Walton, Sam

views updated Jun 27 2018

Walton, Sam

(1918-1992)
Wal-Mart Stores, Inc.

Overview

Sam Walton redefined the shopping experience for residents living in rural areas throughout the United States by opening a chain of Wal-Mart discount stores in towns previously served only by hardware and five & dime stores. His strategy of monopolizing the discount shopping market in rural areas made his stores the largest retail chain in the United States.

Personal Life

Sam Moore Walton was born in Kingfisher, Oklahoma, on March 29, 1918, as the oldest of two boys of Thomas and Nancy Walton. His father, a farm-mortgage banker, moved his family to his native state of Missouri, where they lived in a succession of rural communities for three years and then settled in the medium-sized university town of Colombia. His father believed in saving money, so when the bottom fell out of the economy, his family suffered less during the Great Depression than many of their neighbors. The younger Walton was a standout at Hickman High School in Columbia. He made a name for himself as a quarterback on the school football team, captain of the basketball team, class president, and student council president. His high school year book of 1936 described him as having distinguished himself in "leadership, service, and ability."

Walton financed his education at the University of Missouri with money earned from a paper route. He graduated with a degree in economics in 1940. Walton was unsure of what he would do with his life after leaving college. At one point, he told the Washington Post, "I thought I wanted to be President of the United States." Instead, he took his first retailing job at a J.C. Penney store in Des Moines, Iowa, where he was a sales trainee. He recalled the day that James Cash Penney, the company's founder, paid a visit to that store: "He taught me how to tie a package with very little twine and very little paper and still make it look nice." But that job was short-lived, as Walton was drafted in early 1942 as a communications officer in the Army Intelligence Corps, an assignment that enabled him to remain stateside for the duration of World War II. While in the service, he married Helen Robson on February 14, 1943. The couple had four children.

Walton rose to become one of the wealthiest men in the world, but chose to live in Bentonville, Arkansas with his family. He enjoyed riding around in his pickup truck, eating breakfast with friends at the local Ramada Inn, and attending potluck suppers at the Presbyterian church. Even when he was diagnosed with incurable bone cancer, he continued to lead an active life, rising every day before dawn. He would spend about 80 percent of his time visiting stores and the other 20 percent at meetings at the corporate headquarters. Those sessions customarily began with the singing of "The Star-Spangled Banner."

Among the honors Walton received were the Gold Winner in Financial World's CEO rating, 1986; National Retail Merchants Association's gold medal for the most distinguished retailing performance of the year, 1988; Financial World's CEO of the Decade, 1989; U.S. News & World Report's Excellence Award in Business, 1990; and Advertising Age's Adman of the Year Award, 1991. The Presidential Medal of Freedom from President George Bush in 1992 was the award that Walton deemed "the highlight of my entire career." Even though he was in a wheelchair, Walton led his sales associates in a rousing Wal-Mart cheer. He died on March 29, 1992 of bone cancer at the age of 74, three weeks after receiving the medal from Bush.

Career Details

The retail industry seemed a natural place for Walton to make his mark, but he had no interest in being in someone's employ. In 1945, with a borrowed $25,000, he and his brother, James, opened a five-and-dime store, called Ben Franklin, in Newport, Arkansas. Walton was forced to move five years later when his landlord refused to renew the store's lease, and he travelled across the state to Bentonville, which is now headquarters to the Wal-Mart empire.

Walton started having doubts about the future of dime stores and started paying close attention to chains like K Mart and Zayre. Those retailing giants avoided rural areas, preferring to place their stores in suburban or urban locations. Walton decided that it was time to start his own chain. In 1962, he and brother James opened the first Wal-Mart outlet in Rogers, Arkansas, about five miles from Bentonville. The two brothers thought large stores could be successful in small towns. "There was a lot more business in those towns than people ever thought," Walton explained.

From the beginning, the Wal-Mart concept was to join a friendly, general-store atmosphere with high-quality name-brand merchandise at low prices. The idea caught on, but slowly. The stores were pretty basic and many resembed barns, with merchandise overflowing from plastic bins or metal racks. Along with a top management team, Walton visited a half-dozen to a dozen Wal-Mart stores every week. At one store, he might solicit suggestions on how yard goods could sell faster flat-folded than on bolts. Or he might give advice on increasing deliveries of automotive supplies. At all of his stores, he gave reassuring speeches that kept employees striving for improvement and higher sales.

By 1970, the year Walton took the company public, there were about 25 Wal-Mart stores. By 1972, the chain had more than doubled to 64 stores with sales of $125 million. The rate of growth was phenomenal. In 1981 alone 161 Wal-Mart stores were opened. By 1983, the chain had become the eighth largest retailer in the United States, with 642 stores in 19 states and annual sales of $4.2 billion. That same year, Forbes magazine estimated Walton's net worth to be $2.1 billion, making him the second richest person in the United States, behind oil magnate Gordon P. Getty. At that time, Walton decided to explore another path and opened stores in such medium-sized cities as Little Rock, Arkansas, Springfield, Missouri, and Shreveport, Louisiana. He also opened stores in the suburbs of several large cities, including Kansas City, Missouri and Dallas, Texas. The strategy seemed to work. By 1987 Wal-Mart had 1,108 stores, located from Colorado to Virginia, with sales of over $20 billion. By 1989 there were 1,326 stores, with sales of almost $26 billion.

Walton continued to try innovative ways to attract new customers. In April of 1983 Walton launched the first Sam's Wholesale Club, which was aimed at small-business owners and others who wanted to buy bulk merchandise. The warehouses employed only a few laborers. The goods were priced just eight to 10 percent over cost. By 1991 there were more than 200 Sam's clubs in the United States. In December 1987 he introduced another new retailing concept with the opening of the first Hypermart USA store in Garland, Texas. Encompassing some 220,000 square feet of retail space, about four times the size of the standard Wal-Mart store, these "malls without walls" devote about the same amount of space to food and non-food products. Wal-Mart Supercenters, another Walton innovation, have both a supermarket and a regular Wal-Mart under the same roof.

Social and Economic Impact

Wal-Mart is a success story that redefined how retailers viewed growth markets. Walton had showed the world that consumers, no matter where they lived, preferred the variety and discount pricing that his chain offered. Walton was constantly searching for ways to better serve his customers. He was always walking around competitor's stores to educate himself. He was not above getting down on his hands and knees to look under display cabinets. "Anyone willing to work hard, study the business, and apply the best principles can do well," Walton said in the New York Times.

In addition, the company was firmly committed to a "Buy American" program. Walton built his firm into the fastest growing and most influential force in the retail industry with stores averaging an annual growth rate of more than 35 percent for more than a decade — a rate more than three times that of the retail industry in general. An investor who spent $1,650 for 100 shares of stock in 1979 would have had $700,000 worth of stock in 1987.

A conservative employer, Walton admitted that in the early days of the Wal-Mart operation, his employees were making minimum wage. It was his wife who convinced him to offer his employees various incentive bonuses, including discounts on stock and profit-sharing plans. As a result, some Wal-Mart associates have retired hundreds of thousands of dollars richer.

The economic impact on Bentonville, home to the Wal-Mart corporation, has been tremendous. Walton and his wife have built tennis courts, a recreation hall for senior citizens, a day care center, a library, an athletic center, and a health club in Bentonville. Walton, or "Mr. Sam," as some called him, was unpretentious. He did not believe in company perks like limousines. Executives at a chain acquired by Wal-Mart lost their coveted parking spots near the front door for their leased Cadillacs, which were also eliminated by the thrifty Walton.

But despite all of the success, Walton and his chain of discount stores are not without their detractors. Chief among them are the small town merchants who, ultimately, were driven out of business by the Wal-Mart stores. They knew they could not compete with the low prices and extensive variety of merchandise. Jack D. Seibald, a retail analyst at Salomon Brothers once said that Wal-Mart "moves into town and in the first year they're doing $10 million. That money has to come from somewhere, and generally it's out of the small businessman's cash register."

Regardless, Walton revolutionized the concept of discount stores in America and reshaped consumer shopping patterns across the United States. Walton tells his story in a book, Made In America, that he wrote with the assistance of Fortune magazine editor John Huey.

Chronology: Sam Walton

1918: Born.

1940: Hired at J.C. Penney.

1945: Opened first Ben Franklin store.

1962: Opened first Wal-Mart store.

1970: Took the Wal-Mart public.

1983: Founded Sam's Wholesale Club.

1985: Estimated richest man in the United States.

1992: Published autobiography Sam Walton: Made in America, My Story.

1992: Died.

Without a doubt, Walton was the epitome of modern retailing, adapting to contemporary demographic trends. He built his empire not in the large urban areas of the North, East, and West — the politically and economically dominant regions of the first two-thirds of the twentieth century — but in the South and Midwest, the former depressed and neglected regions of the nation. He pioneered retailing where others did not want to go, and because of his willingness to go to uncharted areas, he reaped astounding financial benefits, propelling this humble man to one of the world's richest and most respected businessmen of his time. Sam Walton's legacy continues. Five years after his death, Wal-Mart had grown to over 2,300 stores with annual revenues of $104.8 billion.

Sources of Information

Contact at: Wal-Mart Stores, Inc.
702 SW 8th St.
Bentonville, AK 72716
Business Phone: (501)273-4000
URL: http://www.wal-mart.com

Bibliography

Byers, Paula K., and Suzanne M. Bourgoin, eds. Encyclopedia of World Biography. Detroit: Gale Research, 1998.

Contemporary Authors. Detroit: Gale Research, 1994.

Contemporary Newsmakers. Detroit: Gale Research, 1986.

Current Biography Yearbook. New York: H.W. Wilson Co., 1992.

Newsmakers. Detroit:Gale Research, 1993.

Business Leader Profiles for Students

Walton, Sam

views updated Jun 11 2018

Sam Walton

Born: March 29, 1918
Kingfisher, Oklahoma
Died: April 5, 1992
Little Rock, Arkansas
Founder, Wal-Mart Stores, Inc.

Sam Walton's passions included flying his own plane over the American countryside, hunting with his dogs, and sharing his good fortune with his family. But Walton will always be best remembered for his lifelong passion for providing low prices and good service to customers at Wal-Mart, his chain of discount stores that revolutionized the retail industry.

Walton did not invent the discount store when he opened his first store in 1962. But he did do something new. Wal-Mart introduced the concept of selling a large number of items at cheap prices to residents of rural towns—customers other discount retailers ignored. From that base, Walton expanded Wal-Mart across the United States and eventually reached into foreign markets, using the latest technology to keep costs low. Along the way, Walton became a billionaire, but one who never forgot his roots and who always remembered to put the customer first.

"I think I overcame every single one of my shortcomings by the sheer passion I brought to my work.… If you love your work, you'll be out there every day trying to do it the best you possibly can."

A Child of the Depression

Sam Moore Walton was born on March 29, 1918, in Kingfisher, Oklahoma, the oldest son of Thomas and Nancy Walton. Sam and his younger brother James (called Bud) spent most of their childhoods in Missouri, living in several different towns. In October 1929, when Sam was eleven, prices of the stocks sold on the New York Stock Exchange crashed. This economic downfall wiped out the fortunes of many Americans who had bought stocks on credit during the so-called Roaring Twenties. In the Great Depression that followed, millions of people lost their jobs and faced poverty for the first time in their lives.

Compared with many families, the Waltons were lucky. Thomas Walton almost always had a job working for his brother's mortgage company. Sam added to the family's income by delivering newspapers and helping his mother run a small milk business she started with a few cows. In his autobiography Sam Walton: Made in America, Walton wrote, "We learned how much hard work it took to get your hands on a dollar, and that when you did it was worth something."

A star athlete at Hickman High School in Columbia, Missouri, Walton was also a Boy Scout, class president, and active in several clubs. After graduating in 1936, he stayed in Columbia and entered the University of Missouri, where he earned a degree in economics. During his college years, Walton continued working hard, waiting tables and expanding his newspaper delivery service. He took on more routes and hired helpers—his first taste of running his own business.

Taking to Retail

In 1940, Walton took his first full-time job, joining the department-store company J. C. Penney as a management trainee. After eighteen months with the company, he was drafted into the U.S. Army and served as a communications officer during World War 11 (1939-45). In 1943, he married Helen Robson, whom he had met while he was stationed in Oklahoma.

With his newspaper business, Sam Walton made between $4,000 and $5,000 a year while still in college. Walton called that "fairly serious money" given that the United States was still in the throes of the Great Depression.

When the war ended in 1945, Walton was ready to resume his career in retail. This time, however, he wanted to be the boss. With some of his own money plus $20,000 borrowed from his father-in-law, Walton bought a Ben Franklin variety store in Newport, Arkansas. His brother Bud helped run the store. As part of a franchise, Walton had to follow the company's rules, but he found ways to act on his own and lower his costs. He bought some goods directly from the manufacturers or distributors, rather than going through Ben Franklin. As he recalled in his autobiography, "I'd bring them back, price them low, and just blow that stuff out the store."

Walton made his store the most profitable Ben Franklin in the region, but in 1950 his landlord refused to renew his lease and the store closed. Walton then bought a new store in Bentonville, Arkansas. He called it Walton's Five and Dime, although it was still part of the Ben Franklin chain. His friendly manner and eye for bargains kept his customers happy and helped him duplicate his earlier success in Newport. Two years later, Walton opened a second store, and he slowly added others in neighboring states.

The Wal-Mart Way

In 1962, Walton opened his first Wal-Mart store, turning from five-and-dime retailing to selling brand-name goods at discount prices. Walton built his base in the same kind of rural towns he had lived in as a child. At first, Walton chose these locations out of necessity, since it was cheaper to build in rural areas. Soon, however, Walton made the rural locations part of his strategy. From his small plane, he flew over the South and Midwest, scouting for new sites for Wal-Marts. "From up in the air," Walton wrote in his autobiography, "we could check out traffic flows, see which way cities and towns were growing, and evaluate the location of competition—if there was any."

Walton became famous for his innovations, such as the air flights and using computers to track inventory. But Walton always kept his focus on the key element of retail sales: people. Wal-Mart needed loyal workers to sell its goods and loyal customers to buy them. Walton believed in sharing profits with his employees and offering them company stock at discounts. Always down-to-earth, even as his own fortune grew, Walton became known as "Mr. Sam" to his employees. He visited his stores regularly to watch operations and inspire his workers. According to the company Web site, in 1975 he introduced the Wal-Mart cheer: employees spelled out the company name one letter at a time, then finished with the shout, "Who's number one? The customer, always!"

The Wal-Mart cheer illustrates Walton's devotion to the customer. He believed providing low prices every day was one way to keep customers happy. But so was greeting them at the door and making sure the sales staff was always ready to offer assistance. "Give [customers] what they want," Walton said, "—and a little more."

There at the Beginning

Sam Walton was quick to admit that he had a lot of help building his retail empire. Two of the most important people in his life were his wife Helen and his brother Bud.

Like Sam Walton, Helen was ambitious and felt strongly about how things should be done. She had a degree in finance, and her father ran a successful business. After helping Sam start his first retail stores, Helen willingly put up the family's assets to help launch Wal-Mart. Walton credits his wife with the idea of sharing profits with Wal-Mart employees. After Sam's death, Helen continued her husband's charitable work through the Walton Family Foundation.

Bud Walton, three years younger than Sam, worked next to his brother at Walton's first store in Newport, Arkansas, helping to wash windows and stock shelves. Bud later went into retail on his own, but soon he and Sam were partners in a Ben Franklin store in Missouri. The brothers continued to open more store together, and Bud invested a small amount in the first Wal-Mart store. Like Sam, Bud became wealthy from this investment. He died in Florida in 1995.

A Lasting Impact

As Wal-Mart grew, so did Walton's wealth. By the 1980s, his family's stock in the company was worth more than $20 billion, and Forbes magazine called Walton the richest person in the United States. But Walton, who still enjoyed flying his own small plane and driving a pick-up truck, did not appreciate the attention he received. He realized, however, that money gave him the opportunity to help others. The Walton family donated money to schools, church groups, and other charitable causes. But Walton's impact went far beyond his wealth. Other retailers copied his formula, and he was compared to Henry Ford (see Ford Motor Company entry) as one of the leading American entrepreneurs, or self-made business owners, of the twentieth century.

After a two-year struggle with cancer, Sam Walton died in 1992. One of his four children, Rob Walton, took over as chairman of the board at Wal-Mart, and the Walton family still owns a large share of the company's stock. Walton is remembered for turning Wal-Mart into one of the largest U.S. corporations, and his methods are used in stores around the world.