This one was on my wishlist for two reasons — it both talks about retail and founding a long-term business, two things I love.
The book is written by Sam Walton himself, who starts with his childhood story, long before named the “Richest Man in America”. He tells the tale of coming from small-town America in the 50’s, where authentic friendships and understanding the local mindset outperforms fancy formal education. He built his empire, starting with one store and slowly adding more — mostly in the southern states. The tale continues for decades, which is a stark contrast with the “overnight tech millionaire’ stories we love hearing about today.
My main takeaways from Sam’s story and mindset:
- Humility — a trait much more rare to find today in our generation, but Sam Walton is old-school humble. Driving a pickup truck, wearing a simple cap and choice of location within the simple town of Bentonville, Arkansas. He tried hard to keep his family out of the public light, only writing the book several years before passing away, as a way to share his story with the world. I found this 1985 article about how Sam Walton lives his modest lifestyle.
- Cutting costs and passing savings to customers — although this falls along the lines of financial humility, his reasoning for saving costs is interesting: a retailer is a middleman between the product being produced and the consumer that wants the product. Every dollar the retailer can save in that process is a direct saving that can be passed on to the customer, which is part of his growth flywheel of being the most affordable:
“We exist to provide value to our customers, which means that in addition to quality and service, we have to save them money. Every time Walmart spends one dollar foolishly, it comes right out of our customers pocket. Everytime we save them a dollar, that puts us one more step ahead of the competition — which is where we always plan to be.”— Sam Walton
3. Studying competitor stores — Sam has an obsession with retail. Throughout his life, his natural curiosity was a very strong enabler — he would enter any type of store and study the way the product assortment was spread out and how consumers interacted with them. He would put an extra emphasis on stores he would deem to be better than his own, even getting “caught taking notes” at competitors’ stores. He would not limit this research to the USA but visited stores around the world to learn. This allowed him to learn user behavior and adapt the store to that format.
4. Weekly manager meetings on Saturdays mornings! — every week, all the managers in Bentonville would gather, often at Sam’s house, to discuss the latest week. They would open the floor to discuss their shortcomings, expansion plans and would regularly invite lower-level employees to suggest new ideas. This is a very unconservative move from a strong family man. Although at first questioned, this move would later help bond the executive team around a single mission. Why Saturday morning? “We are in the retail business. The retail business does not enjoy weekends. Working on Saturday is part of being in this business”.
5. Focusing on small towns — In the 1970’s, the major retail chains, KMart and Gibsons, would not open a branch in a town that had less approx 25,000 residents. Their stores were far apart, which made distribution difficult and made their lives tough juggling zoning permits and cross-state regulations. Walmart’s model, which had positive ROI even on towns with 5000 residents, was able to put up a fight. They would smartly open new stores with close proximity to the distribution centers, so the overhead would be minimal. The book is riddled with the how-and-why many of the early branches were opened and learnings from each one.
6. Making the customer number 1 — Similar to other customer-centric companies like Amazon, the customer also here is the king in Sam’s mind. As he sees it, the customer is actually the boss. They can fire any member of the company, from a cashier to the CEO, by taking their money to a different store. How do you keep your customers? “You need to do everything — a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly; knowledgeable service and a pleasant shopping experience”
7. Decentralizing the control — Sam insisted that each branch manager would have a lot of autonomy over their business. Sam viewed them more as partners and pushed them to know their P/L front and back. They would need to decide which products to sell in their stores and how best to arrange them. This is in contrast to the usual top-down method in which corporations make decisions that start at HQ and trickle their way down to each store. The logic here is that each city or town has many different mindsets and a “one-size-fits-all” will fail.
Sam’s 10 Rules for Building a Business
The book finishes off with a top-10 list, which we all love. These rules are talked about in a lot of depth throughout the book multiple times:
1. Commit to your business.Believe in it more than anybody else. If you love your work, you’ll be out there every day trying to do it the best you possibly can, and pretty soon everybody around will catch the passion from you — like a fever.
2. Share your profits with all your associates, and treat them as partners.In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations.
3. Motivate your partners.Money and ownership alone aren’t enough. Set high goals, encourage competition, and then keep score. Don’t become too predictable.
4. Communicate everything you possibly can to your partners.The more they know, the more they’ll understand. The more they understand, the more they’ll care. Once they care, there’s no stopping them.
5. Appreciate everything your associates do for the business.Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free — and worth a fortune.
6. Celebrate your success.Don’t take yourself so seriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasm — always. All of this is more important, and more fun, than you think, and it really fools competition.
7. Listen to everyone in your company.And figure out ways to get them talking. To push responsibility down in your organization, and to force good ideas to bubble up within it, you must listen to what your associates are trying to tell you.
8. Exceed your customers’ expectations.Give them what they want — and a little more. Make good on all your mistakes, and don’t make excuses — apologize. Stand behind everything you do.
9. Control your expenses better than your competition.This is where you can always find the competitive advantage. You can make a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.
10. Swim upstream.Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction.
An interesting story, mixing ol’ fashioned business as well as retail-related tips. He speaks a lot about work-life balance and how to build a truly family-operated empire, slowly offloading business units to his children. A must-read for any entrepreneur or retail executive.