Sam Walton Success Story – Hi, everybody. If you want to be a legendary entrepreneur, then this article is for you, because the story that I’m about to tell you today is the story of a man who went from being an ordinary salesman to becoming the retail billionaire of America. This is a story of a man who started his business with a small loan from his father-in-law in law and built so much wealth out of it that today his family is worth 215,000,000,000 dollars. This iconic businessman that I’m talking about was none other than Mr Samuel More Walton. And the company that he started is what we know today as the retail giant.
Walmart Success Story – world’s largest Retail Store
|Formerly||Wal-Mart Discount City (1962–1969)Wal-Mart, Inc. (1969–1970)Wal–Mart Stores, Inc. (1970–2018)|
|Traded as||NYSE: WMTDJIA componentS&P 100 componentS&P 500 component|
|Founded||July 2, 1962; 59 years ago in Rogers, Arkansas October 31, 1969; 51 years ago in Wilmington, Delaware (incorporation)|
|Headquarters||Bentonville, Arkansas, U.S.|
|Number of locations||10,526 stores worldwide (April 30, 2021)|
|Key people||Greg Penner (Chairman)Doug McMillon (President, CEO)|
|Revenue||US$559.2 billion (2021)|
|Operating income||US$22.55 billion (2021)|
Today, Walmart is so huge that Americans spend 46,000,000 dollars at Walmart every single hour for 24 hours a day, and for 365 days a year, they employ about 2 2,000,000 people. And in 2,021 alone, Walmart generated a profit of 1 5,000,000 dollars every single hour. The question is, what was so special about Sam Walton that he was able to build such a humongous business Empire and most importantly, as an aspiring entrepreneur? What are the lessons that we need to learn from this legendary businessman? This is a story that dates back to the late 1940?
America, when World War two had just ended. And just like any other post-war situation, the economy was bad. And the Walton family, just like many other people, were struggling to make ends meet in a recovering economy. And since his family was not well off, Walton, all throughout his teenage and early 20? So, had to work at multiple jobs just to pay for school and College.
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Life of Sam Walton during his childhood
Sam Walton sold newspapers, worked at retail stools and even weighted tables. And because of the nature of his job, he had to interact with a lot of people from diverse backgrounds. And through those conversations, Sam Walton was able to understand the operations of several businesses operating in the market. In fact, while he was working at a retail store, he even used to go the extra mile and studied the rest of the competition, although it was never a part of his job. But this ability of his to go the extra mile helped him understand the retail market.
And when he gained enough confidence, he saved some money, borrowed some from his fatherinlaw, and took up a franchise of a retail chain called Ben Franklin. And this is where his retail journey began. Now, people just like any other franchise model, even with Ben Franklin. Although he had the Liberty to use the brand name, they came with a load of restrictions. He had to buy 80% of the products from Ben Franklin.
Otherwise he wouldn’t get a rebate. He had to spend a certain amount of money in advertising and even had to hire a certain amount of people. And all of this gave him only six to 7% profit, with a revenue of only 72,000 dollars. But right in front of him was his competitor, who was generating a revenue of 150,000 dollars a year. And this ignited a fire in his belly because of which from the next day onwards, he started visiting every single store in town and spent hours at his competitors stores.
In fact, a few store owners even used to get creeped out because Walton was acting as if he was trying to dissect their business, and he’s trying to steal some business secrets or something. And in this tedious product cess of examining the competitors and studying the retail market, Sam Walton learned. Walmart Success Story.
Three very important things that helped Sam Walton become the richest man in America.
- Team management
- Market research
The first thing that Sam Walton learned was the power of something called Discounting
which is a technique of selling products at a lower margin in order to maximize the volume sales.
For example, if 100 Tshirts are sold for three dollars each with a profit of one dollar, then the total profit is about 100 dollars. But if the same Tshirt is sold at 2 5 dollars, although the profit is only 50 cents, the volume of sales used to shoot up to 200 Tshirts.
Now, although this might sound like the same 100 dollars profit, it had some incredible benefits that very few people realized. The first benefit was that discounting resulted into more volume in sales, which meant more people brought products at the store and hence resulting into more footfall, which means more visitors. Secondly, the inventory moved in a flash. So if you’re the retailer who can quickly sell your current Tshirts, you can get new Tshirt designs in stock, which would again attract more customers. And last, and most importantly, you as a retailer could get a better bargaining power with your sellers if your inventory moved faster. Walmart Success Story.
For example, if the other players buy about 10 0 units, you could buy 20 0 units. Because of your accelerated sales volume. And using this bigger purchase order, you could ask the seller to reduce the price by another 10%, which could give you 10% extra profit, even with the best prices. Now, for a small store, that’s only 10% increase in margin, along with discount for customers. But when Walmart scaled up using the same principle, they became so powerful that they started dominating the sellers.
For example, in the present day, if the wholesaler sells 20 0 units to a small retailer for five dollars with two dollars profit, Walmart will place an order for 2,000,000 years, and we’ll ask the seller to sell it at 3.5 dollars. And because it’s such a huge purchase order, it gives the seller more profit. So they usually agree. Now, when the normal retailer price we are five dollar purchase at seven dollars, Walmart puts a price tag of only 4 9 dollars, which means what? The selling price of Walmart is lesser than the cost price of the retailer, making it practically impossible for the retailers to compete with Walmart.
And hence Walmart walks away with a healthy profit of 1 4 dollars per unit and generates millions of dollars in profit without competition. This is the power of discounting. Initially, Sam Walton could apply discounting to only 20% of the goods because of the franchise restrictions. But later on, when he opened his first Walmart tour, this aggressive pricing strategy of discounting was a game changer that accelerated the growth of Walmart and made them millions of dollars in profit. This is the first reason why Samuel Walton became Super successful, and that is the power of discounting.
Now, the obvious question is, Sam Walton was not the only one who knew about the power of discounting, right? There were other bigger players in the market. In fact, those people had more capital than Sam Walton. Then why did Sam Walton specifically succeed?
The Second Attribute of this legendary businessman is Market research
People, you know, even I couldn’t believe it. Then I read this. But this man was so persistent that he literally visited every single retail store in America that he could find. And he started taking notes about what they were doing well and what they were not. And in this process, he observed that every successful retailer, knowingly or unknowingly, had something that attracted more people to their store.
For example, some people had an ice cream candy machine that attracted a lot of kids. So when the parents wanted to shop, they specifically chose to go to the store with an ice a machine so that they can shop without being annoyed by the kids, while others applied something called loss leader principle, wherein they sold basic commodities like toothpaste at an ultra low margin so that they can Leer shoppers into making a visit. For example, if the price of the toothpaste itself was one dollar, some stores used to sell it at 50 cents, and that would give them two benefits that very few people actually understood.
Number one, by looking at the low cost of the toothpaste, customers by default assumed that the store had the best prices for the rest of the products also. And Secondly, since they made a visit to the store, they would buy other products like serials, clothes, or DVDs that were all high margin products.
Now, the seller might have lost 50 cents on the paste, but on the rest of the bill, he used to make 10 to 20 dollars. Therefore, Sam Walton carefully observed every one of these elements and tried to incorporate them in his store. Some ideas worked. Some ideas did not. But the one thing was sure that if at all, there was a retail idea that was floating around in the market, it was impossible that Sam Walton did not know about it.
In fact, he even got appointments from the head of other discount chains and introduced himself as a small retailer by the the Street just to get advice from them on how to do business. And you know what, guys? He ended up asking more questions than he was supposed to, and they ended up answering more questions than they were supposed to. And with each passing conversation, Sam Walton walked away with a better understanding of the market. And you know what, guys?
This impeccable market research always kept Walmart at the forefront of the retail revolution, because of which Walmart was always able to find the best sellers, the cheapest products, the best technology, and most importantly, every time they set up a store, they knew exactly what products would work, what products wouldn’t work, and what was your completer strength and weakness. Now, this begs the question, considering the rapid growth of Walmart, wherein they were opening hundreds of stores every single year, how did Sam Walton managed to keep track of the market?
This brings me to the third point, and that is Sam Walton’s Team management.
Walton followed three very powerful principles that helped him nurture the managers of Walmart into extraordinary leaders.
And these three principles were
- shared ownership.
First of All managers of Walmart owned a percentage of their retail store, which gave them a sense of belonging and inspired them to work harder to turn the store into the best one in town. Secondly, he created a culture wherein the entire team would get together every Saturday morning and they would talk about the issues they faced or the problem that needed to be solved in that particular store. And no matter how small or big the problem was, Sam Walter insisted upon solving the problem together as a team with out playing the blame game.
And last and most importantly, while most retailers had strict rules about what a store manager can do and what a store manager cannot do, Sam Walton gave his store managers to experiment with different products and different marketing strategies so that they can keep understanding the market better. And even if they failed, they were not at all punished.
In fact, they were encouraged to do better after introspection because he believed that rigid protocols which stifle innovation and in order keep pace with the fast paced retail industry. It was important that everybody kept experimenting and everybody acquired a deeper understanding of the market. And the result? Well, store managers came out with game changing ideas like new store designs, better seller suggestions. And one of the managers named Phil Green, was so passionate and inspired to experiment that he once bought the largest display of Tide ever and bought 3 500 giant boxes of Tide just to compete with another giant called Kmart.
And the stock that he bought was so large in quantity that it occupied an entire section even after being stacked up all the way up to the roof. Now, most people would get fired for making such a big and risky purchase decision. But at Walmart, he did not have to fear. Guess what? Phil sold out all of those boxes within a week, and suddenly Walmart became the new favorite in town as compared to Kmart.
Revolutionary culture of Walmart Success Story
This was the revolutionary culture that Sam Walton cultivated in Walmart that turned his managers from just managers into ambassadors of the business and risktaking owners, eventually turning Walmart into one of the most powerful companies in America with 2 2,000,000 employees and a revenue of 559,000,000,000 dollars today. Now, people, the lessons from this case study are pretty obvious from the narrative itself. So for this episode, I want to go one step further and I want to give you certain pointers so that you can ponder over in order to cultivate a deeper understanding of thois case study.
So Here’s point to number one, have you ever wondered, just like Sam Walton studied retail chains, even Jeff Bezos must have done some great market research, right? The question is, what did he do so well that he was able to compete with a giant like Walmart when Amazon was a baby?
How did Amazon managed to survive in spite of Walmart being so competitive and so aggressive?
The retail industry belongs to Walmart, while e-commerce is dominated by Amazon. By offering more than just merchandise, both retailers distinguish themselves from one another. As well as financial and clinical services, third-party sellers and subscriptions generate revenue for the company.
n Customer Satisfaction Index ranks Amazon among the top five retailers, although its score dropped 4 points from 2019 to 2020. Amazon’s average ACSI score of 78 is below Walmart’s of 73. Amazon’s customer-obsession culture is well known.
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