The Poor Farmer Who Created Walmart

we knew so little about the variety store business we had to take the book that was written by ben franklin and and apply the principles but of course we added on didn't we and we were started doing strange things like cranking up ice cream machines on the sidewalk on saturday night popcorn on the other end of the sidewalk hawking anything we could hawk on that looked like it might have a chance to sell wherever [Music] 572 billion dollars that's how much revenue walmart generated in 2021 with over 2 million people working for the company it is the largest employer in the world and the biggest retailer in terms of sales but building such an empire was no easy feat it all started when a poor farmer who after being told he had no career in the retail business decided to open his own store sam walton was born on the 28th of march 1918 in kingfisher oklahoma his father thomas walton was a farmer but the farm wasn't generating enough money to provide for his family because of this the family traveled around the country looking for greener pastures moving from one state to another until they finally settled in columbia missouri around this time sam had become a teenager he helped the family by working a variety of small jobs and watched how his father survived by turning a small profit on each business deal he made he also watched his mother start up a fairly successful milk business that involved him milking cows and delivering the milk to customers in the neighborhood after his football practice his parents taught him the value of hard work and also just how much work it took to make a single dollar but things weren't great at home for sam his father thomas was almost never with the family as he was always on the road trying to make extra money where he could because of this thomas's relationship with his wife worsened every year in fact in his autobiography sam described his parents as the two most quarrelsome people to ever live together to escape the troubles at home sam engaged himself in sports joined the boy scouts and took several leadership roles that kept him busy sam graduated from david h hickman high school in 1935 and decided to attend the university of missouri to take his first steps into the business world while in school he worked many odd jobs to support himself including delivering newspapers and waiting tables in exchange for meals upon his graduation in the spring of 1940 sam would get his first taste of the retail industry he got himself a job as a sales trainee at jcpenney which back then was just a small shop in des moines iowa his starting pay was 75 dollars a week but this job did not go smoothly for sam and he was seen as one of jcpenney's worst employees one thing counting against him was that his bookkeeping was terrible because he hated making his customers wait while he fussed with paperwork as a matter of fact sam's boss threatened to fire him at one point and even told him that he had no career in the retail business the only thing that saved walton was his gift for salesmanship which earned him an extra 25 a month in sales commissions when the second world war reached america in 1941 walton was eager to play a role in it he quit his job the following year and joined the u. s army the army recognized sam's natural leadership skills and selected him to become a member of the military's intelligence corps where he rose to the position of captain the military stationed sam in oklahoma in april of 1942 where he met his future wife helen and after a short period of dating they got married on valentine's day in 1943 [Applause] by the time the war was over in 1945 walton had a wife and child to support and so he decided to start up his own retail business with a twenty thousand dollar loan from his father-in-law and five thousand dollars from his own savings sam bought a ben franklin store in newport arkansas it's important to note that millions of small stores had failed during the course of the 20th century in america and when sam bought this particular store it was losing a lot of money not only did sam invest in a store that wasn't bringing in much money but he was also paying far too much for it the rent for the store was five percent of the sales and initially this sounded fine to walton but after signing the lease he discovered that it was the highest rate anybody had ever paid for a variety store business despite all of his obstacles sam succeeded beyond everyone's expectations he studied all the typical rules of retail and then broke the ones he thought didn't make sense which for him was nearly all of them when sam bought the ben franklin store he was required to buy all his goods from company outlets but he knew he could find cheaper merchandise elsewhere so he found a clause in his contract that allowed him to buy his merchandise from somewhere else and then he would reduce the cost of his goods way below what other shops were selling them for he made his profit on volume rather than margin but it took him nearly a decade to fully appreciate the power of that idea nothing sam did was extraordinary neither was he a genius and while there's no question that he was business smart the real reason for his success was his main policy to make the lives of his customers easier and because he did that more and more people bought from him once things were going great for sam and his business he asked his brother bud to join him and together they were able to run the store more smoothly the butler brothers who owned the store sam had leased were not happy with the fact that the waltons were getting their merchandise elsewhere but they couldn't say much about it because the numbers sam was generating were unmatched anywhere his sales had increased by more than 45 percent reaching 105 000 in his first full year of ownership the following year the number increased again to 140 000 and by the third year his sales increased by another 25 percent reaching 175 000 after only three years in the business sam was able to repay the 20 000 loan his father-in-law gave him in full and two years later sam had become the leading variety store owner in arkansas and likely in the neighboring states as well but the truth is it wouldn't matter anyway because the business was destined to fail [Music] you see when sam walton signed the lease for his store back in 1945 it contained no renewal clause options to renew were typically standard features of leases so when walton's father-in-law found out about this oversight he was shocked that sam could have made such a mistake walton had not only built one of the most successful businesses in newport but he had invested his body and soul into the business and the town and his wife helen equally loved the town as three of their four children were born there in his autobiography sam walton is quoted saying it was the lowest point of my life i felt sick to my stomach i had built the best variety store in the whole region and worked hard in the community done everything right and now i was being kicked out of town after being kicked out of his own store sam walton was eager to start again but this time he was determined to do it the right way and better than ever he began to search for a new destination to buy another store until he found one in the tiny community of bentonville arkansas it was here where walton set up his second shop in the town square and this time he insisted on a 99-year lease sam opened his new store in the summer of 1950 and called it walton's five and dime the walton family often heard people whisper amongst themselves saying well we'll give this guy 60 days maybe 90. he won't last that long but sam would prove them wrong at the time there were two other variety stores in town but neither of them offered the consistent low prices that walton did so when walton finally opened his store it changed the lives of the people in the bentonville community during the 50s america's economy was looking great and sam took advantage of it he kept finding new ways to reduce the prices of his goods and keep his customers happy one day walton learned about self-service in the retail industry the concept was simple rather than have his sales clerks get goods for his customers customers could walk into the store get the goods themselves and pay at the entrance walton immediately fell in love with the idea this meant he could have fewer employees and further reduce the cost of his goods not only did this new trick work perfectly but it also tripled his income in less than a year with more money sam had the funds and resources to further expand his business for the next few years sam went on to open one store after another and by the end of the 1950s walton was a proud owner of 15 stores which he had acquired using borrowed money and profits from his stores but sam still felt that he wasn't making as much profit as he should for the kinds of work he was putting into his business so he decided to adopt a new strategy and this new strategy would change everything we exist to provide value to our customers which means that in addition to quality and service we have to save them money walton's idea was to build big stores that discounted everything they stocked and to place them in small towns by dramatically slashing his prices he would undercut his competitors and make up the difference in price through a higher volume of sales this idea was already being practiced across the country but the difference was that the discount stores tended to be small and were located in the cities and most of them only offered discounts for a specific items not their entire stock it was risky and he needed a lot of money to make it work sam initially approached the company that franchised ben franklin stores with his idea but they refused to back him especially because his idea meant that they would have to cut their standard wholesale margin in half to accommodate the low prices he wanted to charge with nowhere else to go walton decided to take a big gamble he mortgaged his home borrowed a whole lot of money and opened his first walmart store in rogers arkansas in 1962.

customers were thrilled that they didn't have to travel all the way to the city to get discount prices on goods they flocked to walmart's stores in droves and the company's sales rose tremendously in those years sam kept learning from his competitors and developed new ways to further reduce the prices of his goods he replaced the wooden shelves in his stores with metal ones as they were cheaper and more durable another strategy he came up with was to keep his stores open for longer hours than his competitors this was something only walmart was doing and it helped him generate more money he also made sure his customers had big parking lots and unlike his competitors he never collected a dime for parking spaces until 1969 sam walton had funded the expansion of his business through profits and borrowing money but in 1970 he decided to take the company public the initial offering generated about 5 million dollars and allowed walton and his family to retain about 61 ownership of the stock the money afforded walton the opportunity to pay off the debts he owed to banks to pay back loans from friends and to move forward with his next ambitious plans for the country [Applause] [Music] between 1970 and 1971 walmart added six more stores followed by another 13 stores in each of the next two years then 14 and then 26 by the end of 1980 walmart had a total of 276 stores and from then on they were opening about a hundred stores per year sam believed that the rapid growth of walmart didn't just come down to their low costs that attracted customers but was also due to the work of his close associates sam made his associates partners and made sure that they benefited from cash bonuses and stock options and this gave them a chance to take part in the growth of his business walton also made sure that his stores were close to warehouses in order to permit one day delivery of goods while also minimizing advertisement costs another innovation was the decision to buy directly from manufacturers rather than through wholesalers which allowed him to lower his prices even more by the end of the 1970s walton had built his store into the fastest growing and most influential force in the retail industry things were going so great for the company that one investor who bought 1 650 worth of walmart shares in 1970 saw his shares rise over 700 000 by 1987. in 1983 walton made another terrific business move he launched the first of his sam's wholesale clubs which were aimed at small business owners and others who wish to buy goods in bulk once again walton had struck gold and by 1990 walmart had more than 1 000 stores and 150 000 employees working for the company but sam had his fair share of people and groups who disliked him and his retail business he has often been criticized for competing with small retailers and putting them out of business sam walton himself acknowledged this by saying the small stores were just destined to disappear at least in the numbers they once existed because the whole thing is driven by the customers who are free to choose where to shop sam walton died on the 5th of april 1992.