Walton

"Walton’s compulsion to keep opening stores reflected an unwilling¬ ness to rest on his laurels. He repeatedly reinvented his business, switch¬ ing from variety stores to discounting, then branching out into warehouse clubs. Still later, he combined his discounting format with food retailing to create Wal-Mart Supercenters. Inevitably, Walton’s boldness generated some mistakes. For example, the successful Wal-Mart Supercenters were scaleddown versions of hypermarkets, a format that the company abandoned af¬ ter opening four stores. The massive (200,000 square feet) hypermarkets combined supermarket items and general merchandise under a single roof. Unfortunately, customers were fatigued by having to cover large dis¬ tances to find items. Additionally, shoppers found the hypermarkets’ selec¬ tion too limited in categories such as electronics. They also balked at buying groceries in the large-quantity packages that the stores featured. Other retailing concepts that proved failures for Wal-Mart included Save-Co Home Improvement Centers, Helen’s Arts and Crafts, and dot Discount Drugs. Another abortive scheme involved selling new cars through Sam’s Club stores at just $100 over dealer’s invoice. The venture collapsed, after selling just 10 cars, when the Arkansas Motor Vehicle Commission ruled that Sam’s Club was illegally acting as a broker."

"The key to Walton’s superb execution, by his own admission, was supreme devotion to copying the methods of other successful discounters."

"As an additional cost-saving measure, Wal-Mart maintained no re¬ gional offices. Instead, the company based all of its regional vice presi¬ dents in Bentonville, flying them out to their regional territories every Monday morning. This strategy saved the company as much as 2 percent of sales, relative to competitors Kmart and Target.90 To economize on the cost of maintaining a fleet of planes, Walton opened a facility at a spare hangar to serve other airplane owners with fuel, storage, and mainte¬ nance. By thus demonstrating that he was in the general aviation busi¬ ness, he qualified to buy parts and fuel on wholesale terms.91"

"Even after Wal-Mart was up and running, Walton capitalized on the fact that few discounters regarded his small, regional outfit as a competitor. By his estimate, he vis¬ ited more headquarters of discounting chains than anyone else in history. Out of curiosity, if nothing else, the managers frequently let him in and freely shared information about their methods."

"Starting with more limited resources than his competitors, Walton was forced to operate differently to achieve his growth objectives. Initially, WalMart built stores only within one day’s driving distance of its single distribu¬ tion center in Bentonville. Operationally, the key benefit was the ability to resupply stores quickly, thereby keeping the shelves stocked while also avoiding excess inventory. From a strategic standpoint, densely packing the territory with stores discouraged competition and maximized Wal-Mart’s name recognition. Repeating the success formula, Wal-Mart added distribu¬ tion centers in other regions and densely filled in the territory around them. Walton got the most out of his resources by running his stores with lean staffs. Constantly in need of additional managers for his rapidly in¬ creasing number of stores, he kept his eyes peeled for entry-level workers who displayed high potential as merchandisers and managers of people. With as little as six months’ experience, a go-getter could get promoted to assistant manager, a much swifter career path than other retailing chains deemed advisable."

"Aside from wringing maximum performance from its people, per¬ haps the most important element inWal-Mart’s overtaking of its competi¬ tors during the 1980s was its willingness to embrace new technologies. By computerizing its inventory management and being early to adopt the Universal Product Code (or bar code) scanning system, the company was able to maintain its frenetic growth without spinning out of control. Even in the area of technology, though, Wal-Mart’s edge derived from the posi¬ tive corporate culture created by its founder. If the environment had been less open to challenging senior management, Walton’s personal reluctance to spend on new systems would have prevented Wal-Mart from embrac¬ ing state-of-the-art techniques. Instead of squelching ideas through a hi¬ erarchical structure, however, Walton encouraged the internal debate that eventually won him over."

"The growing number of stores and expansion of Wal-Mart’s market area eventually induced Walton to take a huge risk on technology. Telephone lines, with their capacity limitations, were beginning to pose a constraint in collecting the vast amounts of data required to keep tabs on operations. In 1983, Wal-Mart’s computer chief proposed a solution: a private satellite sys¬ tem, capable of transmitting not only voice and data, but also video broad¬ casts of Walton leading the company cheer. The technology was not really proven and the cost was huge for a company of Wal-Mart’s size at the time. Nevertheless, Walton gave the project the green light. Predictably, construc¬ tion costs ran significantly over budget. When the system was finally com¬ pleted, it broke down frequently until technicians worked out the bugs. In the end, however, the gamble paid off in spades. With the largest privately owned satellite communications network in the United States, Wal-Mart reaped tremendous benefits in such varied uses as tracking delivery trucks, transmitting training videos, and speeding up the processing of credit card transactions. Savings realized through detection of credit card fraud were more than enough to pay for the system.78"

"Walton also showed his independence by rejecting the retailing in¬ dustry norm of cordial relations between buyers and vendors. He insisted on hard-nosed bargaining and forbade his buyers to accept meals or gifts from sales representatives. Wal-Mart’s buyers were “as folksy and downto-earth as home-grown tomatoes,” according to one executive who did business with them. “But when you start dealing with them—when you get past that ‘down home in Bentonville’ business, they’re as hard as nails and every bit as sharp.”97 An official of another company characterized Wal-Mart more bluntly, calling it “the rudest account in America.”98"

"Wal-Mart softened its stance toward suppliers after the manufactur¬ ers’ representatives organized and launched a publicity campaign de¬ nouncing the company’s policies. Walton’s more accommodative approach did not entirely represent a backing down in the face of criti¬ cism. In part, he was responding to technological advances that made it more economical to cooperate with vendors through information-sharing agreements than to maintain an adversarial relationship."

"Walton conceded that his toughness toward vendors partly reflected lingering resentment of his treatment at their hands in Wal-Mart’s early years. “I don’t mind saying we were the victims of a good bit of arrogance from a lot of vendors in those days,” he recalled. “They didn’t need us, and they acted that way.”100 As a result, he said, “We have always resented paying anyone just for the pleasure of doing business with him.”101"

"Walton, however, steadfastly rejected any suggestion that it was somehow unfair or immoral to offer a superior deal to consumers. Neither did he buy into the tacit agree¬ ment among the chains not to expand beyond their respective market areas."

"The unifying theme in Walton’s work ethic, risk taking, and other princi¬ ples of success was an extraordinary desire to beat the competition. That was surely the motivation that drove him to extraordinary heights, even if it would be naive to assume that he was completely indifferent to money. Had he cut back on expansion during the 1960s and worked his way out of debt, he would have been affluent enough to support the lifestyle he maintained in his later years as a billionaire. Once he recognized the spec¬ tacular expansion potential of his unique brand of discount retailing, however, the drive to be the biggest took over."

"Walton’s book Made in America. These ideas about the sequencing of information may seem trite. But minor shifts in how we operate can have a major impact. By consistently improving the way I consume information, I’m looking to create better conditions for success over many years. Still, we’re all wired differently, so my idea of a healthy and balanced informational diet may be different from yours."