Chapter 8: What to learn from Sam Walton
I have always loved reading biographies about some of the more notable people in history such as JP Morgan, Steve Jobs, and Andrew Churchhill. However, there is one book on a famous entrepreneur that I think does not get enough attention as we look back over the past 100 years. The ones over the years that I have learned the most from have been autobiographies and this one is no different.
Sam Walton was not only one of the first of a new generation of entrepreneurs but he also defined what it means to be a good businessman, put customers first, and was never willing to compromise his values to get ahead. Jeff Bezos has notoriously been one of the earliest and most well-known to have been hyper-focused on customer satisfaction. Sam Walton was years ahead of Jeff Bezos and literally wrote the book on it. Sam Walton wrote his autobiography in 1992 which was 2 years before Amazon was even founded. This book truly changed my ideas around putting customers and employees above the company.
Customer First Mentality
After Walton started Walmart in 1962 at 44 years old he molded his concept on something entirely new, doing the best thing for the customer's pocketbook. There are thousands of companies that say they put customers first but even today there are very few actually living and breathing that statement the way Sam Walton did. When Walmart would enter a new city he would not only underprice what his competitor was charging but he made sure that no product had more than a 25% profit margin. Walton did not care about making a meatier margin if he could get away with it, he only cared about the customer value. He was willing to give up even larger margins and making more money for himself but to him, that wasn't what Walmart was about. Most companies price what they think they can get for the product but so few price it in a way that benefits the customer and makes it harder on the company for the good of the customer.
“There is only one boss. The customer. And he can fire and he can fire everyone in the company from the chairman on down, from simply spending his money somewhere else”
Truly Valued Employee’s
Understood that the company can have a great overall reputation but that reputation is driven by how your employees treat customers day to day. Walton truly pioneered taking care of your employees above and beyond what was expected until he stopped running the company. He gave every employee the option to participate in a stock ownership plan that was nothing more than a thank you to employees. Wal-Mart matches employee stock purchases by 15% on the first $1,800 worth of shares bought each year. If you work at the company and write a check to buy $1,800 worth of the stock, the company is going to give you another $270 to buy shares completely free. That results in an automatic 15% return before you’ve collected your first dividend.
“If you want a successful business, your people must feel that you are working for them — not that they are working for you.”
Knew Where to Build
Sam Walton believed in one driving principle on how to start building Walmart as we know it today. Most large chain retailers would only go into cities with around 50,000 people but Sam Walton discovered that much smaller cities would attract customers from multiple cities and were severely underserved. What most retailers failed to recognize is that if you could drive real value and bargains for customers that a city of 5,000 with Walmart would start to attract customers from surrounding cities. Kmart, Walmart’s biggest competitor at the time, thought Walmart was doomed from the beginning with this strategy considering the large cost and upkeep on 20,000 square foot stores in rural America. Today Kmart is owned by sears and has a market capitalization of $130 million while Walmart has a market capitalization of $375 billion. I think we know who had a better strategy.
These three traits that Sam Walton built Walmart is the reason they employ 2.2 million associates around the world. About 75% of our store management teams started as hourly associates, and last year, promoted more than 215,000 people to jobs with greater responsibility and higher pay. For the fiscal year ended January 31, 2020, Walmart’s total revenue was $524 billion.
Sam Walton to me started the trend of customers first and not only started it but build one of the largest companies in the world entirely based on it. Putting customers first also meant treating employees right and understanding that happy employees directly contribute to happy customers. Sam Walton: Made in America is a must-read for anyone starting or working in a business and yes I know that means most people.
