A Key to Double-Digit Growth: Stay Product-Driven

While store location and low prices were part of Walton's model, so too was the concept of merchandising. Deep down, Sam Walton thought of himself as a merchant first. "In Wal-Mart stores they don't want many brands," explains Philip Kotler, confirming Walton's strong instincts for merchandising. "Basically, Wal-Mart features only a few brands, where they get good volume discounts, and so on. What makes them work is the breadth—every category is represented—but it's not depth within a category. That's different from stores that feel that they have to have all five or six brands that might be around."

Wal-Mart's merchandising strategy was formed early on and changed little over the years. Walton loved to buy an incredible amount of one item—say, Tide detergent—and make it hugely visible in his stores. He would build a gigantic display of it, hang it from the ceiling, or whatever. Walton felt that his competitors failed when they lost their merchandising instincts:

If you are going to show the kind of double-digit comparable store sales increases that we show every year, and grow a company the way we've grown ours, you have to be merchandise driven. I can name you a lot of retailers who were originally merchandise driven, but somehow lost it over the years.

Remember that Walton had two decades of retailing experience before he founded Wal-Mart. He had routinely bought unusual items and sold them by the carload. He perfected the art at Wal-Mart, buying items at rock-bottom prices and selling them by the planeload. In many cases, the more off-the-wall the item, the better it sold, and Walton made stars out of off-beat items, such as Moon Pies or Bedmates, arranged in colossal displays all over the store.