Sam Walton got into retailing by accident. Upon graduating from college, he started as a J. C. Penney management trainee at $75 per month. Later, he borrowed the money he needed to open his first store: a Ben Franklin 5-and-10 franchise in Newport, Arkansas. One of his competitors there was Sterling, a store that was doing twice as much business as the Ben Franklin, even though it was smaller than Walton's store. Walton responded by spending a great deal of time in the Sterling store, studying its displays, comparing prices, and generally annoying its owner.
One of the realities Walton faced was that all Ben Franklin franchise owners were expected to buy at least 80 percent of their stores' goods from Butler Brothers, the company that franchised Federated Stores and the Ben Franklin stores. These goods didn't come cheap, given the 25 percent markup that Butler charged its franchisees. Walton, infuriated by what he saw as an extortionate margin, attempted to go directly to local and regional manufacturers to buy his goods. But most of them turned him down, fearing Butler Brothers' wrath. So Walton went farther afield, traveling as far as Missouri and Tennessee to buy goods as cheaply as possible. This allowed him to cut his costs, pass those savings on to consumers, and increase his sales volume.
Five years later he lost the lease to his store—a setback that he later called the low point of his business life. Undeterred, he relocated and opened his second store. These early stores looked very little like today's Wal-Marts. Instead, they were classic "variety stores," characterized by high levels of customer service, with clerks helping customers select items that ranged from cleaning supplies to cookware to cosmetics.
But in the early 1960s, a new self-service retail model began to catch fire in different parts of the country. When Walton got wind of it, he rode a bus all night to see a self-service store for himself. He was immediately won over, and he set out to copy and improve upon this new model.
His wife of half a century, Helen, described one of her husband's most important work habits in Walton's memoir, Made in America: "What really drove Sam was that competition across the street ...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."
This is a key piece of the Walton saga: While Walton was indeed an original, many of his best ideas were not. From his earliest days in business, young Sam Walton raced around, notebook in hand, learning from competitors and bringing the best ideas into his stores. He spread that attitude around the company during his Saturday morning meetings with managers. Walton was quick to admit, for example, that he did not create the concept of discounting, and he was equally ready to admit that that he borrowed almost all of his best ideas from competitors:
Most everything I've done I've copied from someone else. ... I probably visited more headquarters offices of more discounters than anybody else—ever. ... I'd ask lots of questions about pricing and distribution, whatever. I learned a lot that way.
When it came to learning, nothing was off-limits to Walton. He studied competitors' prices, displays, merchandising techniques, and so on, in order to improve his own stores. He was able to spot a diamond in the rough—a rare skill that David Glass emphasizes: "Most of the best ideas came from our competitor's stores. It's often been said that he [Walton] spent more time in competitors' stores than they did. In a lot of cases, that's true. But I have gone through stores with him many times, thousands of times where the competitors' stores ...would look really bad . . . almost God awful. But he would never say that. He would always find some good idea in there, and everybody, of course, picked up on that."
Walton was also a pioneer of the belief that those closest to the customers have the most to teach the company—an idea that would not gain currency for many years. Recalls Glass, "He genuinely believed that all of the best ideas came from the bottom up, not from the top down, and particularly that all those people who interfaced with the customer knew more about the business and more about what we needed to do and more about how to improve it than anyone else."
Walton said, "In the whole Wal-Mart scheme of things, the most important contact ever made is between the associate in the store and the customer."
Here are some ideas taken from Walton's playbook that you can incorporate into your own:
NEVER STOP LEARNING—FROM COMPETITORS, CUSTOMERS, AND YOUR OWN EMPLOYEES. That's how Walton refined his strategy and improved his stores. He spent most of his time in stores, learning from everyone around him.
ASSUME THAT THERE IS SOMETHING YOU CAN LEARN FROM EVEN YOUR "WORST" COMPETITORS. There is something worthwhile that you can learn from every competitor. He was always looking for at least one good idea to bring back to his own business. His managers picked up on that, and followed Walton's lead.
CONSIDER WEEKEND MEETINGS WITH MANAGERS TO GET A JUMP ON THE COMPETITION. Choosing Saturday mornings to meet with his managers to discuss strategy and incorporate what they had learned into the business was one of Walton's best competitive moves. Walton said that it was in those meetings that the company first decided to try things that seemed unattainable. Those meetings were pivotal, because they were the vehicle Walton used to make his "corrections"—2 days before the competition had a chance to catch up.