differentanother experimentand we really turned a profit on it. I paid off that $1,800 note intwo or three years, and I felt great about it. I really didn't want to be remembered as the guy who lost hisshirt on some crazy ice cream machine.
CHARLIE BAUM:
"Everybody wanted to go see Sam Walton's store. We never had another store that had a Ding Dongice cream bar in it, one of those ice creammaking machines. People went there for that, and it wasfantastic. But one Saturday night for some reason they forgot to clean that machine up when they closed,and I went by there the next day with some of my clients to show them Sam's front window. And I wantto tell you, the flies in that window were just out of this world."As good as business was, I never could leave well enough alone, and, in fact, I think my constant fiddlingand meddling with the status quo may have been one of my biggest contributions to the later success ofWal-Mart. As I mentioned, we facedFront Street, and our biggest competitorJohn Dunham's SterlingStorewas acrossHazel Streeton the other corner. His store was slightly smaller than ours, but he stillmanaged to do twice as much business as our store did before we bought it. We were coming on strong,though. In our first year, the Ben Franklin did $105,000 in sales, compared to $72,000 under the oldowner. Then the next year $140,000, and then $175,000.
Finally we caught, and then passed, old John over there acrossHazel Street. But next door to him, on theother side from us, was a Kroger grocery store. By now, I was real involved in the community and keptmy ear to the ground pretty good, and I heard thatSterlingwas going to buy Kroger's lease and expandJohn's store into that space, making their store much bigger than mine. So I hustled down toHot Springs,to find the landlady of that Kroger building. Somehow, I convinced her to give me the lease, instead ofgiving it toSterling. I didn't have any idea what I was going to do with it, but I sure knew I didn't wantSterlingto have it. Well, I decided to put in a small department store. NowNewportalready had severaldepartment stores, one of which happened to be owned by my store's landlord, P. K. Holmes. That mayor may not have had something to do with the trouble which was going to come soon. But we didn't thinkanything about it.
I drew up a plan, bought a sign, bought new fixtures from a company up in Nebraska, and bought themerchandisedresses, pants, shirts, jackets, whatever I thought I could sell. The fixtures arrived onWednesday by train, and Charlie Baum, who was supposed to be supervising my merchandising forButler Brothers, offered to help me put everything together. He was the most efficient store layer-outerI've ever known. We went over to the railroad tracks and unloaded the fixtures, put them together, laidout the store, put the merchandise togetherand opened six days later on Monday. We called it the EagleStore.
So now we had two stores onFront StreetinNewport. I would run up and down the alley withmerchandise: if it didn't sell in one store, I would try it in the other. I guess they competed with eachother, but not much. By now, the Ben Franklin was doing really well. The Eagle never made muchmoney, but I figured I'd rather have a small profit than have my competitor over there in a big store. I hadto hire my first assistant manager to help out in the Ben Franklin while I was running back and forth, andmy brother Bud had come home from the war and was working with me too.
BUD WALTON"ThatNewportstore was really the beginning of where Wal-Mart is today. We did everything. We wouldwash windows, sweep floors, trim windows. We did all the stockroom work, checked the freight in.
Everything it took to run a store. We had to keep expenses to a minimum. That is where it started, yearsago. Our money was made by controlling expenses. That, and Sam always being ingenious. He neverstopped trying to do something different. One thing, though: I never forgave him for making me clean outthat damned ice cream machine. He knew I'd hated milk and dairy products ever since we were kids. Heused to squirt me when he milked the cows. I always thought he gave me that job because he knew Ididn't like milk. He still laughs about it."We couldn't have felt better about our situation down there. Helen and I both have the kinds ofpersonalities that make us want to participate in community life, and we had become deeply involved.
We had joined the Presbyterian church there, and even though I was a Methodist, it worked out realwell. Just as Helen and I were raised in the church, we felt that our kids would benefit from a churchupbringing. Church is an important part of society, especially in small towns. Whether it's the contactsand associations you make or the contributions you might make toward helping other folks, it all sort ofties in together. Helen was very active in her churchwork, which she still is today, and in PEO, aninternational women's organization. Our four children had come along by now, and Helen really lovedNewport. I was a member of the church's board of deacons, was active in the Rotary Club, and hadbecome president of the Chamber of Commerce as well as head of its industrial committee. I was prettymuch involved in everything around town.
It so happened that on the other side of our store, also onFront Street, was a JC Penney. We didn'tcompete much, and I was friendly with the manager. So one day this dapper supervisor fromNew Yorknamed Blake came to town to audit that store and got to chatting with the manager.
"Say," the manager told Blake, "we've got an ex-Penney man right here inNewport. He came in a fewyears ago and really made a big success of it. He doubled sales in his Ben Franklin, he's got two stores,and he's the president of the Chamber of Commerce." And when the manager told him it was SamWalton, old Blake almost fell over. "It can't be the same one I knew inDes Moines," he said. "That fellowcouldn't have amounted to anything." He came next door and we both had a big laugh about it when hesaw that I really was that kid who couldn't write so you could read it.
By now, my five years inNewportwere about up, and I had met my goal. That little Ben Franklin storewas doing $250,000 in sales a year, and turning $30,000 to $40,000 a year in profit. It was thenumber-one Ben Franklin storefor sales or profitnot only inArkansas, but in the whole six-state region.
It was the largest variety store of any sort inArkansas, and I don't believe there was a bigger one in thethree or four neighboring states.
Every crazy thing we tried hadn't turned out as well as the ice cream machine, of course, but we hadn'tmade any mistakes we couldn't correct quickly, none so big that they threatened the business. Except, itturned out, for one little legal error we made right at the beginning. In all my excitement at becoming SamWalton, merchant, I had neglected to include a clause in my lease which gave me an option to renewafter the first five years.
And our success, it turned out, had attracted a lot of attention. My landlord, the department storeowner, was so impressed with our Ben Franklin's success that he decided not to renew our leaseat anypriceknowing full well that we had nowhere else in town to move the store. He did offer to buy thefranchise, fixtures, and inventory at a fair price; he wanted to give the store to his son. I had no alternativebut to give it up. But I sold the Eagle Store lease toSterlingso that John Dunham, my worthy competitorand mentor, could finally have that expansion he'd wanted.
It was the low point of my business life. I felt sick to my stomach. I couldn't believe it was happening tome. It really was like a nightmare. I had built the best variety store in the whole region and worked hardin the communitydone everything rightand now I was being kicked out of town. It didn't seem fair. Iblamed myself for ever getting suckered into such an awful lease, and I was furious at the landlord.
Helen, just settling in with a brand-new family of four, was heartsick at the prospect of leavingNewport.
But that's what we were going to do.
I've never been one to dwell on reverses, and I didn't do so then. It's not just a corny saying that you canmake a positive out of most any negative if you work at it hard enough. I've always thought of problemsas challenges, and this one wasn't any different. I don't know if that experience changed me or not. Iknow I read my leases a lot more carefully after that, and maybe I became a little more wary of just howtough the world can be. Also, it may have been about then that I began encouraging our oldestboysix-year-old Robto become a lawyer. But I didn't dwell on my disappointment. The challenge athand was simple enough to figure out: I had to pick myself up and get on with it, do it all over again, onlyeven better this time.
Helen and I started looking for a new town.
And he knew he was going to win. It's just the makeup of the man. My only explanation is that Sam has alot of our mother's characteristics."BUD WALTONI don't know what causes a person to be ambitious, but it is a fact that I have been overblessed withdrive and ambition from the time I hit the ground, and I expect my brother's probably right. Our motherwas extremely ambitious for her kids. She read a lot and loved education, although she didn't have toomuch herself. She went to college for a year before she quit to get married, and maybe to compensate forthat, she just ordained from the beginning that I would go to college and make something of myself. Oneof the great sadnesses in my life is that she died young, of cancer, just as we were beginning to do well inbusiness.
Mother must have been a pretty special motivator, because I took her seriously when she told me Ishould always try to be the best I could at whatever I took on. So, I have always pursued everything Iwas interested in with a true passionsome would say obsessionto win. I've always held the bar prettyhigh for myself: I've set extremely high personal goals.
Even when I was a little kid inMarshall,Missouri, I remember being ambitious. I was a class officerseveral years. I played football and baseball and basketball with the other kids, and I swam in thesummers. I was so competitive that when I started Boy Scouts inMarshallI made a bet with the otherguys about which one of us would be the first to reach the rank of Eagle. Before I made Eagle inMarshall, we had moved to the little town of Shelbina, Missouripopulation maybe 1,500but I won thebet; I got my Eagle at age thirteenthe youngest Eagle Scout in the history of the state of Missouri at thattime.
FROM THESHELBINA DEMOCRAT, SUMMER 1932:
"Because of his training in Boy Scout work, Sammy Walton, 14-year-old son of Mr. and Mrs. TomWalton of Shelbina, rescued Donald Peterson, little son of Prof. and Mrs. K.R. Peterson, from drowningin Salt River Thursday afternoon...
"Donald got into water too deep for him and called for help. Loy Jones, who had accompanied theboys, made an effort to get him out, but Donald's struggles pulled Mr. Jones down several times. YoungWalton, who was some distance away, got to the pair just as Donald went down a fifth time. He graspedhim from behind, as he had been taught to do, pulled him to shore and applied artificial respiration thatscouts must become proficient in.
"Donald was unconscious and his whole body had turned blue. It took quite a while to bring himaround."They said I saved his lifemaybe yes, maybe no. Newspapers tend to exaggerate these things. But atleast I got him out of the water. Looking back on such boyhood episodes helps me to realize now thatI've always had a strong bias toward actiona trait that has been a big part of the Wal-Mart story.
Truthfully, though, talking about this embarrasses me a good bit because I worry that it seems like I'mbragging or trying to make myself out to be some big hero. It particularly bothers me because I learned along time ago that exercising your ego in public is definitely not the way to build an effective organization.
One person seeking glory doesn't accomplish much; at Wal-Mart, everything we've done has been theresult of people pulling together to meet one common goalteamworksomething I also picked up at anearly age.
Team play began for me when I was in the fifth grade, and a friend of mine's dad organized a bunch ofus into a peewee football team. We competed against other towns, likeOdessaandSedaliaandRichmond.
Iplayed end, but I wanted to throw the ball or be a running back, even though I was a little guy andcouldn't squeeze my way in yet. Team athletics remained a big part of my life all through high school andat the intramural levelin college too. By the time we moved to Shelbina, I had more football experiencethan most of the other kids in the ninth grade, so I was able to make the team as a second-stringquarterback. I was still smallonly about 130 poundsbut I knew a lot about blocking and tackling andthrowing the ball, and by being extremely competitive I got my letter.
Then we moved on againthis time toColumbia,Missouri. There, atHickmanHigh School, I got involvedin just about everything. I wasn't what you'd call a gifted student, but I worked really hard and made thehonor roll. I was president of the student body and active in a lot of clubsI remember the speech club inparticularand I was voted Most Versatile Boy. I was really a gym rat. I loved hanging around that gymplaying basketball, but I didn't go out for the teammaybe because I was only five nine. When I was asenior, though, they drafted me for the team, and I became a guard, sometimes a starter. I wasn't a greatshot, but I was a pretty good ball handler and a real good floor leader. I liked running the team, I guess.
We went undefeatedand in one of my biggest thrillswon the state championship.
My high school athletic experience was really unbelievable, because I was also the quarterback on thefootball team, which went undefeated tooand won the state championship as well. I didn't throwparticularly well, but we were mostly a running team. And I was fairly slow for a back, but I was shifty,sometimes so shifty that I would fall down with a bunch of daylight in front of me. On defense, myfavorite thing was when the coach would slip me in and let me play linebacker. I had a good sense forwhere the ball was going to go, and I really loved to hit. I guess I was just totally competitive as anathlete, and my main talent was probably the same as my best talent as a retailerI was a good motivator.
This is hard to believe, but it's true: in my whole life I never played in a losing football game. I certainlycan't take much of the credit for that, and, in fact, there was definitely some luck involved. I was sick orinjured for a couple of games that we wouldn't have won with or without meso I dodged the bullet on afew losses that I could have played in. But I think that record had an important effect on me. It taught meto expect to win, to go into tough challenges always planning to come out victorious. Later on in life, Ithink Kmart, or whatever competition we were facing, just becameJeffCityHigh School, the team weplayed for the state championship in 1935. It never occurred to me that I might lose; to me, it was almostas if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy.
Having been the quarterback for the Hickman Kewpiesthe undefeated state championsI was alreadypretty well known aroundColumbia, where theUniversityofMissouriis located. So my high school careerjust merged right on into college. Most of the fraternities were really for the more well-to-do kids, and Iordinarily wouldn't have qualified for membership. But they rushed me even as a town boy, and I had mypick of the best. I chose Beta Theta Pi because they were the top scholastic fraternity and had led theintramural athletic league for a number of years.
When I was a sophomore, the Betas made me rush captain. So I bought a real old Ford, and I traveledthe whole state that summer, interviewing potential Beta candidates. With all this competitive spirit andambition I had back then, I even entertained thoughts of one day becoming President of theUnited States.
Closer at hand, I had decided I wanted to be president of the university student body. I learned early onthat one of the secrets to campus leadership was the simplest thing of all: speak to people coming downthe sidewalk before they speak to you. I did that in college. I did it when I carried my papers. I wouldalways look ahead and speak to the person coming toward me. If I knew them, I would call them byname, but even if I didn't I would still speak to them. Before long, I probably knew more students thananybody in the university, and they recognized me and considered me their friend. I ran for every officethat came along. I was elected president of the senior men's honor society, QEBH, an officer in myfraternity, and president of the senior class. I was captain and president of Scabbard and Blade, the elitemilitary organization of ROTC.
FROM AN ARTICLE CALLED "HUSTLER WALTON" IN FRATERNITY NEWSPAPER, 1940:
"Sam is one of those rare people who knows every janitor by name, passes plates in church, loves tojoin organizations . . . Sam's ability to lead has been the cause of much ribbing. His military uniform haslet him be called 'Little Caesar.' For his presidency of the Bible class he suffered the nickname 'Deacon.'"Also while I was atMissouri, I was elected president of the Burall Bible Classa huge class made up ofstudents from bothMissouriandStephensCollege. Growing up, I had always gone to church and Sundayschool every Sunday; it was an important part of my life. I don't know that I was that religious, per se,but I always felt like the church was important. Obviously, I enjoyed running for office during my collegeyears. But aside from dabbling in some city council politics years later, I really left my ambitions forelected office on the college campus.
I was about to graduate from the University of Missouri in June of 1940 with a business degree, and Ihad been working probably as hard as I ever worked in my life. I've always had lots of energy, but I wastired. Ever since high school, I had made all my own money and paid for all my own clothes. Thatcontinued in college except I had to add tuition and food and fraternity dues and date money to myexpenses. Dad and Mother would have been glad to help if they could have, but it was the Depressionand they had no extra money at all. I had continued to throw a newspaper route all through high school,and in college I added a few more routes, hired a few helpers, and turned it into a pretty good business. Imade about $4,000 to $5,000 a year, which at the end of the Depression was fairly serious money.
EZRA ENTREKIN, FORMER CIRCULATION MANAGER OF THECOLUMBIAMISSOURIAN:
"We hired Sam to deliver newspapers, and he really became our chief salesman. When school started,we had a drive to get the kids in the fraternities and sororities to subscribe. And Sam was the boy wehad do that because he could sell more than anybody else. He was good. He was really good. Anddedicated. And he did a lot of other things besides deliver newspapers. In fact, he was a little bitscatterbrained at times. He'd have so many things going, he'd almost forget one. But, boy, when hefocused on something, that was it."In addition to the newspapers, I waited tables in exchange for meals, and I was also the head lifeguard incharge of the swimming pool. You can see that I was a pretty busy fellow, and you can see why mynotorious respect for the value of a dollar continued. But now that I was about to become a collegegraduate, I was ready to give up this routine, really eager to get out in the world and make something ofmyself in a real job.
My first exposure to the possibilities of retail had come in 1939, when our family happened to move nextdoor to a guy named Hugh Mattingly. He had been a barber inOdessa,Missouri, before he and hisbrothers started a variety store chain which had grown to around sixty stores by that time. I would talkwith him about merchandising, how to do it, and how well it was working out for him. He took an interestin me, and later even offered me a job.
But I never seriously considered retail in those days. In fact, I was sure I was going to be an insurancesalesman. I had a high school girlfriend whose father was a very successful salesman for GeneralAmerican Life Insurance Company, and I had talked to him about his business. It appeared to me that hewas making all the money in the world. Insurance seemed like a natural for me because I thought I couldsell. I had always sold things. As a little kid I soldLibertymagazines for a nickel, and then switched toWoman's Home Companion when it came along for a dime, figuring I could make twice as muchmoney. The girl and I broke up, but I still had big plans. I figured I would get my degree and go on to theWharton School of Finance inPennsylvania. But as college wound down, I realized that even if I kept upthe same kind of work routine I'd had all through college, I still wouldn't have the money to go toWharton. So I decided to cash in what chips I already had, and I visited with two company recruiterswho had come to theMissouricampus. Both of them made me job offers. I accepted the one from JCPenney; I turned down the one from Sears Roebuck. Now I realize the simple truth: I got into retailingbecause I was tired and I wanted a real job.
The deal was pretty straightforwardreport to the JC Penney store inDes Moines,Iowa, three days aftergraduation,June 3, 1940, and begin work as a management trainee. Salary: $75 a month. That's the day Iwent into retail, andexcept for a little time out as an Army officerthat's where I've stayed for the lastfifty-two years. Maybe I was born to be a merchant, maybe it was fate. I don't know about that kind ofstuff. But I know this for sure: I loved retail from the very beginning, and I still love it today. Not that itwent all that smooth right off the bat.
Like I said, I could sell. And I loved that part. Unfortunately, I never learned handwriting all that well.
Helen says there're only about five people in the world who can read my chicken scratchshe's not oneof themand this began to cause some problems for me at my new job. Penney's had a fellow out ofNewYorknamed Blake, who traveled around the country auditing stores and evaluating personnel andwhatnot, and he would come to see us pretty regularly. I remember him as a big fellow, over six feet,who always dressed to the nines, you know, Penney's best suits and shirts and ties. Anyway, he'd get allupset at the way I would screw up the sales slips and generally mishandle the cash register part of things.
I couldn't stand to leave a new customer waiting while I fiddled with paperwork on a sale I'd alreadymade, and I have to admit it did create some confusion.
"Walton," Blake would say to me when he came toDes Moines, "I'd fire you if you weren't such a goodsalesman. Maybe you're just not cut out for retail."Fortunately, I found a champion in my store manager, Duncan Majors, a great motivator, who wasproudest of having trained more Penney managers than anybody else in the country. He had his owntechniques and was a very successful manager. His secret was that he worked us from six-thirty in themorning until seven oreight o'clockat night. All of us wanted to become managers like him. On Sundays,when we weren't working, we would go out to his housethere were about eight of us, all menand wewould talk about retailing, of course, but we also played Ping-Pong or cards. It was a seven-day job. Iremember one Sunday Duncan Majors had just gotten his annual bonus check from Penney's and waswaving it around all over the place. It was for $65,000, which impressed the heck out of us boys.
Watching this guy is what got me excited about retail. He was really good. Then, of course, the icing onthe cake was when James Cash Penney himself visited the store one day. He didn't get around to hisstores as often as I would later on, but he did get around. I still remember him showing me how to tie andpackage merchandise, how to wrap it with very little twine and very little paper but still make it look nice.
I worked for Penney's about eighteen months, and they really were the Cadillac of the industry as far asI was concerned. But even back then I was checking out the competition. The intersection where Iworked inDes Moineshad three stores, so at lunch I would always go wander around the Sears and theYonkersstores to see what they were up to.
By early 1942, though, the war was on, and as an ROTC graduate I was gung-ho to go, ready to shipout overseas and see my share of the action. But the Army had a big surprise for me. Because of a minorheart irregularity, I flunked the physical for combat duty and was classified for limited duty. This kind ofgot me down in the dumps, and since I was just waiting around to be called up anyway I quit myPenney's job and wandered south, towardTulsa, with some vague idea of seeing what the oil businesswas like. Instead, I got a job at a big Du Pont gunpowder plant in the town ofPryor, outsideTulsa. Theonly room I could find to stay in was nearby, over in Claremore. That's where I met Helen Robson oneApril night in a bowling alley.
HELEN WALTON:
"I was out on a date with another fellow, and it was the first time I'd ever been bowling. I had just rolledthe ball and when I came back to the seats they were those old wooden theater chairsSam had his legup over the armrest of one of them, and he smiled at me and said, corny as it was, "Haven't I met yousomewhere before" We discovered that he had dated a girl I knew in college. Later on, he called meand asked me for her number, and I think maybe he even went out with her. But pretty soon, he and Iwere going out together. My whole family just fell in love with him, and I always said he fell in love asmuch with my family as he did with me."When Helen and I met and I started courting her, I just fell right in love. She was pretty and smart andeducated, ambitious and opinionated and strong-willed with ideas and plans of her own. Also, like me,she was an athlete who loved the outdoors, and she had lots of energy.
HELEN WALTON:
"I always told my mother and dad that I was going to marry someone who had that special energy anddrive, that desire to be a success. I certainly found what I was looking for, but now I laugh sometimesand say maybe I overshot a little."At the same time Helen and I fell for each other, I was finally called up to the Army for active duty.
Because of my heart irregularity, I couldn't see combat, but I was still able to accept my ROTCcommission as a second lieutenant. By the time I went into the Army I had two things settled: I knew whoI wanted to marry, and I knew what I wanted to do for a livingretailing. About a year after I went intothe Army, Helen and I were married on Valentine's Day, 1943, in her hometown ofClaremore,Oklahoma.
I wish I could recount a valiant military careerlike my brother Bud, who was a Navy bomber pilot on acarrier in the Pacificbut my service stint was really fairly ordinary time spent as a lieutenant and then as acaptain doing things like supervising security at aircraft plants and POW camps in California and aroundthe country.
Helen and I spent two years living the Army life, and when I got out in 1945, I not only knew I wantedto go into retailing, I also knew I wanted to go into business for myself. My only experience was thePenney job, but I had a lot of confidence that I could be successful on my own. Our last Army postingwas inSalt Lake City, and I went to the library there and checked out every book on retailing. I alsospent a lot of my off-duty time studying ZCMI, the Mormon Church's department store out there, justfiguring that when I got back to civilian life I would somehow go into the department store business. Theonly question left was where we were going to set up housekeeping.
HELEN WALTON:
"My father wanted us to move to Claremore, but I told him, 'Dad, I want my husband to be himself, Idon't want him to be L. S. Robson's son-in-law. I want him to be Sam Walton."As I mentioned, Helen's father was a very prominent lawyer, banker, and rancher, and she felt weshould be independent. I agreed with her, and I thought our best opportunity might be inSt. Louis. As itturned out, an old friend of mine, Tom Bates, also wanted to go into the department store business. I'dknown Tom when we were kids in Shelbinahis father owned the biggest department store in townandTom and I were roommates in the Beta Theta Pi fraternity house atMissouri. When I got out of theArmy, I caught up with Tom inSt. Louis. He was working in the shoe department of Butler Brothers.
Butler Brothers was a regional retailer with two franchise operations: Federated Stores, a chain of smalldepartment stores, and Ben Franklin, a chain of variety stores, what we used to call "five and dimes" or"dime stores."Tom had a great idea, I thought. He and I would become partners, each putting up $20,000, and buy aFederated department store on Del Mar Avenue inSt. Louis. Helen and I had $5,000 or so, and I knewwe could borrow the rest from her father, who always had a lot of faith in me and was very supportive.
Man, I was all set to become a big-city department store owner. That's when Helen spoke up and laiddown the law.
Helen walton:
"Sam, we've been married two years and we've moved sixteen times. Now, I'll go with you any placeyou 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 allabout the initial small-town strategy that got Wal-Mart going almost two decades later, you can see thatthis pretty much set the course for what was to come. She also said no partnerships; they were too risky.
Her family had seen some partnerships go sour, and she was dead-set in the notion that the only way togo was to work for yourself. So I went back to Butler Brothers to see what else they might have for me.
What they had was a Ben Franklin variety store inNewport,Arkansasa cotton and railroad town ofabout 7,000 people, in the Mississippi River Delta country of easternArkansas. I remember riding downthere on the train from St. Louis, still wearing my Army uniform with the Sam Browne belt, and walkingdown Front Street to give this storemy dreamthe once-over. A guy fromSt. Louisowned it, and thingsweren't working out at all for him. He was losing money, and he wanted to unload the store as fast as hecould. I realize now that I was the sucker Butler Brothers sent to save him. I was twenty-seven years oldand full of confidence, but I didn't know the first thing about how to evaluate a proposition like this so Ijumped right in with both feet. I bought it for $25,000 $5,000 of our own money and $20,000borrowed from Helen's father. My naivet about contracts and such would later come back to haunt mein a big way.
But at the time I was sureNewportand the Ben Franklin had great potential, and I've always believed ingoals, so I set myself one: I wanted my littleNewportstore to be the best, most profitable variety store inArkansaswithin five years. I felt I had the talent to do it, that it could be done, and why not go for it Setthat as a goal and see if you can't achieve it. If it doesn't work, you've had fun trying.
Only after we closed the deal, of course, did I learn that the store was a real dog. It had sales of about$72,000 a year, but its rent was 5 percent of saleswhich I thought sounded finebut which, it turned out,was the highest rent anybody'd ever heard of in the variety store business. No one paid 5 percent of salesfor rent. And it had a strong competitora Sterling Store across the streetwhose excellent manager, JohnDunham, was doing more than $150,000 a year in sales, double mine.
For all my confidence, I hadn't had a day's experience in running a variety store, so Butler Brothers sentme for two weeks' training to the Ben Franklin inArkadelphia,Arkansas. After that, I was on my own,and we opened for business onSeptember 1, 1945. Our store was a typical old variety store, 50 feetwide and 100 feet deep, facingFront Street, in the heart of town, looking out on the railroad tracks. Backthen, those stores had cash registers and clerk aisles behind each counter throughout the store, and theclerks would wait on the customers. Self-service hadn't been thought of yet.
It was a real blessing for me to be so green and ignorant, because it was from that experience that Ilearned a lesson which has stuck with me all through the years: you can learn from everybody. I didn'tjust learn from reading every retail publication I could get my hands on, I probably learned the most fromstudying what John Dunham was doing across the street.
HELEN WALTON:
"It turned out there was a lot to learn about running a store. And, of course, what really drove Sam wasthat competition across the streetJohn Dunham over at the Sterling Store. Sam was always over therechecking on John. Always. Looking at his prices, looking at his displays, looking at what was going on.
He was always looking for a way to do a better job. I don't remember the details, but I remember somekind of panty price war they got into. Later on, long after we had leftNewport, and John had retired, wewould see him and he would laugh about Sam always being in his store. But I'm sure it aggravated himquite a bit early on. John had never had good competition before Sam."I learned a tremendous amount from running a store in the Ben Franklin franchise program. They had anexcellent operating program for their independent stores, sort of a canned course in how to run a store. Itwas an education in itself. They had their own accounting system, with manuals telling you what to do,when and how. They had merchandise statements, they had accounts-payable sheets, they hadprofit-and-loss sheets, they had little ledger books called Beat Yesterday books, in which you couldcompare this year's sales with last year's on a day-by-day basis. They had all the tools that anindependent merchant needed to run a controlled operation. I had no previous experience inaccountingand I wasn't all that great at accounting in collegeso I just did it according to their book. Infact, I used their accounting system long after I'd started breaking their rules on everything else. I evenused it for the first five or six Wal-Marts.
As helpful as that franchise program was to an eager-to-learn twenty-seven-year-old kid, ButlerBrothers wanted us to do things literally by the booktheir book. They really didn't allow their franchiseesmuch discretion. The merchandise was assembled inChicago,St. Louis, orKansas City. They told mewhat merchandise to sell, how much to sell it for, and how much they would sell it to me for. They toldme that their selection of merchandise was what the customers expected. They also told me I had to buyat least 80 percent of my merchandise from them, and if I did, I would get a rebate at year-end. If Iwanted to make a 6 or 7 percent net profit, they told me I would have to hire so much help and do somuch advertising. This is how most franchises work.
At the very beginning, I went along and ran my store by their book because I really didn't know anybetter. But it didn't take me long to start experimenting that's just the way I am and always have been.
Pretty soon I was laying on promotional programs of my own, and then I started buying merchandisedirectly from manufacturers. I had lots of arguments with manufacturers. I would say, "I want to buythese ribbons and bows direct. I don't want you to sell them to Butler Brothers and then I have to payButler Brothers 25 percent more for them. I want it direct." Most of the time, they didn't want to makeButler Brothers mad so they turned me down. Every now and then, though, I would find one who wouldcross over and do it my way.
That was the start of a lot of the practices and philosophies that still prevail at Wal-Mart today. I wasalways looking for offbeat suppliers or sources. I started driving over to Tennessee to some fellows Ifound who would give me special buys at prices way below what Ben Franklin was charging me. One Iremember was Wright Merchandising Co. inunion City, which would sell to small businesses like mine atgood wholesale prices. I'd work in the store all day, then take off around closing and drive that windyroad over to theMississippi Riverferry atCottonwood Point,Missouri, and then intoTennesseewith an oldhomemade trailer hitched to my car. I'd stuff that car and trailer with whatever I could get good dealsonusually on softlines: ladies' panties and nylons, men's shirts and I'd bring them back, price them low,and just blow that stuff out the store.
I've got to tell you, it drove the Ben Franklin folks crazy. Not only were they not getting theirpercentages, they couldn't compete with the prices I was buying at. Then I started branching out furtherthanTennessee. Somehow or another, I got in touch by letter with a manufacturer's agent out ofNewYorknamed Harry Weiner. He ran Weiner Buying Services at505 Seventh Avenue. That guy ran a verysimple business. He would go to all these different manufacturers and then list what they had for sale.
When somebody like me sent him an order, he would take maybe 5 percent for himself and then send theorder on to the factory, which would ship it to us. That 5 percent seemed like a pretty reasonable cut tome, compared to 25 percent for Ben Franklin.
I'll never forget one of Harry's deals, one of the best items I ever had and an early lesson in pricing. Itfirst got me thinking in the direction of what eventually became the foundation of Wal-Mart's philosophy.
If you're interested in "how Wal-Mart did it," this is one story you've got to sit up and pay close attentionto. Harry was selling ladies' pantiestwo-barred, tricot satin panties with an elastic waistfor $2.00 adozen. We'd been buying similar panties from Ben Franklin for $2.50 a dozen and selling them at threepair for $1.00. Well, at Harry's price of $2.00, we could put them out at four for $1.00 and make a greatpromotion for our store.
Here's the simple lesson we learnedwhich others were learning at the same time and which eventuallychanged the way retailers sell and customers buy all across America: say I bought an item for 80 cents. Ifound that by pricing it at $1.00 I could sell three times more of it than by pricing it at $1.20. I mightmake only half the profit per item, but because I was selling three times as many, the overall profit wasmuch greater. Simple enough. But this is really the essence of discounting: by cutting your price, you canboost your sales to a point where you earn far more at the cheaper retail price than you would have byselling the item at the higher price. In retailer language, you can lower your markup but earn morebecause of the increased volume.
I began to mull this idea inNewport, but it would be another ten years before I took it seriously. Icouldn't follow up on it inNewportbecause the Ben Franklin program was too cut-and-dried to permit it.
And despite my dealings with the likes of Harry Weiner, I still had that contract saying I was supposed tobuy at least 80 percent of my merchandise from Ben Franklin. If I missed that target, I didn't get myyear-end rebate. The fact of the matter is I stretched that contract every way I could. I would buy asmuch as I could on the outside and still try to meet the 80 percent. Charlie Baumwho was then one ofthe field men for Ben Franklinwould say we were only at 70 percent, and I would foam at the mouthand rant and rave about it. I guess the only reason Butler Brothers didn't give me a harder time about it allis that our store had quickly gone from being a laggard to one of the top performers in our district.
Things began to clip along pretty good inNewportin a very short time. After only two and a half yearswe had paid back the $20,000 Helen's father loaned us, and I felt mighty good about that. It meant thebusiness had taken off on its own, and I figured we were really on our way now.
We tried a lot of promotional things that worked really well. First, we put a popcorn machine out on thesidewalk, and we sold that stuff like crazy. So I thought and thought about it and finally decided what weneeded was a soft ice cream machine out there too. I screwed my courage up and went down to thebank and borrowed what at the time seemed like the astronomical sum of $1,800 to buy that thing. Thatwas the first money I ever borrowed from a bank. Then we rolled the ice cream machine out there on thesidewalk next to the popcorn machine, and I mean we attracted some attention with those two. It wasnew and differentanother experimentand we really turned a profit on it. I paid off that $1,800 note intwo or three years, and I felt great about it. I really didn't want to be remembered as the guy who lost hisshirt on some crazy ice cream machine.
CHARLIE BAUM:
"Everybody wanted to go see Sam Walton's store. We never had another store that had a Ding Dongice cream bar in it, one of those ice creammaking machines. People went there for that, and it wasfantastic. But one Saturday night for some reason they forgot to clean that machine up when they closed,and I went by there the next day with some of my clients to show them Sam's front window. And I wantto tell you, the flies in that window were just out of this world."As good as business was, I never could leave well enough alone, and, in fact, I think my constant fiddlingand meddling with the status quo may have been one of my biggest contributions to the later success ofWal-Mart. As I mentioned, we facedFront Street, and our biggest competitorJohn Dunham's SterlingStorewas acrossHazel Streeton the other corner. His store was slightly smaller than ours, but he stillmanaged to do twice as much business as our store did before we bought it. We were coming on strong,though. In our first year, the Ben Franklin did $105,000 in sales, compared to $72,000 under the oldowner. Then the next year $140,000, and then $175,000.
Finally we caught, and then passed, old John over there acrossHazel Street. But next door to him, on theother side from us, was a Kroger grocery store. By now, I was real involved in the community and keptmy ear to the ground pretty good, and I heard thatSterlingwas going to buy Kroger's lease and expandJohn's store into that space, making their store much bigger than mine. So I hustled down toHot Springs,to find the landlady of that Kroger building. Somehow, I convinced her to give me the lease, instead ofgiving it toSterling. I didn't have any idea what I was going to do with it, but I sure knew I didn't wantSterlingto have it. Well, I decided to put in a small department store. NowNewportalready had severaldepartment stores, one of which happened to be owned by my store's landlord, P. K. Holmes. That mayor may not have had something to do with the trouble which was going to come soon. But we didn't thinkanything about it.
I drew up a plan, bought a sign, bought new fixtures from a company up in Nebraska, and bought themerchandisedresses, pants, shirts, jackets, whatever I thought I could sell. The fixtures arrived onWednesday by train, and Charlie Baum, who was supposed to be supervising my merchandising forButler Brothers, offered to help me put everything together. He was the most efficient store layer-outerI've ever known. We went over to the railroad tracks and unloaded the fixtures, put them together, laidout the store, put the merchandise togetherand opened six days later on Monday. We called it the EagleStore.
So now we had two stores onFront StreetinNewport. I would run up and down the alley withmerchandise: if it didn't sell in one store, I would try it in the other. I guess they competed with eachother, but not much. By now, the Ben Franklin was doing really well. The Eagle never made muchmoney, but I figured I'd rather have a small profit than have my competitor over there in a big store. I hadto hire my first assistant manager to help out in the Ben Franklin while I was running back and forth, andmy brother Bud had come home from the war and was working with me too.
BUD WALTON"ThatNewportstore was really the beginning of where Wal-Mart is today. We did everything. We wouldwash windows, sweep floors, trim windows. We did all the stockroom work, checked the freight in.
Everything it took to run a store. We had to keep expenses to a minimum. That is where it started, yearsago. Our money was made by controlling expenses. That, and Sam always being ingenious. He neverstopped trying to do something different. One thing, though: I never forgave him for making me clean outthat damned ice cream machine. He knew I'd hated milk and dairy products ever since we were kids. Heused to squirt me when he milked the cows. I always thought he gave me that job because he knew Ididn't like milk. He still laughs about it."We couldn't have felt better about our situation down there. Helen and I both have the kinds ofpersonalities that make us want to participate in community life, and we had become deeply involved.
We had joined the Presbyterian church there, and even though I was a Methodist, it worked out realwell. Just as Helen and I were raised in the church, we felt that our kids would benefit from a churchupbringing. Church is an important part of society, especially in small towns. Whether it's the contactsand associations you make or the contributions you might make toward helping other folks, it all sort ofties in together. Helen was very active in her churchwork, which she still is today, and in PEO, aninternational women's organization. Our four children had come along by now, and Helen really lovedNewport. I was a member of the church's board of deacons, was active in the Rotary Club, and hadbecome president of the Chamber of Commerce as well as head of its industrial committee. I was prettymuch involved in everything around town.
It so happened that on the other side of our store, also onFront Street, was a JC Penney. We didn'tcompete much, and I was friendly with the manager. So one day this dapper supervisor fromNew Yorknamed Blake came to town to audit that store and got to chatting with the manager.
"Say," the manager told Blake, "we've got an ex-Penney man right here inNewport. He came in a fewyears ago and really made a big success of it. He doubled sales in his Ben Franklin, he's got two stores,and he's the president of the Chamber of Commerce." And when the manager told him it was SamWalton, old Blake almost fell over. "It can't be the same one I knew inDes Moines," he said. "That fellowcouldn't have amounted to anything." He came next door and we both had a big laugh about it when hesaw that I really was that kid who couldn't write so you could read it.
By now, my five years inNewportwere about up, and I had met my goal. That little Ben Franklin storewas doing $250,000 in sales a year, and turning $30,000 to $40,000 a year in profit. It was thenumber-one Ben Franklin storefor sales or profitnot only inArkansas, but in the whole six-state region.
It was the largest variety store of any sort inArkansas, and I don't believe there was a bigger one in thethree or four neighboring states.
Every crazy thing we tried hadn't turned out as well as the ice cream machine, of course, but we hadn'tmade any mistakes we couldn't correct quickly, none so big that they threatened the business. Except, itturned out, for one little legal error we made right at the beginning. In all my excitement at becoming SamWalton, merchant, I had neglected to include a clause in my lease which gave me an option to renewafter the first five years.
And our success, it turned out, had attracted a lot of attention. My landlord, the department storeowner, was so impressed with our Ben Franklin's success that he decided not to renew our leaseat anypriceknowing full well that we had nowhere else in town to move the store. He did offer to buy thefranchise, fixtures, and inventory at a fair price; he wanted to give the store to his son. I had no alternativebut to give it up. But I sold the Eagle Store lease toSterlingso that John Dunham, my worthy competitorand mentor, could finally have that expansion he'd wanted.
It was the low point of my business life. I felt sick to my stomach. I couldn't believe it was happening tome. It really was like a nightmare. I had built the best variety store in the whole region and worked hardin the communitydone everything rightand now I was being kicked out of town. It didn't seem fair. Iblamed myself for ever getting suckered into such an awful lease, and I was furious at the landlord.
Helen, just settling in with a brand-new family of four, was heartsick at the prospect of leavingNewport.
But that's what we were going to do.
I've never been one to dwell on reverses, and I didn't do so then. It's not just a corny saying that you canmake a positive out of most any negative if you work at it hard enough. I've always thought of problemsas challenges, and this one wasn't any different. I don't know if that experience changed me or not. Iknow I read my leases a lot more carefully after that, and maybe I became a little more wary of just howtough the world can be. Also, it may have been about then that I began encouraging our oldestboysix-year-old Robto become a lawyer. But I didn't dwell on my disappointment. The challenge athand was simple enough to figure out: I had to pick myself up and get on with it, do it all over again, onlyeven better this time.
Helen and I started looking for a new town.