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Samuel Walton: Retail Giant

Sam Walton founded Wal-Mart, growing it to over a thousand stores. He is a serial early-adopter whose commitment to innovations made them ubiquitous and his investors extremely rich.

Sam Walton

Short Biography

Samuel Walton was born in Oklahoma, in 1918, and grew up on the move in Missouri, during the great Depression, as his father worked at a series of sales jobs. Walton worked too, during his education, pausing to take a degree in Business at the University of Missouri at Columbia.

On leaving, he started working as a management trainee at JC Penney, where he also started learning the management skills that would help him grow his own business in the future. As for many young men of his age, the Second World War put the brakes on his career, when he served in the US Military Police. Returning to civilian life in 1945, he decided not to return to JC Penney, but to open a franchise Ben Franklin store in Arkansas, funded by a loan from his father-in-law.

This thrived, but he was unable to renew his lease, so opened a new one in a nearby town in 1950. Gradually, he bought more and grew his empire, using a light aircraft to get from one store to another and to scout possible new locations.

In 1962, he opened his first Wal-Mart store, on a new model he’d seen in Chicago – a Kmart, owned by competitor Sebastian Kresge. He had started his experiment with bulk retailing. Over the coming years, he experimented further in stock lines and layouts, and opened a second Wal-Mart in 1964. Then, in 1970, he raised $5 million in equity through a stock issue (at $16.50 per share), and opened six new stores and a distribution warehouse. By the time of his death, one of the original Wal-Mart shares had grown in value to $26,000 and the Wal-Mart empire was the biggest retailer in the US, with over a thousand stores.

Sam Walton stood down as CEO of Wal-Mart in 1988, to fight both leukaemia and bone marrow cancer; and finally died of it in 1992.

Five Retail Lessons from Sam Walton

1. The Personal Touch

Walton would get to know his employees (or Associates, as they are known) personally in the early days. He maintained this as long as he could, having gained a pilot’s licence so he could fly from store to store. The use of the term ‘Associate’ was a deliberate choice to create a sense of inclusion and what we would now call engagement. Indeed, he encouraged managers of new stores to take shares in the business to create a sense of their ownership. Walton practised, from his earliest days at JC Penney, a management style that can be called MBWA: Management by Walking About.

2. Rigorous Standards

In visiting stores, Walton set and expected strict quality standards. If he did not find them, he was sanguine about just shutting the store and not re-opening it until the management and staff could get it right.

3. Control your Supply Chain

There is a story about Walton that reminds me of one I recounted about Ingvar Kamprad (founder of Ikea). In the early days (his second Ben Franklin store), when a local competitor sold out of a product – women’s rayon underwear – instead of ordering himself a stock, he bought the distributor. In one move, he deprived his competitor of stock and assured his own supply chain. The money he raised in 1970 from a stock issue was used in part, not to expand his retail base as much as possible, but to fund a distribution centre. Like a good military general, Walton understood the criticality of his supply chain. He invested heavily in warehousing, logistics and, early on, in networking his stores and warehouses to one another.

4. Embrace the New

Less of an innovator and more of an early adopter, Walton frequently saw and rapidly embraced new ideas that would help him grow his business (Jim Collins’ Flywheel principle). I mentioned satellite networking of his stores, above, but other examples abound:  self-service retailing, discounting, and hypermarkets. Each step made him more successful.

5. Experimentation

Walton believed in achieving the best results he could, so he was constantly experimenting to test the effects of different layouts, promotions, and stock lines. Once again, the flywheel principle at work, but the salient lesson for me is test-evaluate-improve – then test something new.

If all this sounds a little familiar, take a look back at the blog on Ingvar Kamprad, which I posted just over a year ago. I cannot help feeling that these two retailers, born only eight years apart, are kindred spirits.

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How To Get Purchasing Right

The Management Pocketbooks Pocket Correspondence Course

This is part of an extended management course. You can dip into it, or follow the course from the start. If you do that, you may want a course notebook, for the exercises and any notes you want to make.


Procurement is a deep skill, with its own professional membership bodies around the globe:  the Chartered Institute of Purchasing and Supply in the UK. Yet small organisations rarely have the scale to justify a full-time qualified professional purchasing manager.

This means that all managers working within a supply chain need to be able to turn their hand to the craft of buying – and to be able to do it well enough to secure the right materials, assets or services, at competitive rates.

Another reason for needing a good basic understanding of procurement is because, if your organisation does have a professional purchasing team, their interests and yours may not always, on the surface, overlap completely.  Understanding how this is so, and what pressures they are under, will help you to negotiate  with them and influence the selection process. Often, in setting good practices, purchasing managers create ample flexibility. Your job is them to establish where it is and learn how to exploit it to the good of your organisation. The confrontational approach that many managers adopt with central functions will rarely achieve the results you need.

So what is it that Procurement Professionals know?

Professionals follow a simple purchasing cycle.

Procurement Process

What makes the cycle work well is the understanding that blindly following the process can produce unintended results. Each organisation will optimise the details of their process for certain factors, like price, speed, reliability or accountability. Adaptability is the key to getting it right in every case. Here are some tips for a strong underpinning to your process.

1: Cost and value are not the same thing. If you focus only on cost, you rarely achieve value.

2: If you do not specify what really matters, the negotiation process will optimise for cost and deliver the wrong result. Ensure you understand the functional and logistic requirements of the department or team on whose behalf you are procuring the goods or services. Use your expertise to adapt the process appropriately, to balance consistency and transparency against the genuine variability in requirements across a complex business.

3: Over-focus on cost comes with a price: ‘you get what you pay for’ as my dad used to say.

4: A paper and data based evaluation of your supplier is valuable, but if you are going to depend on that supplier, quality accreditation and balance sheets are not enough: you need to speak to other customers and visit the supplier’s site to meet the people you will rely upon.

5: Regular reviews are important to ensure that they are maintaining the quality and service standards that led you to select them at the start of your relationship.

6: The right balance of competitive market testing and long-term relationship building will yield the best results. If you commit to a supplier for too long, without subjecting their prices and services to competition, they may become complacent, but if you try to re-tender your contracts too frequently, suppliers will have little reason to be loyal to you, knowing that an opportunist competitor could offer a lower price in a year or two.

7: Everything is negotiable, but if you take a stance that is too aggressive, your supplier may need to make hidden compromises to maintain their profitability. Those could harm you in the long run.

8: Once you have built a relationship, it is tempting to relax and turn your focus elsewhere. Continue to invest in the relationship with frequent communication, regular meetings and constant research into new developments in the trade, from things like trade shows, conferences and trade journals. Discuss new developments with your supplier and gauge their levels of investment in new ideas and technologies.

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