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How Sam Walton Built The Greatest Retail Empire Of The 20th Century

Updated: Jan 27, 2018

Sam Walton wrote his autobiography, Made in America, after he got sick and was hospitalized. It’s a top recommended book by Warren Buffett and a great read for anyone interested in starting a business. Sam wanted to clear up a lot of what has been written about him in his personal life, his wealth, his family, how and why he started Wal-Mart, what his principles were (business and personal) and many other interesting aspects of his life so he wrote this book.

I recommend this book to anyone who is trying to start a business whether that business is a retailer, a restaurant, an amusement park, e-commerce, or any other business I’m not thinking of here. The reason is because this book really delves into the mind of one of the most successful business men of all time and there are certain business principles that the reader can better understand how to put into practice.

One of the most thoughtful insights Sam had was that he always thought about the customer. He mentions in his book that the customer is his boss.

Now think of the last time you were a customer and what you were shopping for. Was it a new bed, a TV, a house, a watch, a hotel or flight for your favorite vacation, or a nice restaurant to eat at? Lowest price and shopping experience are two important factors that come into play when we are shopping and very likely played a large role the last time you were shopping for something. The shopping experience has everything to do with the cleanliness of the stores, the layout and how easy it is to find something, the other people shopping there, how the workers or staff are treating you, the lighting and fixtures, and much more.

Sam understood this and was really obsessive about getting his customers the lowest price. He also used to strive as hard as he could to create the best shopping experience possible for his customers.

He would do this by revolutionizing the way we discount shop today and I don’t think most people realize the changes he made to the industry. I certainly didn’t until I read this book. The other idea — getting the lowest price — is so fundamental you may think it isn’t worth mentioning, but the great insight you get from this book is understanding exactly how Sam got the best price for his customers.

A factor that helped him get the lowest prices for his customers was to create a culture and a set of principles that always focused on getting the lowest price, and then to follow the rules himself. He never lived a lavish lifestyle. He is a billionaire and even flew commercial at times.

All of Wal-Mart’s associates were watching Sam’s every step and Sam understood that if he really wanted to be the company with the best prices, he had to cut costs and not tell his employees and colleagues, but show them how to live a frugal lifestyle.

Sam would also drive a hard bargain with vendors to get his customers the lowest price. Wal-Mart got a bad reputation from the media at times since they often portrayed Wal-Mart to always rip its vendors off, but what they don’t realize is that this type of negotiation is somewhat of a zero-sum game.

Everyone can’t be a winner but two out of the following three parties can: Wal-Mart, the vendors, and the customers.

If Wal-Mart gets a high price from their vendors and then sells this merchandise to their customers at a low price, then the vendors and customers are the winners meanwhile Wal-Mart is the loser and will eventually go into bankruptcy. If Wal-Mart got a high price from their vendors and then sold their merchandise at a high price to their customers then the customers will shop at another retailer that has lower prices.

So Wal-Mart chose to be the winner along with their customers. They bought at the lowest price possible from their vendors and passed the low price onto their customers.

Another interesting thing I learned from Sam was how he changed the shopping experience in the retail business. When he first started out, the retail clerks behind the counter would go and grab what you wanted from the shelves. You wouldn’t just shop around and pick stuff off the shelves like you do today. Times were different back then. At least until Sam and a few other pioneers came along and changed that.

Another interesting thing was how Sam got an advantage over his competitors. He was able to do this by lowering his margins. If you were a retailer and you went to buy a box of shirts that cost $10 each from one of your vendors and then you sell each of them at a price of $15 to your customers then you will earn $5 or a 33% gross margin on each sale.

Sam noticed that instead of selling each shirt for $15, you could sell them for $12 each. A lot of you are probably thinking you could do that but you would earn less money. Stay with me for a minute though because that isn’t the case and I’m going to show you why.

If all the other retailers are selling for $15 and you sell your T-shirts for $12 then your competitors’ customers will leave their stores and go to your store which has the lowest price. So what Sam learned was this exact strategy. He could charge less per item, but he would make more money overall because he would sell a lot more in volume.

And this is exactly what Sam did. Other retailers had a very difficult time understanding this in Wal-Mart’s early years. They didn’t want to cut their prices because they didn’t want to lose their profit margins. It cost them their customers. As Sam says, “These shoppers voted with their feet.” They walked out of the stores, didn’t buy anything, and went right to Wal-Mart.

Sam also talked about change a lot because the retail business is a difficult business and you need to constantly be changing and adapting. This is still the case even today! Retailers, including Wal-Mart, need to adapt because the industry is changing towards being mostly online instead of the traditional brick and mortar stores. Amazon is leading this change.

Below are some passages that I found insightful from the book. I categorized them into three sections: Sam’s personal life philosophy, his business philosophy, and his biggest mistake.

Reading the book is a better option but I hope you can also find some wisdom in the passages below.

Personal Life Philosophy:

Pg xii — xiii If I had to single out one element in my life that has made a difference for me, it would be a passion to compete. That passion has pretty much kept me on the go, looking ahead to the next store visit, or the next store opening, or the next merchandising item I personally wanted to promote out in those stores — like a minnow bucket or a Thermos bottle or a mattress pad or a bag of candy.

Pg 7 We don’t need to buy a yacht. And thank goodness we never thought we had to go out and buy anything like an island. We just don’t have those kinds of needs or ambitions which wreck a lot of companies when they get along in years. Some families sell their stock off a little at a time to live high, and then — boom — somebody takes them over, and it all goes down the drain.

Pg 39 David Glass, “Two things about Sam Walton distinguish him from almost everyone else I know. First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong than anyone I’ve ever known. And once he sees he’s wrong, he just shakes it off and heads in another direction.”

Pg 26 A lot of people think it’s crazy of me to fly coach whenever I go on a commercial flight, and maybe I do overdo it a little bit. But I feel like it’s up to me as a leader to set an example. It’s not fair for me to ride one way and ask everybody else to ride another way. The minute you do that, you start building resentment and your whole team idea begins to start at the seams.

Business Philosophy and Business Strategy:

Pg 10 [Walmart] exists to provide value to [their] customers, which means that in addition to quality and service, we have to save them money. Every time Wal-Mart spends one dollar foolishly, it comes right out of our customer’s pockets. Every time we save them a dollar, that puts us one more step ahead of the competition — which is where we always plan to be.

Pg 47 It was totally unproven at the time, but it was really what we’d been doing all along: experimenting, trying to do something different, educating ourselves as to what was going on in the retail industry and trying to stay ahead of those trends. This is a big contradiction in my makeup that I don’t completely understand to this day. In many of my core values — things like church and family and civic leadership and even politics — I’m a pretty conservative guy. But for some reason in business, I have always been driven to buck the system, to innovate, to take things beyond where they’ve been.

Pg 63 Charlie Cate, “I remember him saying over and over again: go in and check our competition. Check everyone who is our competition. And don’t look for the bad. Look for the good.”

Pg 70 Helen Walton [Sam’s wife] on Sam Walton, “Of course, we always had to stop and look at stores — any kind of stores — on the way to wherever we were headed. You know, we would go through a good town, and he knew about some store there. I would sit in the car with the kids, who, of course, would say, ‘Oh no, Daddy, not another store…’ We just got used to it. Later on, Sam never went by a Kmart that he didn’t stop and look at.”

Pg 107 What’s really worried me over the years is not our stock price, but that we might someday fail to take care of our customers, or that our mangers might fail to motivate and take care of our associates. I also worried that we might lose the team concept, or fail to keep the family concept viable and realistic and meaningful to our folks as we grow. Those challenges are more real than somebody’s theory that we’re headed down the wrong path.

Pg 149 You can’t just keep doing what works one time, because everything around you is always changing. To succeed, you have to stay out in front of that change.

Pg 184 If American business is going to prevail, and be competitive, we’re going to have to get accustomed to the idea that business conditions change, and that survivors have to adapt to those changing conditions. Business is a competitive endeavor, and job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.

Pg 173 For my whole career in retail, I have stuck by one guiding principle. It’s a simple one, and I have repeated it over and over and over in this book until I’m sure you’re sick to death of it. But I’m going to say it again anyway: the secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.

Sam’s rules for building a business:

 1. Commit to your business. Believe in it more than anybody else.  2. Share your profits with all your associates, and treat them as partners.  3. Motivate your partners. Money and ownership alone aren’t enough.  4. Communicate everything you possibly can to your partners.  5. Appreciate everything your associates do for the business.  6. Celebrate your successes. Find some humor in your failures. Don’t take yourself so seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm — always.  7. Listen to everyone in your company  8. Exceed your customer’s expectations  9. Control your expenses better than your competition  10. Swim upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going in the exactly the opposite direction.

Sam Walton On His Mistakes:

Pg 38–39 I probably lost $25,000 and that was a time when Helen and I were counting every dollar. It was probably the biggest mistake of my business career. I did learn a heck of a lot about real estate business from the experience, and maybe it paid off somewhere down the line — though I would rather have learned it some cheaper way.

Pg 128 The biggest single regret in my whole business career is that we didn’t include our associates in the initial, mangers-only profit-sharing plan when we took the company public in 1970. But there was nobody around preaching that philosophy in those days, and I guess I was just too worried about my own debt, and in too big a hurry to get somewhere fast.

Pg 132 The decision we reached around that time, to commit ourselves to giving the associates more equitable treatment in the company, was without a doubt the single smartest move we ever made at Wal-Mart.

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