Acknowledgments
　　Life has been great to me, probably better than any man has a right to expect. At home, I've beenblessed with a wife and family who've stuck together and loved each other and indulged my lifelongobsession with minding the store. At work, my business life has been spent in lockstep with an incrediblegroup of Wal-Mart associates who have put up with all my aggravation and bullheadedness and pulledtogether to make what once appeared truly impossible now seem expected and routine.

So first, I want to dedicate this book to Helen Robson Walton and the four fine kids she raisedwithsome help along the way from the old manour sons Rob, John, and Jim, and our daughter Alice.

Then I want to dedicate it to all my partnersand I wish I could recognize every one of you individually,but we've talked over the years and you know how I feel about youand to all 400,000 of myassociate-partners who've made this wild, wild Wal-Mart ride so much fun and so special. Much of thisbook is really your story.

Earlier on, there were fewer of us. Jackie Lancaster, our first floor manager inNewport,Arkansas. InezThreet, Ruby Turner, Wanda Wiseman, Ruth Kellermy first four associates when we opened Walton'sFive and Dime in Bentonville onAugust 1, 1951. What would we have done without those earlymanagers Most of them risked so much by leaving good jobs with much larger variety chains to join upwith a one-horse outfit run by an overactive dreamer down in Bentonvillepeople like Clarence Leis,Willard Walker, Charlie Baum, Ron Loveless, Bob Bogle, Claude Harris, Ferold Arend, Charlie Cate,Al Miles, Thomas Jefferson, Gary Reinboth. There was Bob Thornton, Darwin Smith, Jim Henry, PhilGreen, and Don Whitaker. And I can't forget Ray Thomas, Jim Dismore, Jim Elliott, or John Hawks.

Ron Mayer made special contributions, and Jack Shewmaker had as much to do with making Wal-Marta great company as anybody. John Tate has provided valuable counsel all along the way.

Of course, Wal-Mart wouldn't be what it is today without a host of fine competitors, most especiallyHarry Cunningham of Kmart, who really designed and built the first discount store as we know it today,and who, in my opinion, should be remembered as one of the leading retailers of all time.

Still, I think I'll hold on to my Wal-Mart stock, knowing that David Glass is at the wheel, steering a greatteam: Don Soderquist, Paul Carter, and A. L. Johnson. And when I think about young guys like BillFields and Dean Sanders and Joe Hardin running huge parts of the company, I know that one day they'llput us all to shame.

Of course, my number-one retail partner from our third store on has been my brother, James L. "Bud"Walton, who has a few things of his own to say about me in this booknot all of them flattering. Bud'swise counsel and guidance kept us from many a mistake. My nature has always been to charge, to saylet's do it now. Often, Bud would advise taking a different direction, or maybe changing the timing. I soonlearned to listen to him because he has exceptional judgment and a great deal of common sense.

Finally, I hope there's a special place in heaven reserved for my two secretaries, Loretta Boss, who waswith me for twenty-five years, and Becky Elliott, who's been with me now for three years. They deserveit after what they've put up with here on earth.

Samuel Moore WaltonBentonville,Arkansas
Foreword
　　Hello, friends, I'm Sam Walton, founder and chairman of Wal-Mart Stores. By now I hope you'veshopped in one of our stores, or maybe bought some stock in our company. If you have, you probablyalready know how proud I am of what is simply the miracle that all these Wal-Mart associates of minehave accomplished in the thirty years since we opened our first Wal-Mart here in northwestArkansas,which Wal-Mart and I still call home. As hard as it is to believe sometimes, we've grown from that onelittle store into what is now the largest retailing outfit in the world. And we've really had a heck of a timealong the way. I realize we have been through something amazing here at Wal-Mart, something specialthat we ought to share more of with all the folks who've been so loyal to our stores and to our company.

That's one thing we never did much of while we were building Wal-Mart, talk about ourselves or do awhole lot of bragging outside the Wal-Mart familyexcept when we had to convince some banker orsome Wall Street financier that we intended to amount to something someday, that we were worth takinga chance on. When folks have asked me, "How did Wal-Mart do it" I've usually been flip aboutanswering them. "Friend, we just got after it and stayed after it," I'd say. We have always pretty muchkept to ourselves, and we've had good reasons for it; we've been very protective of our business dealingsand our home lives, and we still like it that way.

But as a result, a whole lot of misinformation and myth and half-truths have gotten around over the yearsabout me and about Wal-Mart. And I think there's been way too much attention paid to my personalfinances, attention that has caused me and my family a lot of extra trouble in our livesthough I've justignored it and pretty much gone about my life and the business of Wal-Mart as best I could.

None of this has really changed. But I've been fighting cancer for a while now, and I'm not getting anyyounger anyway. And lately a lot of folksincluding Helen and the kids, some of our executives here atthe company, and even some of the associates in our stores have been fussing at me that I'm really thebest person to tell the Wal-Mart tale, and thatlike it or notmy life is all wrapped up in Wal-Mart, and Ishould get it down right while I still can. So I'm going to try to tell this story the best I'm able to, as closeto the way it all came about as I can, and I hope it will be almost as interesting and fun and exciting as it'sbeen for all of us, and that it can capture for you at least something of the spirit we've all felt in buildingthis company. More than anything, though, I want to get across once and for all just how importantWal-Mart's associates have been to its success.

This is a funny thing to do, this looking back on your life trying to figure out how all the pieces cametogether. I guess anybody would find it a little strange, but it's really odd for somebody like me becauseI've never been a very reflective fellow, never been one to dwell in the past. If I had to single out oneelement in my life that has made a difference for me, it would be a passion to compete. That passion haspretty much kept me on the go, lookingahead to the next store visit, or the next store opening, or thenext merchandising item I personally wanted to promote out in those storeslike a minnow bucket or aThermos bottle or a mattress pad or a big bag of candy.

As I do look back though, I realize that ours is a story about the kinds of traditional principles that madeAmericagreat in the first place. It is a story about entrepreneurship, and risk, and hard work, andknowing where you want to go and being willing to do what it takes to get there. It's a story aboutbelieving in your idea even when maybe some other folks don't, and about sticking to your guns. But Ithink more than anything it proves there's absolutely no limit to what plain, ordinary working people canaccomplish if they're given the opportunity and the encouragement and the incentive to do their best.

Because that's how Wal-Mart became Wal-Mart: ordinary people joined together to accomplishextraordinary things. At first, we amazed ourselves. And before too long, we amazed everybody else,especially folks who thoughtAmericawas just too complicated and sophisticated a place for this sort ofthing to work anymore.

The Wal-Mart story is unique: nothing quite like it has been done before. So maybe by telling it the wayit really happened, we can help some other folks down the line take these same principles and apply themto their dreams and make them come true.
Chapter 1  Learning to Value a Dollar
　　"I was awake one night and turned on my radio, and I heard them announce that Sam Walton was therichest man inAmerica. And I thought, 'Sam Walton. Why, he was in my class.' And I got so excited."HELEN WILLIAMS,former history and speech teacher atHickmanHigh SchoolinColumbia,MissouriSuccess has always had its price, I guess, and I learned that lesson the hard way in October of 1985whenForbes magazine named me the so-called "richest man inAmerica." Well, it wasn't too hard toimagine all those newspaper and TV folks up inNew Yorksaying "Who" and "He lives where" The nextthing we knew, reporters and photographers started flocking down here to Bentonville, I guess to takepictures of me diving into some swimming pool full of money they imagined I had, or to watch me light bigfat cigars with $100 bills while the hootchy-kootchy girls danced by the lake.

I really don't know what they thought, but I wasn't about to cooperate with them. So they found out allthese exciting things about me, like: I drove an old pickup truck with cages in the back for my bird dogs,or I wore a Wal-Mart ball cap, or I got my hair cut at the barbershop just off the townsquaresomebody with a telephoto lens even snuck up and took a picture of me in the barber chair, andit was in newspapers all over the country. Then folks we'd never heard of started calling us and writing usfrom all over the world and coming here to ask us for money. Many of them represented worthy causes,I'm sure, but we also heard from just about every harebrained, cockamamy schemer in the world. Iremember one letter from a woman who just came right out and said, "I've never been able to afford the$100,000 house I've always wanted. Will you give me the money" They still do it to this day, write orcall asking for a new car, or money to go on a vacation, or to get some dental workwhatever comesinto their minds.

Now, I'm a friendly fellow by natureI always speak to folks in the street and suchand my wife Helen isas genial and outgoing as she can be, involved in all sorts of community activities, and we've always livedvery much out in the open. But we really thought there for a while that this "richest" thing was going toruin our whole lifestyle. We've always tried to do our share, but all of a sudden everybody expected us topay their way too. And nosy people from the media would call our house at all hours and get downrightrude when we'd tell them no, you can't bring a TV crew out to the house, or no, we don't want yourmagazine to spend a week photographing the lives of the Waltons, or no, I don't have time to share mylife story with you. It made me mad, anyway, that all they wanted to talk about was my family's personalfinances. They weren't even interested in Wal-Mart, which was probably one of the best business storiesgoing on anywhere in the world at the time, but it never even occurred to them to ask about thecompany. The impression I got is that most media folksand some Wall Street types tooeither thoughtwe were just a bunch of bumpkins selling socks off the back of a truck, or that we were some kind offast buck artists or stock scammers. And when they did write about the company they either got it wrongor just made fun of us.

So the Walton family almost instinctively put a pretty tight lid on personal publicity for any of us, althoughwe kept living out in the open and going around visiting folks in the stores all the time. Fortunately, here inBentonville, our friends and neighbors protected us from a lot of these scavengers. But I did getambushed by the "Lifestyles of the Rich and Famous" guy at a tennis tournament I was playing in, andHelen talked to one of the women's magazines for an article. The media usually portrayed me as a reallycheap, eccentric recluse, sort of a hillbilly who more or less slept with his dogs in spite of having billionsof dollars stashed away in a cave. Then when the stock market crashed in 1987, and Wal-Mart stockdropped along with everything else in the market, everybody wrote that I'd lost a half billion dollars.

When they asked me about it I said, "It's only paper," and they had a good time with that.

But now I'd like to explain some of my attitudes about moneyup to a point. After that, our financeslikethose of any other normal-thinking American familyare nobody's business but our own. No questionabout it, a lot of my attitude toward money stems from growing up during a pretty hardscrabble time inour country's history: the Great Depression. And this heartland area we come from out hereMissouri,Oklahoma,Kansas,Arkansaswas hard hit during that Dust Bowl era. I was born in Kingfisher,Oklahoma, in 1918 and lived there until I was about five, but my earliest memories are ofSpringfield,Missouri,where I started school, and later of the littleMissouritown ofMarshall. After that, we lived in Shelbina,Missouri, where I started high school, and still later Columbia, where I finished high school and went onto college.

My dad, Thomas Gibson Walton, was an awfully hard worker who got up early, put in long hours, andwas honest. Completely, totally honest, remembered by most people for his integrity. He was also a bitof a character, who loved to trade, loved to make a deal for just about anything: horses, mules, cattle,houses, farms, cars. Anything. Once he traded our farm in Kingfisher for another one, near Omega,Oklahoma. Another time, he traded his wristwatch for a hog, so we'd have meat on the table. And hewas the best negotiator I ever ran into. My dad had that unusual instinct to know how far he could gowith someoneand did it in a way that he and the guy always parted friendsbut he would embarrass mewith some of the offers he would make, they were so low. That's one reason I'm probably not the bestnegotiator in the world; I lack the ability to squeeze that last dollar. Fortunately, my brother Bud, who hasbeen my partner from early on, inherited my dad's ability to negotiate.

Dad never had the kind of ambition or confidence to build much of a business on his own, and he didn'tbelieve in taking on debt. When I was growing up, he had all sorts of jobs. He was a banker and afarmer and a farm-loan appraiser, and an agent for both insurance and real estate. For a few months,early in the Depression, he was out of work altogether, and eventually he went to work for his brother'sWalton Mortgage Co., which was an agent for Metropolitan Life Insurance. Dad became the guy whohad to service Metropolitan's old farm loans, most of which were in default. In twenty-nine and thirty andthirty-one, he had to repossess hundreds of farms from wonderful people whose families had owned theland forever. I traveled with him some, and it was tragic, and really hard on Dad too but he tried to do itin a way that left those farmers with as much of their self-respect as he could. All of this must have madean impression on me as a kid, although I don't ever remember saying anything to myself like "I'll never bepoor."We never thought of ourselves as poor, although we certainly didn't have much of what you'd calldisposable income lying around, and we did what we could to raise a dollar here and there. For example,my mother, Nan Walton, got the idea during the Depression to start a little milk business. I'd get up earlyin the morning and milk the cows, Mother would prepare and bottle the milk, and I'd deliver it afterfootball practice in the afternoons. We had ten or twelve customers, who paid ten cents a gallon. Best ofall, Mother would skim the cream and make ice cream, and it's a wonder I wasn't known as Fat SamWalton in those days from all the ice cream I ate.

I also started selling magazine subscriptions, probably as young as seven or eight years old, and I hadpaper routes from the seventh grade all the way through college. I raised and sold rabbits and pigeonstoo, nothing really unusual for country boys of that era.

I learned from a very early age that it was important for us kids to help provide for the home, to becontributors rather than just takers. In the process, of course, we learned how much hard work it took toget your hands on a dollar, and that when you did it was worth something. One thing my mother and dadshared completely was their approach to money: they just didn't spend it.

BUD WALTON:

"People can't understand why we're still so conservative. They make a big deal about Sam being abillionaire and driving an old pickup truck or buying his clothes at Wal-Mart or refusing to fly first class.

"It's just the way we were brought up.

"When a penny is lying out there on the street, how many people would go out there and pick it up I'llbet I would. And I know Sam would."STEPHEN PUMPHREY, PHOTOGRAPHER:

"Once I was setting up to photograph Sam out on the tarmac of some little airport inMissouri. He wasover filing a flight plan, and I threw a nickel down on the pavementtrying to be cuteand said to myassistant: 'Lets see if he picks it up.' Planes are landing and taking off, and Sam comes walking over in abig hurry, a little put out that he has to pose for another picture. 'Okay,' he says, 'where do you want meto standon that nickel'"By the time I got out in the world ready to make something of myself, I already had a strongly ingrainedrespect for the value of a dollar. But my knowledge about money and finances probably wasn't all thatsophisticated in spite of the business degree I had. Then I got to know Helen's family, and listening to herfather, L. S. Robson, was an education in itself. He influenced me a great deal. He was a great salesman,one of the most persuasive individuals I have ever met. And I am sure his success as a trader and abusinessman, his knowledge of finance and the law, and his philosophy had a big effect on me. Mycompetitive nature was such that I saw his success and admired it. I didn't envy it. I admired it. I said tomyself: maybe I will be as successful as he is someday.

The Robsons were very smart about the way they handled their finances: Helen's father organized hisranch and family businesses as a partnership, and Helen and her brothers were all partners. They all tookturns doing the ranch books and things like that. Helen has a B.S. degree in finance, which back then wasreally unusual for a woman. Anyway, Mr. Robson advised us to do the same thing with our family, andwe did, way back in 1953. What little we had at the time, we put into a partnership with our kids, whichwas later incorporated into Walton Enterprises.

Over the years, our Wal-Mart stock has gone into that partnership. Then the board of WaltonEnterprises, which is us, the family, makes decisions on a consensus basis. Sometimes we argue, andsometimes we don't. But we control the amount we pay out to each of us, and everybody gets the same.

The kids got as much over the years as Helen and I did, except I got a salary, which my son, Jim, nowdraws as head of Walton Enterprises. That way, we accumulated funds in Enterprises rather thanthrowing it all over the place to live high. And we certainly drew all we needed, probably more, in myopinion.

The partnership works in a number of different ways. First, it enables us to control Wal-Mart throughthe family and keep it together, rather than having it sold off in pieces haphazardly. We still own 38percent of the company's stock today, which is an unusually large stake for anyone to hold in an outfit thesize of Wal-Mart, and that's the best protection there is against the takeover raiders. It's something thatany family who has faith in its strength as a unit and in the growth potential of its business can do. Thetransfer of ownership was made so long ago that we didn't have to pay substantial gift or inheritancetaxes on it. The principle behind this is simple: the best way to reduce paying estate taxes is to give yourassets away before they appreciate.

It turned out to be a great philosophy and a great strategy, and I certainly wouldn't have figured it outway back then without the advice of Helen's father. It wasn't lavish or exorbitant, and that was part of theplanto keep the family together as well as maintain a sense of balance in our standards.

HELEN WALTON:

"It was great moneywise, but there was another aspect to it: the relationship that was established amongthe children and with the family. It developed their sense of responsibility toward one another. You justcan't beat that."So along comesForbes in 1985 and says I'm the richest man inAmerica. Well, there's no question that ifyou multiply the Wal-Mart stock price by how much we own, then maybe we are worth $20 or $25billion, or whatever they say. The family may have those kinds of assets, but I have never seen thatmyself. For one thing, Helen and I only own 20 percent of our family's total interest in Wal-Mart. Foranother, as long as I have anything to do with itand I'm confident this attitude will last at least anothergenerationmost of that Wal-Mart stock is staying right where it is. We don't need the money. We don'tneed to buy a yacht. And thank goodness we never thought we had to go out and buy anything like anisland. We just don't have those kinds of needs or ambitions, which wreck a lot of companies when theyget along in years. Some families sell their stock off a little at a time to live high, andthenboomsomebody takes them over, and it all goes down the drain. One of the real reasons I'mwriting this book is so my grandchildren and great-grandchildren will read it years from now and knowthis: If you start any of that foolishness, I'll come back and haunt you. So don't even think about it.

Not that I'm trying to poor-mouth here. We certainly have had more than adequate funds in this familyfor a long timeeven before we got Wal-Mart cranked up. Here's the thing: money never has meant thatmuch to me, not even in the sense of keeping score. If we had enough groceries, and a nice place to live,plenty of room to keep and feed my bird dogs, a place to hunt, a place to play tennis, and the means toget the kids good educationsthat's rich. No question about it. And we have it. We're not crazy. Wedon't live like paupers the way some people depict us. We all love to fly, and we have nice airplanes, butI've owned about eighteen airplanes over the years, and I never bought one of them new. We have ourfamily meetings at fine places like the Ritz-Carlton inNaples,Florida, or the Del Coronado inSan Diego.

This house we live in was designed by E. Fay Jones, who lives down the road inFayettevilleand is aworld-famous disciple of Frank Lloyd Wright. And even though I think it cost too much, I have to admitthat it's beautifulbut in a real simple, natural kind of way.

We're not ashamed of having money, but I just don't believe a big showy lifestyle is appropriate foranywhere, least of all here in Bentonville where folks work hard for their money and where we all knowthat everyone puts on their trousers one leg at a time. I'm not sure I ever really figured out this celebritybusiness. Why in the world, for example, would I get an invitation to Elizabeth Taylor's wedding out inHollywood I still can't believe it was news that I get my hair cut at the barbershop. Where else would Iget it cut Why do I drive a pickup truck What am I supposed to haul my dogs around in, a RollsRoyceNowadays, I'm willing to concede that some good may have come from that magazine article and all thehubbub it created, as much as I hated it for years. At first I thought it was going to be bad for my relationship with the associates in the stores. But I found out that, gosh, they almost looked at it like: "Look, wehelped him get there. Good for him!" I think my coming by to visit the stores somehow means more tothem now. I noticed a big difference in their reaction since that list made me into sort of a public figure.

And, of course, our customers seem to get a kick out of it tooasking me to autograph dollar bills andother stuff.

CHARLIE BAUM, EARLY WAL-MART PARTNER:

"I've known Sam since his first store inNewport,Arkansas, and I believe that money is, in some respects,almost immaterial to him. What motivates the man is the desire to absolutely be on top of the heap. It isnot money. Money drives him crazy now. His question to me at6a.m.not long ago was 'How do youinspire a grandchild to go to work if they know they'll never have a poor day in their life'"DAVID GLASS, CEO, WAL-MART:

"Does Sam have money I've been traveling with him for thirty years, and you could never tell it by me.

In fact, if I didn't read the proxy statement every year, I'd swear he was broke. I remember one time wewere flying out of New Yorkon a commercial flightgoing to see our friends at The Limited inColumbus, Ohioand all of a sudden at the airport, Sam sort of looks startled and says, 'David, I don'thave any money with me. Do you' I reached in my wallet and pulled out two twenties. He looked atthem and said, 'You won't need both of those, let me borrow one.' "Now, when it comes to Wal-Mart, there's no two ways about it: I'm cheap. I think it's a real statementthat Wal-Mart never bought a jet until after we were approaching $40 billion in sales and expanded asfar away as California and Maine, and even then they had to practically tie me up and hold me down todo it. On the road, we sleep two to a room, although as I've gotten older I have finally started staying inmy own room. We stay in Holiday Inns and Ramada Inns and Days Inns, and we eat a lot at familyrestaurantswhen we have time to eat. A lot of what goes on these days with high-flying companies andthese overpaid CEO's, who're really just looting from the top and aren't watching out for anybody butthemselves, really upsets me. It's one of the main things wrong with American business today.

GARY REINBOTH, EARLY STORE MANAGER, WAL-MART:

"In those days, we would go on these buying trips with Sam, and we'd all stay, as much as we could, inone room or two. I remember one time inChicagowhen we stayed eight of us to a room. And the roomwasn't very big to begin with. You might say we were on a pretty restricted budget."But sometimes I'm asked why today, when Wal-Mart has been so successful, when we're a $50billion-plus company, should we stay so cheap That's simple: because we believe in the value of thedollar. 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 Wal-Mart spends one dollar foolishly, it comes right out of ourcustomers' pockets. Every time we save them a dollar, that puts us one more step ahead of thecompetitionwhich is where we always plan to be.
Chapter 2 Starting on a Dime
　　"From the time we were kids, Sam could excel at anything he set his mind to. I guess it's just the way hewas born. Back when he carried newspapers, they had a contest. I've forgotten what the prizesweremaybe $10, who knows. He won that contest, going out selling new subscriptions door to door.

And he knew he was going to win. It's just the makeup of the man. My only explanation is that Sam has alot of our mother's characteristics."BUD WALTONI don't know what causes a person to be ambitious, but it is a fact that I have been overblessed withdrive and ambition from the time I hit the ground, and I expect my brother's probably right. Our motherwas extremely ambitious for her kids. She read a lot and loved education, although she didn't have toomuch herself. She went to college for a year before she quit to get married, and maybe to compensate forthat, she just ordained from the beginning that I would go to college and make something of myself. Oneof the great sadnesses in my life is that she died young, of cancer, just as we were beginning to do well inbusiness.

Mother must have been a pretty special motivator, because I took her seriously when she told me Ishould always try to be the best I could at whatever I took on. So, I have always pursued everything Iwas interested in with a true passionsome would say obsessionto win. I've always held the bar prettyhigh for myself: I've set extremely high personal goals.

Even when I was a little kid inMarshall,Missouri, I remember being ambitious. I was a class officerseveral years. I played football and baseball and basketball with the other kids, and I swam in thesummers. I was so competitive that when I started Boy Scouts inMarshallI made a bet with the otherguys about which one of us would be the first to reach the rank of Eagle. Before I made Eagle inMarshall, we had moved to the little town of Shelbina, Missouripopulation maybe 1,500but I won thebet; I got my Eagle at age thirteenthe youngest Eagle Scout in the history of the state of Missouri at thattime.

FROM THESHELBINA DEMOCRAT, SUMMER 1932:

"Because of his training in Boy Scout work, Sammy Walton, 14-year-old son of Mr. and Mrs. TomWalton of Shelbina, rescued Donald Peterson, little son of Prof. and Mrs. K.R. Peterson, from drowningin Salt River Thursday afternoon...

"Donald got into water too deep for him and called for help. Loy Jones, who had accompanied theboys, made an effort to get him out, but Donald's struggles pulled Mr. Jones down several times. YoungWalton, who was some distance away, got to the pair just as Donald went down a fifth time. He graspedhim from behind, as he had been taught to do, pulled him to shore and applied artificial respiration thatscouts must become proficient in.

"Donald was unconscious and his whole body had turned blue. It took quite a while to bring himaround."They said I saved his lifemaybe yes, maybe no. Newspapers tend to exaggerate these things. But atleast I got him out of the water. Looking back on such boyhood episodes helps me to realize now thatI've always had a strong bias toward actiona trait that has been a big part of the Wal-Mart story.

Truthfully, though, talking about this embarrasses me a good bit because I worry that it seems like I'mbragging or trying to make myself out to be some big hero. It particularly bothers me because I learned along time ago that exercising your ego in public is definitely not the way to build an effective organization.

One person seeking glory doesn't accomplish much; at Wal-Mart, everything we've done has been theresult of people pulling together to meet one common goalteamworksomething I also picked up at anearly age.

Team play began for me when I was in the fifth grade, and a friend of mine's dad organized a bunch ofus into a peewee football team. We competed against other towns, likeOdessaandSedaliaandRichmond.

Iplayed end, but I wanted to throw the ball or be a running back, even though I was a little guy andcouldn't squeeze my way in yet. Team athletics remained a big part of my life all through high school andat the intramural levelin college too. By the time we moved to Shelbina, I had more football experiencethan most of the other kids in the ninth grade, so I was able to make the team as a second-stringquarterback. I was still smallonly about 130 poundsbut I knew a lot about blocking and tackling andthrowing the ball, and by being extremely competitive I got my letter.

Then we moved on againthis time toColumbia,Missouri. There, atHickmanHigh School, I got involvedin just about everything. I wasn't what you'd call a gifted student, but I worked really hard and made thehonor roll. I was president of the student body and active in a lot of clubsI remember the speech club inparticularand I was voted Most Versatile Boy. I was really a gym rat. I loved hanging around that gymplaying basketball, but I didn't go out for the teammaybe because I was only five nine. When I was asenior, though, they drafted me for the team, and I became a guard, sometimes a starter. I wasn't a greatshot, but I was a pretty good ball handler and a real good floor leader. I liked running the team, I guess.

We went undefeatedand in one of my biggest thrillswon the state championship.

My high school athletic experience was really unbelievable, because I was also the quarterback on thefootball team, which went undefeated tooand won the state championship as well. I didn't throwparticularly well, but we were mostly a running team. And I was fairly slow for a back, but I was shifty,sometimes so shifty that I would fall down with a bunch of daylight in front of me. On defense, myfavorite thing was when the coach would slip me in and let me play linebacker. I had a good sense forwhere the ball was going to go, and I really loved to hit. I guess I was just totally competitive as anathlete, and my main talent was probably the same as my best talent as a retailerI was a good motivator.

This is hard to believe, but it's true: in my whole life I never played in a losing football game. I certainlycan't take much of the credit for that, and, in fact, there was definitely some luck involved. I was sick orinjured for a couple of games that we wouldn't have won with or without meso I dodged the bullet on afew losses that I could have played in. But I think that record had an important effect on me. It taught meto expect to win, to go into tough challenges always planning to come out victorious. Later on in life, Ithink Kmart, or whatever competition we were facing, just becameJeffCityHigh School, the team weplayed for the state championship in 1935. It never occurred to me that I might lose; to me, it was almostas if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy.

Having been the quarterback for the Hickman Kewpiesthe undefeated state championsI was alreadypretty well known aroundColumbia, where theUniversityofMissouriis located. So my high school careerjust merged right on into college. Most of the fraternities were really for the more well-to-do kids, and Iordinarily wouldn't have qualified for membership. But they rushed me even as a town boy, and I had mypick of the best. I chose Beta Theta Pi because they were the top scholastic fraternity and had led theintramural athletic league for a number of years.

When I was a sophomore, the Betas made me rush captain. So I bought a real old Ford, and I traveledthe whole state that summer, interviewing potential Beta candidates. With all this competitive spirit andambition I had back then, I even entertained thoughts of one day becoming President of theUnited States.

Closer at hand, I had decided I wanted to be president of the university student body. I learned early onthat one of the secrets to campus leadership was the simplest thing of all: speak to people coming downthe sidewalk before they speak to you. I did that in college. I did it when I carried my papers. I wouldalways look ahead and speak to the person coming toward me. If I knew them, I would call them byname, but even if I didn't I would still speak to them. Before long, I probably knew more students thananybody in the university, and they recognized me and considered me their friend. I ran for every officethat came along. I was elected president of the senior men's honor society, QEBH, an officer in myfraternity, and president of the senior class. I was captain and president of Scabbard and Blade, the elitemilitary organization of ROTC.

FROM AN ARTICLE CALLED "HUSTLER WALTON" IN FRATERNITY NEWSPAPER, 1940:

"Sam is one of those rare people who knows every janitor by name, passes plates in church, loves tojoin organizations . . . Sam's ability to lead has been the cause of much ribbing. His military uniform haslet him be called 'Little Caesar.' For his presidency of the Bible class he suffered the nickname 'Deacon.'"Also while I was atMissouri, I was elected president of the Burall Bible Classa huge class made up ofstudents from bothMissouriandStephensCollege. Growing up, I had always gone to church and Sundayschool every Sunday; it was an important part of my life. I don't know that I was that religious, per se,but I always felt like the church was important. Obviously, I enjoyed running for office during my collegeyears. But aside from dabbling in some city council politics years later, I really left my ambitions forelected office on the college campus.

I was about to graduate from the University of Missouri in June of 1940 with a business degree, and Ihad been working probably as hard as I ever worked in my life. I've always had lots of energy, but I wastired. Ever since high school, I had made all my own money and paid for all my own clothes. Thatcontinued in college except I had to add tuition and food and fraternity dues and date money to myexpenses. Dad and Mother would have been glad to help if they could have, but it was the Depressionand they had no extra money at all. I had continued to throw a newspaper route all through high school,and in college I added a few more routes, hired a few helpers, and turned it into a pretty good business. Imade about $4,000 to $5,000 a year, which at the end of the Depression was fairly serious money.

EZRA ENTREKIN, FORMER CIRCULATION MANAGER OF THECOLUMBIAMISSOURIAN:

"We hired Sam to deliver newspapers, and he really became our chief salesman. When school started,we had a drive to get the kids in the fraternities and sororities to subscribe. And Sam was the boy wehad do that because he could sell more than anybody else. He was good. He was really good. Anddedicated. And he did a lot of other things besides deliver newspapers. In fact, he was a little bitscatterbrained at times. He'd have so many things going, he'd almost forget one. But, boy, when hefocused on something, that was it."In addition to the newspapers, I waited tables in exchange for meals, and I was also the head lifeguard incharge of the swimming pool. You can see that I was a pretty busy fellow, and you can see why mynotorious respect for the value of a dollar continued. But now that I was about to become a collegegraduate, I was ready to give up this routine, really eager to get out in the world and make something ofmyself in a real job.

My first exposure to the possibilities of retail had come in 1939, when our family happened to move nextdoor to a guy named Hugh Mattingly. He had been a barber inOdessa,Missouri, before he and hisbrothers started a variety store chain which had grown to around sixty stores by that time. I would talkwith him about merchandising, how to do it, and how well it was working out for him. He took an interestin me, and later even offered me a job.

But I never seriously considered retail in those days. In fact, I was sure I was going to be an insurancesalesman. I had a high school girlfriend whose father was a very successful salesman for GeneralAmerican Life Insurance Company, and I had talked to him about his business. It appeared to me that hewas making all the money in the world. Insurance seemed like a natural for me because I thought I couldsell. I had always sold things. As a little kid I soldLibertymagazines for a nickel, and then switched toWoman's Home Companion when it came along for a dime, figuring I could make twice as muchmoney. The girl and I broke up, but I still had big plans. I figured I would get my degree and go on to theWharton School of Finance inPennsylvania. But as college wound down, I realized that even if I kept upthe same kind of work routine I'd had all through college, I still wouldn't have the money to go toWharton. So I decided to cash in what chips I already had, and I visited with two company recruiterswho had come to theMissouricampus. Both of them made me job offers. I accepted the one from JCPenney; I turned down the one from Sears Roebuck. Now I realize the simple truth: I got into retailingbecause I was tired and I wanted a real job.

The deal was pretty straightforwardreport to the JC Penney store inDes Moines,Iowa, three days aftergraduation,June 3, 1940, and begin work as a management trainee. Salary: $75 a month. That's the day Iwent into retail, andexcept for a little time out as an Army officerthat's where I've stayed for the lastfifty-two years. Maybe I was born to be a merchant, maybe it was fate. I don't know about that kind ofstuff. But I know this for sure: I loved retail from the very beginning, and I still love it today. Not that itwent all that smooth right off the bat.

Like I said, I could sell. And I loved that part. Unfortunately, I never learned handwriting all that well.

Helen says there're only about five people in the world who can read my chicken scratchshe's not oneof themand this began to cause some problems for me at my new job. Penney's had a fellow out ofNewYorknamed Blake, who traveled around the country auditing stores and evaluating personnel andwhatnot, and he would come to see us pretty regularly. I remember him as a big fellow, over six feet,who always dressed to the nines, you know, Penney's best suits and shirts and ties. Anyway, he'd get allupset at the way I would screw up the sales slips and generally mishandle the cash register part of things.

I couldn't stand to leave a new customer waiting while I fiddled with paperwork on a sale I'd alreadymade, and I have to admit it did create some confusion.

"Walton," Blake would say to me when he came toDes Moines, "I'd fire you if you weren't such a goodsalesman. Maybe you're just not cut out for retail."Fortunately, I found a champion in my store manager, Duncan Majors, a great motivator, who wasproudest of having trained more Penney managers than anybody else in the country. He had his owntechniques and was a very successful manager. His secret was that he worked us from six-thirty in themorning until seven oreight o'clockat night. All of us wanted to become managers like him. On Sundays,when we weren't working, we would go out to his housethere were about eight of us, all menand wewould talk about retailing, of course, but we also played Ping-Pong or cards. It was a seven-day job. Iremember one Sunday Duncan Majors had just gotten his annual bonus check from Penney's and waswaving it around all over the place. It was for $65,000, which impressed the heck out of us boys.

Watching this guy is what got me excited about retail. He was really good. Then, of course, the icing onthe cake was when James Cash Penney himself visited the store one day. He didn't get around to hisstores as often as I would later on, but he did get around. I still remember him showing me how to tie andpackage merchandise, how to wrap it with very little twine and very little paper but still make it look nice.

I worked for Penney's about eighteen months, and they really were the Cadillac of the industry as far asI was concerned. But even back then I was checking out the competition. The intersection where Iworked inDes Moineshad three stores, so at lunch I would always go wander around the Sears and theYonkersstores to see what they were up to.

By early 1942, though, the war was on, and as an ROTC graduate I was gung-ho to go, ready to shipout overseas and see my share of the action. But the Army had a big surprise for me. Because of a minorheart irregularity, I flunked the physical for combat duty and was classified for limited duty. This kind ofgot me down in the dumps, and since I was just waiting around to be called up anyway I quit myPenney's job and wandered south, towardTulsa, with some vague idea of seeing what the oil businesswas like. Instead, I got a job at a big Du Pont gunpowder plant in the town ofPryor, outsideTulsa. Theonly room I could find to stay in was nearby, over in Claremore. That's where I met Helen Robson oneApril night in a bowling alley.

HELEN WALTON:

"I was out on a date with another fellow, and it was the first time I'd ever been bowling. I had just rolledthe ball and when I came back to the seats they were those old wooden theater chairsSam had his legup over the armrest of one of them, and he smiled at me and said, corny as it was, "Haven't I met yousomewhere before" We discovered that he had dated a girl I knew in college. Later on, he called meand asked me for her number, and I think maybe he even went out with her. But pretty soon, he and Iwere going out together. My whole family just fell in love with him, and I always said he fell in love asmuch with my family as he did with me."When Helen and I met and I started courting her, I just fell right in love. She was pretty and smart andeducated, ambitious and opinionated and strong-willed with ideas and plans of her own. Also, like me,she was an athlete who loved the outdoors, and she had lots of energy.

HELEN WALTON:

"I always told my mother and dad that I was going to marry someone who had that special energy anddrive, that desire to be a success. I certainly found what I was looking for, but now I laugh sometimesand say maybe I overshot a little."At the same time Helen and I fell for each other, I was finally called up to the Army for active duty.

Because of my heart irregularity, I couldn't see combat, but I was still able to accept my ROTCcommission as a second lieutenant. By the time I went into the Army I had two things settled: I knew whoI wanted to marry, and I knew what I wanted to do for a livingretailing. About a year after I went intothe Army, Helen and I were married on Valentine's Day, 1943, in her hometown ofClaremore,Oklahoma.

I wish I could recount a valiant military careerlike my brother Bud, who was a Navy bomber pilot on acarrier in the Pacificbut my service stint was really fairly ordinary time spent as a lieutenant and then as acaptain doing things like supervising security at aircraft plants and POW camps in California and aroundthe country.

Helen and I spent two years living the Army life, and when I got out in 1945, I not only knew I wantedto go into retailing, I also knew I wanted to go into business for myself. My only experience was thePenney job, but I had a lot of confidence that I could be successful on my own. Our last Army postingwas inSalt Lake City, and I went to the library there and checked out every book on retailing. I alsospent a lot of my off-duty time studying ZCMI, the Mormon Church's department store out there, justfiguring that when I got back to civilian life I would somehow go into the department store business. Theonly question left was where we were going to set up housekeeping.

HELEN WALTON:

"My father wanted us to move to Claremore, but I told him, 'Dad, I want my husband to be himself, Idon't want him to be L. S. Robson's son-in-law. I want him to be Sam Walton."As I mentioned, Helen's father was a very prominent lawyer, banker, and rancher, and she felt weshould be independent. I agreed with her, and I thought our best opportunity might be inSt. Louis. As itturned out, an old friend of mine, Tom Bates, also wanted to go into the department store business. I'dknown Tom when we were kids in Shelbinahis father owned the biggest department store in townandTom and I were roommates in the Beta Theta Pi fraternity house atMissouri. When I got out of theArmy, I caught up with Tom inSt. Louis. He was working in the shoe department of Butler Brothers.

Butler Brothers was a regional retailer with two franchise operations: Federated Stores, a chain of smalldepartment stores, and Ben Franklin, a chain of variety stores, what we used to call "five and dimes" or"dime stores."Tom had a great idea, I thought. He and I would become partners, each putting up $20,000, and buy aFederated department store on Del Mar Avenue inSt. Louis. Helen and I had $5,000 or so, and I knewwe could borrow the rest from her father, who always had a lot of faith in me and was very supportive.

Man, I was all set to become a big-city department store owner. That's when Helen spoke up and laiddown the law.

Helen walton:

"Sam, we've been married two years and we've moved sixteen times. Now, I'll go with you any placeyou want so long as you don't ask me to live in a big city. Ten thousand people is enough for me."So any town with a population over 10,000 was off-limits to the Waltons. If you know anything at allabout the initial small-town strategy that got Wal-Mart going almost two decades later, you can see thatthis pretty much set the course for what was to come. She also said no partnerships; they were too risky.

Her family had seen some partnerships go sour, and she was dead-set in the notion that the only way togo was to work for yourself. So I went back to Butler Brothers to see what else they might have for me.

What they had was a Ben Franklin variety store inNewport,Arkansasa cotton and railroad town ofabout 7,000 people, in the Mississippi River Delta country of easternArkansas. I remember riding downthere on the train from St. Louis, still wearing my Army uniform with the Sam Browne belt, and walkingdown Front Street to give this storemy dreamthe once-over. A guy fromSt. Louisowned it, and thingsweren't working out at all for him. He was losing money, and he wanted to unload the store as fast as hecould. I realize now that I was the sucker Butler Brothers sent to save him. I was twenty-seven years oldand full of confidence, but I didn't know the first thing about how to evaluate a proposition like this so Ijumped right in with both feet. I bought it for $25,000 $5,000 of our own money and $20,000borrowed from Helen's father. My naivet about contracts and such would later come back to haunt mein a big way.

But at the time I was sureNewportand the Ben Franklin had great potential, and I've always believed ingoals, so I set myself one: I wanted my littleNewportstore to be the best, most profitable variety store inArkansaswithin five years. I felt I had the talent to do it, that it could be done, and why not go for it Setthat as a goal and see if you can't achieve it. If it doesn't work, you've had fun trying.

Only after we closed the deal, of course, did I learn that the store was a real dog. It had sales of about$72,000 a year, but its rent was 5 percent of saleswhich I thought sounded finebut which, it turned out,was the highest rent anybody'd ever heard of in the variety store business. No one paid 5 percent of salesfor rent. And it had a strong competitora Sterling Store across the streetwhose excellent manager, JohnDunham, was doing more than $150,000 a year in sales, double mine.

For all my confidence, I hadn't had a day's experience in running a variety store, so Butler Brothers sentme for two weeks' training to the Ben Franklin inArkadelphia,Arkansas. After that, I was on my own,and we opened for business onSeptember 1, 1945. Our store was a typical old variety store, 50 feetwide and 100 feet deep, facingFront Street, in the heart of town, looking out on the railroad tracks. Backthen, those stores had cash registers and clerk aisles behind each counter throughout the store, and theclerks would wait on the customers. Self-service hadn't been thought of yet.

It was a real blessing for me to be so green and ignorant, because it was from that experience that Ilearned a lesson which has stuck with me all through the years: you can learn from everybody. I didn'tjust learn from reading every retail publication I could get my hands on, I probably learned the most fromstudying what John Dunham was doing across the street.

HELEN WALTON:

"It turned out there was a lot to learn about running a store. And, of course, what really drove Sam wasthat competition across the streetJohn Dunham over at the Sterling Store. Sam was always over therechecking on John. Always. Looking at his prices, looking at his displays, looking at what was going on.

He was always looking for a way to do a better job. I don't remember the details, but I remember somekind of panty price war they got into. Later on, long after we had leftNewport, and John had retired, wewould see him and he would laugh about Sam always being in his store. But I'm sure it aggravated himquite a bit early on. John had never had good competition before Sam."I learned a tremendous amount from running a store in the Ben Franklin franchise program. They had anexcellent operating program for their independent stores, sort of a canned course in how to run a store. Itwas an education in itself. They had their own accounting system, with manuals telling you what to do,when and how. They had merchandise statements, they had accounts-payable sheets, they hadprofit-and-loss sheets, they had little ledger books called Beat Yesterday books, in which you couldcompare this year's sales with last year's on a day-by-day basis. They had all the tools that anindependent merchant needed to run a controlled operation. I had no previous experience inaccountingand I wasn't all that great at accounting in collegeso I just did it according to their book. Infact, I used their accounting system long after I'd started breaking their rules on everything else. I evenused it for the first five or six Wal-Marts.

As helpful as that franchise program was to an eager-to-learn twenty-seven-year-old kid, ButlerBrothers wanted us to do things literally by the booktheir book. They really didn't allow their franchiseesmuch discretion. The merchandise was assembled inChicago,St. Louis, orKansas City. They told mewhat merchandise to sell, how much to sell it for, and how much they would sell it to me for. They toldme that their selection of merchandise was what the customers expected. They also told me I had to buyat least 80 percent of my merchandise from them, and if I did, I would get a rebate at year-end. If Iwanted to make a 6 or 7 percent net profit, they told me I would have to hire so much help and do somuch advertising. This is how most franchises work.

At the very beginning, I went along and ran my store by their book because I really didn't know anybetter. But it didn't take me long to start experimenting that's just the way I am and always have been.

Pretty soon I was laying on promotional programs of my own, and then I started buying merchandisedirectly from manufacturers. I had lots of arguments with manufacturers. I would say, "I want to buythese ribbons and bows direct. I don't want you to sell them to Butler Brothers and then I have to payButler Brothers 25 percent more for them. I want it direct." Most of the time, they didn't want to makeButler Brothers mad so they turned me down. Every now and then, though, I would find one who wouldcross over and do it my way.

That was the start of a lot of the practices and philosophies that still prevail at Wal-Mart today. I wasalways looking for offbeat suppliers or sources. I started driving over to Tennessee to some fellows Ifound who would give me special buys at prices way below what Ben Franklin was charging me. One Iremember was Wright Merchandising Co. inunion City, which would sell to small businesses like mine atgood wholesale prices. I'd work in the store all day, then take off around closing and drive that windyroad over to theMississippi Riverferry atCottonwood Point,Missouri, and then intoTennesseewith an oldhomemade trailer hitched to my car. I'd stuff that car and trailer with whatever I could get good dealsonusually on softlines: ladies' panties and nylons, men's shirts and I'd bring them back, price them low,and just blow that stuff out the store.

I've got to tell you, it drove the Ben Franklin folks crazy. Not only were they not getting theirpercentages, they couldn't compete with the prices I was buying at. Then I started branching out furtherthanTennessee. Somehow or another, I got in touch by letter with a manufacturer's agent out ofNewYorknamed Harry Weiner. He ran Weiner Buying Services at505 Seventh Avenue. That guy ran a verysimple business. He would go to all these different manufacturers and then list what they had for sale.

When somebody like me sent him an order, he would take maybe 5 percent for himself and then send theorder on to the factory, which would ship it to us. That 5 percent seemed like a pretty reasonable cut tome, compared to 25 percent for Ben Franklin.

I'll never forget one of Harry's deals, one of the best items I ever had and an early lesson in pricing. Itfirst got me thinking in the direction of what eventually became the foundation of Wal-Mart's philosophy.

If you're interested in "how Wal-Mart did it," this is one story you've got to sit up and pay close attentionto. Harry was selling ladies' pantiestwo-barred, tricot satin panties with an elastic waistfor $2.00 adozen. We'd been buying similar panties from Ben Franklin for $2.50 a dozen and selling them at threepair for $1.00. Well, at Harry's price of $2.00, we could put them out at four for $1.00 and make a greatpromotion for our store.

Here's the simple lesson we learnedwhich others were learning at the same time and which eventuallychanged the way retailers sell and customers buy all across America: say I bought an item for 80 cents. Ifound that by pricing it at $1.00 I could sell three times more of it than by pricing it at $1.20. I mightmake only half the profit per item, but because I was selling three times as many, the overall profit wasmuch greater. Simple enough. But this is really the essence of discounting: by cutting your price, you canboost your sales to a point where you earn far more at the cheaper retail price than you would have byselling the item at the higher price. In retailer language, you can lower your markup but earn morebecause of the increased volume.

I began to mull this idea inNewport, but it would be another ten years before I took it seriously. Icouldn't follow up on it inNewportbecause the Ben Franklin program was too cut-and-dried to permit it.

And despite my dealings with the likes of Harry Weiner, I still had that contract saying I was supposed tobuy at least 80 percent of my merchandise from Ben Franklin. If I missed that target, I didn't get myyear-end rebate. The fact of the matter is I stretched that contract every way I could. I would buy asmuch as I could on the outside and still try to meet the 80 percent. Charlie Baumwho was then one ofthe field men for Ben Franklinwould say we were only at 70 percent, and I would foam at the mouthand rant and rave about it. I guess the only reason Butler Brothers didn't give me a harder time about it allis that our store had quickly gone from being a laggard to one of the top performers in our district.

Things began to clip along pretty good inNewportin a very short time. After only two and a half yearswe had paid back the $20,000 Helen's father loaned us, and I felt mighty good about that. It meant thebusiness had taken off on its own, and I figured we were really on our way now.

We tried a lot of promotional things that worked really well. First, we put a popcorn machine out on thesidewalk, and we sold that stuff like crazy. So I thought and thought about it and finally decided what weneeded was a soft ice cream machine out there too. I screwed my courage up and went down to thebank and borrowed what at the time seemed like the astronomical sum of $1,800 to buy that thing. Thatwas the first money I ever borrowed from a bank. Then we rolled the ice cream machine out there on thesidewalk next to the popcorn machine, and I mean we attracted some attention with those two. It wasnew and differentanother experimentand we really turned a profit on it. I paid off that $1,800 note intwo or three years, and I felt great about it. I really didn't want to be remembered as the guy who lost hisshirt on some crazy ice cream machine.

CHARLIE BAUM:

"Everybody wanted to go see Sam Walton's store. We never had another store that had a Ding Dongice cream bar in it, one of those ice creammaking machines. People went there for that, and it wasfantastic. But one Saturday night for some reason they forgot to clean that machine up when they closed,and I went by there the next day with some of my clients to show them Sam's front window. And I wantto tell you, the flies in that window were just out of this world."As good as business was, I never could leave well enough alone, and, in fact, I think my constant fiddlingand meddling with the status quo may have been one of my biggest contributions to the later success ofWal-Mart. As I mentioned, we facedFront Street, and our biggest competitorJohn Dunham's SterlingStorewas acrossHazel Streeton the other corner. His store was slightly smaller than ours, but he stillmanaged to do twice as much business as our store did before we bought it. We were coming on strong,though. In our first year, the Ben Franklin did $105,000 in sales, compared to $72,000 under the oldowner. Then the next year $140,000, and then $175,000.

Finally we caught, and then passed, old John over there acrossHazel Street. But next door to him, on theother side from us, was a Kroger grocery store. By now, I was real involved in the community and keptmy ear to the ground pretty good, and I heard thatSterlingwas going to buy Kroger's lease and expandJohn's store into that space, making their store much bigger than mine. So I hustled down toHot Springs,to find the landlady of that Kroger building. Somehow, I convinced her to give me the lease, instead ofgiving it toSterling. I didn't have any idea what I was going to do with it, but I sure knew I didn't wantSterlingto have it. Well, I decided to put in a small department store. NowNewportalready had severaldepartment stores, one of which happened to be owned by my store's landlord, P. K. Holmes. That mayor may not have had something to do with the trouble which was going to come soon. But we didn't thinkanything about it.

I drew up a plan, bought a sign, bought new fixtures from a company up in Nebraska, and bought themerchandisedresses, pants, shirts, jackets, whatever I thought I could sell. The fixtures arrived onWednesday by train, and Charlie Baum, who was supposed to be supervising my merchandising forButler Brothers, offered to help me put everything together. He was the most efficient store layer-outerI've ever known. We went over to the railroad tracks and unloaded the fixtures, put them together, laidout the store, put the merchandise togetherand opened six days later on Monday. We called it the EagleStore.

So now we had two stores onFront StreetinNewport. I would run up and down the alley withmerchandise: if it didn't sell in one store, I would try it in the other. I guess they competed with eachother, but not much. By now, the Ben Franklin was doing really well. The Eagle never made muchmoney, but I figured I'd rather have a small profit than have my competitor over there in a big store. I hadto hire my first assistant manager to help out in the Ben Franklin while I was running back and forth, andmy brother Bud had come home from the war and was working with me too.

BUD WALTON"ThatNewportstore was really the beginning of where Wal-Mart is today. We did everything. We wouldwash windows, sweep floors, trim windows. We did all the stockroom work, checked the freight in.

Everything it took to run a store. We had to keep expenses to a minimum. That is where it started, yearsago. Our money was made by controlling expenses. That, and Sam always being ingenious. He neverstopped trying to do something different. One thing, though: I never forgave him for making me clean outthat damned ice cream machine. He knew I'd hated milk and dairy products ever since we were kids. Heused to squirt me when he milked the cows. I always thought he gave me that job because he knew Ididn't like milk. He still laughs about it."We couldn't have felt better about our situation down there. Helen and I both have the kinds ofpersonalities that make us want to participate in community life, and we had become deeply involved.

We had joined the Presbyterian church there, and even though I was a Methodist, it worked out realwell. Just as Helen and I were raised in the church, we felt that our kids would benefit from a churchupbringing. Church is an important part of society, especially in small towns. Whether it's the contactsand associations you make or the contributions you might make toward helping other folks, it all sort ofties in together. Helen was very active in her churchwork, which she still is today, and in PEO, aninternational women's organization. Our four children had come along by now, and Helen really lovedNewport. I was a member of the church's board of deacons, was active in the Rotary Club, and hadbecome president of the Chamber of Commerce as well as head of its industrial committee. I was prettymuch involved in everything around town.

It so happened that on the other side of our store, also onFront Street, was a JC Penney. We didn'tcompete much, and I was friendly with the manager. So one day this dapper supervisor fromNew Yorknamed Blake came to town to audit that store and got to chatting with the manager.

"Say," the manager told Blake, "we've got an ex-Penney man right here inNewport. He came in a fewyears ago and really made a big success of it. He doubled sales in his Ben Franklin, he's got two stores,and he's the president of the Chamber of Commerce." And when the manager told him it was SamWalton, old Blake almost fell over. "It can't be the same one I knew inDes Moines," he said. "That fellowcouldn't have amounted to anything." He came next door and we both had a big laugh about it when hesaw that I really was that kid who couldn't write so you could read it.

By now, my five years inNewportwere about up, and I had met my goal. That little Ben Franklin storewas doing $250,000 in sales a year, and turning $30,000 to $40,000 a year in profit. It was thenumber-one Ben Franklin storefor sales or profitnot only inArkansas, but in the whole six-state region.

It was the largest variety store of any sort inArkansas, and I don't believe there was a bigger one in thethree or four neighboring states.

Every crazy thing we tried hadn't turned out as well as the ice cream machine, of course, but we hadn'tmade any mistakes we couldn't correct quickly, none so big that they threatened the business. Except, itturned out, for one little legal error we made right at the beginning. In all my excitement at becoming SamWalton, merchant, I had neglected to include a clause in my lease which gave me an option to renewafter the first five years.

And our success, it turned out, had attracted a lot of attention. My landlord, the department storeowner, was so impressed with our Ben Franklin's success that he decided not to renew our leaseat anypriceknowing full well that we had nowhere else in town to move the store. He did offer to buy thefranchise, fixtures, and inventory at a fair price; he wanted to give the store to his son. I had no alternativebut to give it up. But I sold the Eagle Store lease toSterlingso that John Dunham, my worthy competitorand mentor, could finally have that expansion he'd wanted.

It was the low point of my business life. I felt sick to my stomach. I couldn't believe it was happening tome. It really was like a nightmare. I had built the best variety store in the whole region and worked hardin the communitydone everything rightand now I was being kicked out of town. It didn't seem fair. Iblamed myself for ever getting suckered into such an awful lease, and I was furious at the landlord.

Helen, just settling in with a brand-new family of four, was heartsick at the prospect of leavingNewport.

But that's what we were going to do.

I've never been one to dwell on reverses, and I didn't do so then. It's not just a corny saying that you canmake a positive out of most any negative if you work at it hard enough. I've always thought of problemsas challenges, and this one wasn't any different. I don't know if that experience changed me or not. Iknow I read my leases a lot more carefully after that, and maybe I became a little more wary of just howtough the world can be. Also, it may have been about then that I began encouraging our oldestboysix-year-old Robto become a lawyer. But I didn't dwell on my disappointment. The challenge athand was simple enough to figure out: I had to pick myself up and get on with it, do it all over again, onlyeven better this time.

Helen and I started looking for a new town.
Chapter 3 Bouncing Back
　　"When we leftNewport, it was a thriving cotton town, and I hated to leave. We had built a life there, andit was so disturbing to have to walk away from it. I have said that time and time again. I still have goodfriends there from those days."HELEN WALTONI came out of thatNewportexperience with my pride a little damaged, but I had made money on the saleof the Ben Franklinmore than $50,000. The whole thing was probably a blessing. I had a chance for abrand-new start, and this time I knew what I was doing. Now, at the age of thirty-two, I was afull-fledged merchant; all I needed was a store. Helen and the kids and I started driving around in thespring of 1950 hunting in earnest for one, and northwestArkansasappealed to us for several reasons.

First, for Helen it was a whole lot closer to her folks in Claremore thanNewporthad been. And it wasgood for me because Iwanted to get closer to good quail hunting, and withOklahoma,Kansas,Arkansas,andMissouriall coming together right there it gave me easy access to four quail seasons in four states.

We tried to buy a store in Siloam Springs, on the Oklahoma border, but we couldn't come to terms withthe owner, Jim Dodson, who later became a friend of ours. So one day Helen's father and I drove intoBentonville and had a look around the square. It was the smallest of the towns we considered, and italready had three variety stores, when one would have been enough. Still, I love competition, and it juststruck me as the right place to prove I could do it all over again. We found an old store willing tosellHarrison's Variety Storebut we needed to double its size, and to do that we had to get aninety-nine-year lease on the barbershop next door (no more five-year leases for me). These two oldwidows from Kansas City who owned it wouldn't budge, and, frankly, if Helen's father hadn't gone upthereunbeknownst to meand negotiated a deal, I'm not sure where the Waltons would have ended up.

HELEN WALTON:

"Bentonville really was just a sad-looking country town, even though it had a railroad track to it. It wasmostly known for apples, but at the time chickens were beginning to come on. I remember I couldn'tbelieve this was where we were going to live. It only had 3,000 people, compared to Newport, whichwas a thriving cotton and railroad town of 7,000 people. The store was a small old country town storewith cans of lace, boxes of hats, sewing patterns, everything you can imagine just stored aroundeverywhere. But I knew right after we got here that it was going to work out."Now I had a store to run again, and even though it didn't do but $32,000 the year before I boughtit-compared to $250,000 at Newportit didn't matter that much because I had big plans. We tore thewall out between the barbershop and the old store, put in brand-new fluorescent fixtures instead of thefew low-watt bulbs they had hanging from the ceiling, and basically built a new store in there. It was ahuge store for Bentonville at the time50 feet by 80 feet, or 4,000 square feet. Charlie Baum of BenFranklin came to my rescue again. This time he helped me break down all those fixtures he had helpedme put up in my old Eagle Store. We loaded them onto a big truck, which I drove over to Bentonvillefrom Newport. We had to get on an old dirt road to bypass a weigh station over at Rogers because Iknew our load was illegal several different ways. Bouncing on that old road tore up half the fixtures.

Anyway, Charlie and I installed them again. Around this time, I read an article about these two BenFranklin stores up in Minnesota that had gone to self-servicea brand-new concept at the time. I rode thebus all night long to two little towns up therePipestone and Worthington. They had shelves on the sideand two island counters all the way back. No clerks with cash registers around the store. Just checkoutregisters up front. I liked it. So I did that too.

CHARLIE BAUM:

"As soon as Sam moved the store from Newport to Bentonville, he had a nice big sale, and we putbarrels full of stuff all around the floor. Those elderly ladies would come in and bend way down over intothose barrels. I'll never forget this. Sam takes a look, frowns, and says: 'One thing we gotta do, Charlie.

We gotta be real strong in lingerie.' Times had been hard, and some of those underthings were prettyragged."So when Charlie and I laid out that store in Bentonville it became only the third self-service variety storein the whole country and the first in our eight-state area. Maybe nobody here knew it, but it was a bigdeal. We've got our first ad from the July 29, 1950,Benton County Democrat on display today down atour Wal-Mart Visitors Center. It's for the Grand Remodeling Sale of Walton's Five and Dime, promisinga whole bunch of good stuff: free balloons for the kids, a dozen clothespins for nine cents, iced teaglasses for ten cents apiece. The folks turned out, and they kept coming. Although we called it Walton'sFive and Dime, it was a Ben Franklin franchise, and that store took off just like Newport had and turnedinto a good business right away. It really was an A-l store for these parts back then.

INEZ THREET, CLERK, WALTON's FIVE AND DIME, BENTONVILLE:

"I guess Mr. Walton just had a personality that drew people in. He would yell at you from a block away,you know. He would just yell at everybody he saw, and that's the reason so many liked him and didbusiness in the store. It was like he brought in business by his being so friendly.

"He was always thinking up new things to try in the store. I remember one time he made a trip to NewYork, and he came back a few days later and said, 'Come here, I want to show you something. This isgoing to be the item of the year.' I went over and looked at a bin full ofI think they called them zorisandalsthey call them thongs now. And I just laughed and said, 'No way will those things sell. They'll justblister your toes.' Well, he took them and tied them together in pairs and dumped them all on a table atthe end of an aisle for nineteen cents a pair. And they just sold like you wouldn't believe. I have neverseen an item sell as fast, one after another, just piles of them. Everybody in town had a pair."Right away I started looking around for store opportunities in other towns. Maybe it was just my itch todo more business, and maybe, too, I didn't want all my eggs in one basket again. By 1952 I had drivendown to Fayetteville and found an old grocery store that Kroger was abandoning because it was fallingapart. It was right on the square, only 18 feet wide and 150 feet deep. Our main competitor was aWoolworth's on one side of the square, and a Scott Store on the other side of the square. So here wewere challenging two popular stores with a little old 18-foot independent variety store. It wasn't a BenFranklin franchise; we just called it Walton's Five and Dime like the store in Bentonville. I remembersitting on the square right after I bought it listening to a couple of the local codgers say: "Well, we'll givethat guy sixty days, maybe ninety. He won't be there long."But this store was ahead of its time too, self-service all the way, unlike the competition. This was thebeginning of our way of operating for a long while tocome. We were innovating, experimenting, andexpanding. Somehow over the years, folks have gotten the impression that Wal-Mart was something Idreamed up out of the blue as a middle-aged man, and that it was just this great idea that turned into anovernight success. It's true that I was forty-four when we opened our first Wal-Mart in 1962, but thestore was totally an outgrowth of everything we'd been doing since Newportanother case of me beingunable to leave well enough alone, another experiment. And like most other overnight successes, it wasabout twenty years in the making.

Of course I needed somebody to run my new store, and I didn't have much money, so I did something Iwould do for the rest of my run in the retail business without any shame or embarrassment whatsoever:

nose around other people's stores searching for good talent. That's when I made my first real hire, thefirst manager, Willard Walker.

WILLARD WALKERFIRST MANAGER, WALTON'S FIVE AND DIME, FAYETTEVILLE:

"The first time I ever saw Sam Walton was when he and his brother-in-law, Nick Robson, dropped intoa TG&Y dime store I was managing in Tulsa. He visited with me for about an hour, asking a lot ofquestions, and left, and I never thought anything about it. Later on he called me and said he was openinga new store in Fayetteville and wondered if Id be interested in interviewing for the manager's job. I had tomove myself over there, work half days for free until the store opened, and I remember sleeping on a cotin the storeroom. But he said I would get a percentage of the profits, and that appealed to me. When Iwent to quit TG&Y, the vice president said, 'Remember, Willard, a percentage of nothing is still nothing.'

But I went ahead and took the job. Sam was down there every day from the time we started until thetime we left. He rolled up his sleeves and worked every day until we built that store from scratch.

"Sam would haul in all kinds of merchandise that he bought from these friends of his over inTennesseehaul it in by station wagon. It worked real good. The first year that store was open, I believeBentonville did $95,000 and we did $90,000.

"Well, later on, when we had Wal-Marts and went public, I went out and borrowed what seemed likean awful lot of money at the time and bought stock with it. Bud and Sam came down to the store oneday, and Bud said: 'Willard, I sure hope you know what you're doing.' He told me I had more faith thanhe did. I always knew it was going to be successful. The philosophy made sense, and you couldn't helpbut believe in the man."In the years to come, that lure of partnership helped us attract a lot of good managers, but I don't believewe ever had one who bought more stock than Willard. And of course he feels pretty good about ittoday.

I remember those days mostly as a time of always looking around for ideas and items that would makeour stores stand out. Sometime in there the Hula Hoop fad hit real big, and they were flooding thebig-city stores. But the genuine articles, which were made of plastic hose, were pricey and hard for us toget. Jim Dodsonthe fellow who wouldn't sell me the Siloam Springs storecalled me and said he knew amanufacturer who could make hose the same size as the Hula Hoop's. He thought we should go infifty-fifty and make our own Hula Hoops. We did. We made them up in his attic, and sold a ton of themat his stores and mine. Every kid in northwest Arkansas had to have one. Later Jim ended up managing aWal-Mart for us up in Columbia, Missouri, for about fifteen years.

Also at that time, I had been buying all my fixtures from Ben Franklin. They were wooden standards,which was par for the course in those days, with wooden shelf brackets to hold the merchandise. Then Iwent somewhere to look at what Sterling Stores was doingmost everything I've done I've copied fromsomebody elseand saw these all-metal fixtures. I met a guy named Gene Lauer here in Bentonville andpersuaded him to build us some for the Fayetteville store, which became, I'm sure, the first variety storein the country to use 100 percent metal standards, like the ones you see in stores today. Gene built thefixtures for the first Wal-Mart and stayed with us for twenty-one years before retiring a few years ago.

Today he works here in Bentonville at the Wal-Mart Visitors Center, which is sort of a museum locatedon the site of that first store.

CHARLIE CATE, STOCKBOY IN FAYETTEVILLE STORE, NOW RETIRED WAL-MARTSTORE MANAGER:

"Sam used to come down to our Fayetteville store driving an old fifty-three Plymouth. He had that car soloaded up he barely had enough room to drive. And would you like to guess what he had in it Ladies'

panties. Three for $1.00 and four for $1.00 and nylon hose. He would come in and take an end counter,and say, 'Now, Charlie, here's what you do: on this feature bin you put three for $1.00 panties, and onthis one you put four for $1.00. And you put these nylons right in between the two of them. And thenwatch em sell.' And they did. Like crazy."While I was doing all this running around between Bentonville and Fayetteville and Tennessee and theBen Franklin regional office in Kansas City, my brother Bud had borrowed some money and bought aBen Franklin of his own up in the little town of Versailles, Missouri, population 2,000. He and I kept intouch, but we weren't really doing any business together, and he had started a family and was doingpretty well on his own. Well, one time when I was up in Kansas City I heard about this big subdivisiongoing up thereRuskin Heights. In the middle of the subdivision would be a 100,000-square-footshopping center a whole new concept at that time. It was going to have an A&P store and a BenFranklin store in the middle, a Crown drugstore on the end, and small shops in between. So I called Budand told him to meet me up there right away. I said, "You want to gamble and go into this thing" And hesaid, "Might as well." And we did. We borrowed all the money we could and went into that Ben Franklinfifty-fifty.

BUD WALTON:

"In the early days of the variety store business out here, there were some conventions amongcompetitors. Each chain more or less controlled its own state. Oklahoma was TG&Y. Kansas was Alco,Texas was Mott's, Missouri was Mattingly. Nebraska was Hested's. Indiana was Danners. They werelocally based and developed, and they'd say, 'Well, you don't cross my border, and I won't cross yourborder.' Ben Franklin franchises were for little independent operators who wanted to fit a store or twosomewhere in the cracks between those guys. Of course, Sam changed all that. Borders didn't meanmuch to my brother. He thought nothing of doing business in four statesall in one day."If I ever had any doubts about the potential of the business we were in, Ruskin Heights ended them.

That thing took off like a house afire. The first year we made about $30,000 profits on sales of$250,000, which went up to $350,000 in no time. When I saw that shopping center catch on the way itdid I thought, "Man, this is the forerunner of many, many things to come." And I decidedwith no moneyto amount to anythingto go into the shopping center development business myself back in Arkansas. Iwent down to Little Rock just on fire with the idea of being the pioneer shopping center developer there.

I tried to get one real good corner, but a big wheeler-dealer with Sterling Stores bought it out from underme and put in what became the town's first shopping center, which featured a Sterling Store and anOklahoma Tire and Supply.

I kept at it. I probably spent two years going around trying to sell people on the idea of shopping centersin Arkansas in the middle fiftieswhich was about ten years too early. I finally got an option on one pieceof property and talked Kroger and Woolworth into signing leases, based on us getting this one streetpaved. I started raising money for the pavement, but it got real complicated, and in the end I decided Ihad better take my whipping, so I backed out of the whole deal and went back to concentrating on theretail business. I probably lost $25,000, and that was at a time when Helen and I were counting everydollar. It was probably the biggest mistake of my business career. I did learn a heck of a lot about thereal estate business from the experience, and maybe it paid off somewhere down the linethough I wouldrather have learned it some cheaper way. Incidentally, after I dropped my option on that last piece ofland, a well-known young fellow named Jack Stephenswho had a whole lot more money than Ididwent on to develop a successful shopping center that's still there.

DAVID GLASS:

"Two things about Sam Walton distinguish him from almost everyone else I know. First, he gets up everyday bound and determined to improve something. Second, he is less afraid of being wrong than anyoneI've ever known. And once he sees he's wrong, he just shakes it off and heads in another direction."All during that real estate fiasco, I was, of course, still trying to run these variety stores, and everythingwas going along great until May 20, 1957I'll never forget the day. Bud called me from Versailles andsaid a tornado had hit the Ruskin store. "Ah, it probably shook up a little glass," I said. But later I got toworrying about it, and I couldn't get through to anybody up there so I went on up to Kansas City to seefor myself.

I got there about two in the morning and saw that the whole shopping center was practically leveled.

None of our people were seriously hurt, but the store was about gone. And even though the merchandiseand the fixtures were insured, it was still a big blow to Bud and me. This was our best store, the one wewere really excited about. It was there one minute and gone the next. We just rebuilt it and got back at it.

By now, though, with all the places I had to visit, I was driving too much to have time for anything else.

So I began to wonder if maybe flying wouldn't be the way to go.

BUD WALTON:

"One day I got a call from Sam, and he said, 'Meet me in Kansas City, I want to buy an airplane.' Boy,it took me by such surprise. I always thought he was the world's worst driver and even my fatherwouldn't ever let Sam drive him. I thought, 'He will kill himself the first year.' So I did everything in theworld to try and talk him out of that first airplane. He just said, 'Whether you meet me or not, I'm goingto look at this airplane.' And I did not go because I knew he would kill himself in that plane. He called melater and said he hadn't bought that particular plane, but he'd gone to Oklahoma City and bought this AirCoupe for $1,850, and I had to come see it. I'll never forget going out to the Bentonville airport andseeing what he called an airplane. It had a washing machine motor in it, and it would putt-putt, and thenmiss a lick, then putt-putt again. It didn't even look like an airplane, and I wouldn't go near it for at leasttwo years. But then we were putting some more stores in around Little Rock, and one day he says, 'Let'sgo to Little Rock.' I hadn't flown since the Navy in the Pacific, and I was always used to water. Here wewere with Sam at the stick going over all these trees and mountains. It was the longest trip I ever took.

That was the start of the Wal-Mart aviation era."In spite of what Bud says, I loved that little two-seat plane because it would go 100 miles an hourif youdidn't have the wind against youand I could get to places in a straight line. In all the years and thousandsof hours I've been flying, I've only had one engine failure, and it came in that Air Coupe. I was taking offfrom Fort Smith and was just over the river when an exhaust stack blew. It sounded like the end of theworld. The motor hadn't quite quit, but I had to cut it off. For a minute there I thought that might be it forme, but I was able to circle back and land with a dead engine.

Once I took to the air, I caught store fever. We opened variety stores, many of them Ben Franklinfranchises, in Little Rock, Springdale, and Siloam Springs, Arkansas, and we had a couple more inNeodesha and Coffeyville, Kansas. All these stores were organized as separate partnerships betweenBud and me, along with other partners, including my dad, Helen's two brothersNick and Frankandeven the kids, who invested their paper route money.

JOHN WALTON, SECOND SON OF SAM AND HELEN:

"This is hard to believe, but between my paper route money and the money I made in the Army both ofwhich I invested in those storesthat investment is worth about $40 million today."Whatever money we made in one store, we'd put it in another new one, and just keep on going. Also,from Willard Walker on, we would offer to bring the managers we hired in as limited partners. If youhad, say, a $50,000 investment in a store, and the manager put in $1,000, he'd own 2 percent.

GARY REINBOTH:

"He would never let us buy more than $1,000 per store. I think $600 of it was a loan, and $400 of itwas four shares of privately owned stock at $100 a share. All he would guarantee was that he would payus interest every year, which at that time was 4  percent. I remember one guy who ran a store wouldcall and say, 'Are you going to buy into store so-and-so' And I'd say, 'I think so.' Later, he would say,'I'm not going to loan it to Sam and let him expand onmy money.' Then I'd pick up the phone and callMr. Walton and say, 'So-and-so isn't going to buy his share of that store, can I buy his share' He'd say,'Sure.' So I'd get a double share."That whole periodwhich scarcely gets any attention from most people studying uswas really very, verysuccessful. In fifteen years' time, we had become the largest independent variety store operator in theUnited States. But the business itself seemed a little limited. The volume was so little per store that itreally didn't amount to that much. I mean, after fifteen years in 1960we were only doing $1.4 million infifteen stores. By now, you know me. I began looking around hard for whatever new idea would breakus over into something with a little better payoff for all our efforts.

Our first big clue came in Saint Robert, Missourinear Fort Leonard Woodwhere we learned that bybuilding larger stores, which we called family centers we could do unheard-of amounts of business forvariety stores, over $2 million a year in sales per store, just unthinkable for small towns. The same thingproved true to a lesser degree in Berryville, Arkansas, and right here in Bentonville too.

I began to hear talk of the early discounterscompanies like Ann & Hope, whose founder, Marty Chase,is generally considered the father of discounting. Spartan's and Mammoth Mart and Two Guys fromHarrison and Zayre and Arlan's were all starting up in the Northeast, and I remembered that lesson I'dlearned a long time ago in Newport with the panties selling in such huge volume when they were priced at$1.00, instead of $1.20. So I started running all over the country, studying the concept from the millstores in the East to California, where Sol Price started his Fed-Mart in 1955.

Then closer to home, Herb Gibsona barber from over at Berryvillestarted his stores with a simplephilosophy: "Buy it low, stack it high, sell it cheap." He sold it cheaper than anybody ever had before,and he sold more of it. He did it in Abilene, he did it in Amarillo, and he surrounded Dallas with stores.

Then in 1959 he came to northwest Arkansas with a franchiser named Howard's and did so well in FortSmith that he branched out to the square in Fayetteville and started competing with our variety stores.

We knew we had to act. He was the only one discounting out this way, and, because I had made allthose trips back East, I was probably one of the few out here who understood what he was up to.

By then, I knew the discount idea was the future. But I was used to franchising, and I liked the mind-set.

I generally liked my experience with Ben Franklin, and I didn't want to get involved in having to build acompany with all that support apparatus. So, first I went up to Butler Brothers in Chicago armed with myusual yellow legal pad full of notes and made a big pitch for them to back me in a discounting venture. Iwanted them to be our wholesale arm, our merchandiser. If they had agreed, our family could havecontinued our fairly normal lifestyle. In those days, I wasn't as fully committed with my time to thebusiness, and it wouldn't have been all that difficult to put together an organization with them. But theyweren't interested. Then I approached Gibson, but he already had his franchiser so we couldn't gettogether either. We really had only two choices left: stay in the variety store business, which I knew wasgoing to be hit hard by the discounting wave of the future; or open a discount store. Of course I wasn'tabout to sit there and become a target. Now, right down the road from Bentonville sits Rogers,Arkansas, which was a good bit bigger town, but I never could operate there because Max Russellowned the Ben Franklin franchise. I tried to talk him into going in with me as a partner and building a bigstore there. But he wasn't interested.

I went ahead and started building a store in Rogers. It was a big commitment on the family's part. Wecouldn't use Ben Franklin at all for that store, so I had made some arrangements with a distributor inSpringfield, Missouri.

Nobody wanted to gamble on that first Wal-Mart. I think Bud put in 3 percent, and DonWhitakerwhom I had hired to manage the store from a TG&Ystore out in Abilene, Texasput in 2percent, and I had to put up 95 percent of the dollars. Helen had to sign all the notes along with me, andher statement allowed us to borrow more than I could have alone. We pledged houses and property,everything we had. But in those days we were always borrowed to the hilt. We were about to go into thediscount business for real now. And from the time those doggone Wal-Marts opened until almost today,it has been a little challenging.

BOB BOGLE, FIRST MANAGERWALTON'SFIVEAND DIME, bentonville, now retired fromwal-mart:

"We were flying to Fort Smith in the spring of 1962, and Sam was piloting the plane over the BostonMountains. It was that Tri-Pacer by then, not the original plane that we had made a lot of trips in. Sampulled this card out of his pocket, on which he had written down three or four names, and he handed it tome and asked me which one I liked best. They all had three or four words in the title, and I said, 'Well,you know, Scotch as I am, I'd just keep the Walton name and make it a place to shop.' I scribbled'W-A-L-M-A-R-T' on the bottom of the card and said, 'To begin with, there's not as many letters tobuy.' I had bought the letters that said Ben Franklin, and I knew how much it cost to put them up and tolight them and repair the neon, so I said, 'This is just seven letters.' He didn't say anything, and I droppedthe subject. A few days later I went by to see when we could start setting the fixtures in the building, andI saw that our sign maker, Rayburn Jacobs, already had the 'W-A-L' up there and was headed up theladder with an 'M.' You didn't have to be a genius to figure out what the name was going to be. I justsmiled and went on."Something else about that sign that's worth mentioning. On one side of it, I had Rayburn put "We Sell forLess," and on the other, "Satisfaction Guaranteed," two of the cornerstone philosophies that still guide thecompany.

After years and years of studying the discount business and experimenting with it sort of halfheartedly,we were finally getting ready to jump into it whole hog. On July 2, 1962, we finally opened Wal-MartNo. 1, and not everybody was happy about it.

LEE SMITH, EARLY WAL-MART ASSOCIATE:

"Because there was a Ben Franklin store in Rogers, run by somebody else, we really stirred up ahornet's nest when we opened that first store. I vividly remember opening day. Along with the crowds ofshoppers, a group of 'officials' from Ben Franklin in Chicagoall dressed in pin-striped suitsshowed up.

They marched in like a military delegation, and in the front of the store asked me, just as cold as theycould be, 'Where is Mr. Walton' They marched on back to Sam's office without a word.

"They were back there about a half hour, and then they marched out without so much as a goodbye. Afew minutes later, Sam came down and told Whitaker and me that they had issued an ultimatum: Don'tbuild any more of these Wal-Mart stores. We knew he felt threatened because he had all those BenFranklin franchises. But we also knew Sam Walton wasn't the kind of guy you issued ultimatums to."To tell the truth, though, that first Wal-Mart in Rogers wasn't all that great. We did a million dollars in ayear, a lot more than most of our variety stores, which did $200,000 to $300,000 a year. But remember,Saint Robertup there in that Army townwas doing $2 million in sales. Once we opened Rogers, we satthere and held our breath for two years. Then we put stores up in Springdale, a bigger town near Rogers,and Harrison, a smaller town. Here, of course, I have to let David Glass tell his now-famous story aboutcoming to Harrison to see what a Wal-Mart was, and being so horrified at the sight.

DAVID GLASS:

"In those days, word was starting to get out that a guy named Sam Walton had some interesting retailingideas, so I drove down from Springfield, where I was with Crank Drugs at the time, to see a Wal-Martopening. It was the worst retail store I had ever seen. Sam had brought a couple of trucks ofwatermelons in and stacked them on the sidewalk. He had a donkey ride out in the parking lot. It wasabout 115 degrees, and the watermelons began to pop, and the donkey began to do what donkeys do,and it all mixed together and ran all over the parking lot. And when you went inside the store, the messjust continued, having been tracked in all over the floor. He was a nice fellow, but I wrote him off. It wasjust terrible."I guess it really was about as bad as David describes it, but he just happened to hit it on its worst day.

The store was only 12,000 square feet, and had an 8-foot ceiling and a concrete floor, with bare-bonedwooden plank fixtures. Sterling had a huge variety store in downtown Harrison, with tile on the floor, nicelights, really good fixtures, and good presentations. Ours was just barely put togetherhighly promotional,truly ugly, heavy with merchandisebut for 20 percent less than the competition. We were trying to findout if customers in a town of 6,000 people would come to our kind of a barn and buy the samemerchandise strictly because of price. The answer was yes. We found out they did, and they wanted it.

Today, we have a 90,000-square-foot store in Harrison. Down the road in Springdale, we were trying tolearn something else: would a really big, nice store work in a larger town We opened a35,000-square-foot Wal-Mart there, and it quickly became our number-one store in sales. Just to giveyou some idea of how the whole concept has changed over the years, we recently opened a gigantic185,000-square-foot store in Springdale, and the store in Rogers today is 135,000 square feetcompared to 18,000 for the original old number one.

Maybe a lot of people saw the same things David Glass observed that day out there in Harrison, but Iwas feeling pretty good. After we got those first three stores up and running, I knew it would work.

Wal-Mart was off to a good start, and we saw lots of potential. But now Gibson's and other folks werebeginning to look at the smaller towns and say, "Hey, maybe there is something out there that we ought tolook into." We figured we'd better roll the stores out just as quickly as we could.
Chapter 4 Swimming Upstream
　　"From day one of Wal-Mart, Mr. Walton made it clear that this wasn't just Ben Franklin with low priceson some items. He wanted real discounting. He said, 'We want to discount everything we carry.' Whenthe other chains around us weren't discounting, he said, 'We advertise that we sell for less, and we meanit!' So whatever else we did, we always had to sell for less. If an item came in and everybody else intown was selling it for twenty-five cents, we'd go with twenty-one cents."CHARLIE CATE,store managerAs I said earlier, once we opened that Wal-Mart in Springdale, I knew we were on to something. Iknew in my bones it was going to work. But at the time, most folksincluding my own brother, Budwerepretty skeptical of the whole concept. They thought Wal-Mart was just another one of Sam Walton'scrazy ideas. It was totally unproven at the time, but it was really what we'd been doing all along:

experimenting, trying to do something different, educating ourselves as to what was going on in the retailindustry and trying to stay ahead of those trends. This is a big contradiction in my makeup that I don'tcompletely understand to this day. In many of my core valuesthings like church and family and civicleadership and even politicsI'm a pretty conservative guy. But for some reason in business, I havealways been driven to buck the system, to innovate, to take things beyond where they've been. On theone hand, in the community, I really am an establishment kind of guy; on the other hand, in themarketplace, I have always been a maverick who enjoys shaking things up and creating a little anarchy.

And sometimes the establishment has made me mad. The truth is, when those Butler Brothers folksturned down my discounting idea, I got a little angry, and maybe that helped me decide to swim upstreamon my own.

DON SODERQUIST, FORMER PRESIDENT OF BEN FRANKLIN, NOW VICE CHAIRMANAND CHIEF OPERATING OFFICER, WAL-MART:

"I first met Sam in 1964, when I was in charge of data processing at Ben Franklin, and he was ourbiggest franchisee. He had already opened the Rogers Wal-Mart and he was up in Chicago trying toconvince our officers to franchise his discount stores in small towns. They gave him a flat no. After themeeting he came back to see me and moved right on to the subject of computers. He wanted to know allabout how we were using them, and how we were planning to use them.

And he took everything I said down on this yellow legal pad.

"The next day was Saturday, and I went shoppingdressed in a pair of mangy cutoff jeans at the Kmartnear my house. I walked over into the apparel section and saw this guy talking to one of the clerks. Ithought, 'Jeez, that looks like that guy I met yesterday. What the heck is he doing way out here' Istrolled up behind him, and I could hear him asking this clerk, 'Well, how frequently do you order . . .

Uh-huh. . . . How much do you order . . . And if you order on a Tuesday, when does the merchandisecome in" He's writing everything she says down in a little blue spiral notebook. Then Sam gets down onhis hands and knees and he's looking under this stack table, and he opens the sliding doors and says,'How do you know how much you've got under here when you're placing that order'

"Finally, I said, 'Sam Walton, is that you' And he looked up from the floor and said, 'Oh, Don! Hi!

What are you doing here' I said, 'I'm shopping. What areyou doing' And he said, 'Oh, this is just partof the educational process. That's all.' Of course, he's still doing the same thing today, except he uses hislittle tape recorder."I guess everybody who knew I was going ahead with the discounting idea on my own really did think I'dcompletely lost my mind. I laugh now when I look back on Wal-Mart's beginning. In 1962, the discountindustry was fairly young and full of high-living, big-spending promoters driving around in Cadillacsguyslike Herb Gibsonwho had the world by the tail. But it had very few of what you'd call goodoperatorsuntil 1962, the year which turned out to be the big one for discounting. In that year, fourcompanies that I know of started discount chains. S. S. Kresge, a big, 800-store variety chain, opened adiscount store in Garden City, Michigan, and called it Kmart. F. W. Woolworth, the granddaddy of themall, started its Woolco chain. Dayton-Hudson out of Minneapolis opened its first Target store. And someindependent down in Rogers, Arkansas, opened something called a Wal-Mart. At the time, and for quitea while after that, I can guarantee you that hardly anybody noticed that last guy. Heck, within five years,Kmart had 250 stores to our 19, and sales of more than $800 million to our $9 million. Here's whatmakes me laugh today: it would have been absolutely impossible to convince anybody back then that inthirty years most all of the early discounters would be gone, that three of these four new chains would bethe biggest, best-run operators in the business, that the one to fold up would be Woolco, and that thebiggest, most profitable one would be the one down in Arkansas. Sometimes even I have troublebelieving it.

I can tell you this, though: after a lifetime of swimming upstream, I am convinced that one of the realsecrets to Wal-Mart's phenomenal success has been that very tendency. Many of our best opportunitieswere created out of necessity. The things that we were forced to learn and do, because we started outunderfinanced and undercapitalized in these remote, small communities, contributed mightily to the waywe've grown as a company. Had we been capitalized, or had we been the offshoot of a large corporationthe way I wanted to be, we might not ever have tried the Harrisons or the Rogers or the Springdales andall those other little towns we went into in the early days. It turned out that the first big lesson we learnedwas that there was much, much more business out there in small-town America than anybody, includingme, had ever dreamed of.

CLARENCE LEIS, SECOND MANAGER, WAL-MART NO. 1:

"When we opened Wal-Mart No. 3 in Springdale, Sam wanted a red-hot price on antifreeze. So he gottwo or three truckloads of Prestone and priced it at $1.00 a gallon. Then he priced Crest toothpaste at27 cents a tube. Well, we had people come from as far as Tulsa to buy toothpaste and antifreeze. Thecrowd was so big that the fire department made us open the doors for five minutes, then lock them untilshoppers left. Sam grabbed a tackle box and started using it as a cash register, checking people out asfast as he could."We stuck with what we had learned in the variety store business about customer service and satisfactionguaranteed, but I have to admit that in those days we did not have anywhere near the emphasis on qualitythat we have today. What we were obsessed with was keeping our prices below everybody else's. Ourdedication to that idea was total. Everybody worked like crazy to keep the expenses down. We tried tobuild decent buildings, but we had to keep the rent downwe never liked to pay more than $1.00 asquare foot. Our stores really didn't look that goodthey weren't professional at all. We opened one,store number 8 in Morrilton, Arkansas, that was really a sight. We rented this old Coca-Cola bottlingplant. It was all broken up into five rooms, and we bought some old fixtures from a failing Gibson's storefor $3,000. We hung them by baling wire from the ceiling. We had clothes hanging in layers on conduitpipe all the way to the ceiling, and shelves wired into the walls. But this was really a small, small town, sonumber 8 was another experiment.

We didn't have systems. We didn't have ordering programs. We didn't have a basic merchandiseassortment. We certainly didn't have any sort of computers. In fact, when I look at it today, I realize thatso much of what we did in the beginning was really poorly done. But we managed to sell ourmerchandise as low as we possibly could, and that kept us right-side-up for the first ten yearsthat andconsistently improving our sales in these smaller markets by building up our relationship with thecustomers. The idea was simple: when customers thought of Wal-Mart, they should think of low pricesand satisfaction guaranteed. They could be pretty sure they wouldn't find it cheaper anywhere else, and ifthey didn't like it, they could bring it back.

CLARENCE LEIS:

"Rogers had been open about a year, and everything was just piled up on tables, with no rhyme orreason whatsoever. Sam asked me to kind of group the stuff by category or department, and that's whenwe began our department system. The thing I remember most, though, was the way we priced goods.

Merchandise would come in and we would just lay it down on the floor and get out the invoice. Samwouldn't let us hedge on a price at all. Say the list price was $1.98, but we had only paid 50 cents.

Initially, I would say, 'Well, it's originally $1.98, so why don't we sell it for $1.25' And he'd say, 'No.

We paid 50 cents for it. Mark it up 30 percent, and that's it. No matter what you pay for it, if we get agreat deal, pass it on to the customer.' And of course that's what we did."It was a little frustrating there for a while, being out on our own. In addition to no basic merchandiseassortment, we had no real replenishment system. We didn't even have inventory books like we had withthe Ben Franklin stores, where if necessary you could simply look over what you needed and order itfrom Butler Brothers, then price it accordingly. We had no established distributors. No credit. Salesmenwould just show up at our door, and we would try to get the best deals we could. Sometimes it wasdifficult getting the bigger companiesthe Procter & Gambles, Eastman Kodaks, whoeverto call on us atall, and when they did they would dictate to us how much they would sell us and at what price. P&Ggave a 2 percent discount if you paid within ten days, and if you didn't, man, they took that discount rightoff. I don't mind saying that we were the victims of a good bit of arrogance from a lot of vendors in thosedays. They didn't need us, and they acted that way. I never could understand it. To me, it always seemedlike a customer was a customer, and you ought to try to sell them what you could.

The biggest challenge was buying health and beauty aids at low cost and staying stocked up on thembecause those items were really at the heart of almost every early discounter's strategy. I figured that outafter I went into the first Gibson's store. His whole concept was to buy direct at a lower cost thanindividual stores could buy, then charge $300 a month to run one of his franchises, and he would act asthe store's buying agent. The basic discounter's idea was to attract customers into the store by pricingthese itemstoothpaste, mouthwash, headache remedies, soap, shampooright down at cost. Those werewhat the early discounters called your "image" items. That's what you pushed in your newspaperadvertisinglike the twenty-seven-cent Crest at Springdaleand you stacked it high in the stores to callattention to what a great deal it was. Word would get around that you had really low prices. Everythingelse in the store was priced low too, but it had a 30 percent margin. Health and beauty aids were pricedto give away.

As far as building the company up, we simply had no time for it. We were too busy concentrating onday-to-day operations. I had moved my office from the Ben Franklin on the Bentonville square to an oldgarage nearby, where I worked with three ladies who helped out with the bookkeeping. By the earlysixties, we had eighteen variety stores and a handful of Wal-Marts. (For a time in there, we owned a mixof several different types of stores. We had variety stores under both the Ben Franklin and Walton namesas well as our Wal-Mart discount stores. For years, while we were building Wal-Marts, we continued torun our various Ben Franklin and Walton variety stores. But we gradually phased them out, usuallyreplacing them with Wal-Marts.) We kept a little pigeonhole on the wall for the cash receipts andpaperwork of each store. I had a blue binder ledger book for each store. When we added a store, weadded a pigeonhole. I know we did that at least up to twenty stores. Then once a month, WandaWiseman and I would close those booksenter the merchandise, enter the sales, enter the cash, balanceit, and close them. Nowadays, you hear a lot about fancy accounting methods, like LIFO and FIFO, butback then we were using the ESP method, which really sped things along when it came time to closethose books. It's a pretty basic method: if you can't make your books balance, you take however muchthey're off by and enter it under the heading ESP, which stands for Error Some Place.

Then we would come up with a profit and loss sheet, a p&l for each store, and get it out to that storemanager as quickly as we couldsomething we still do today. If there was a problem, I would get withthat manager immediately. But most of them owned a piece of their stores, so they were likely to be asconcerned as I was. I had a big ledger sheet pasted together to make room for everything I wanted on it,probably fifteen different columns, for every store. It had columns for sales, expenses, net profit,markdownseverything utilities, postage, insurance, taxes. I entered the numbers myself each month witha pen, which helped me remember them better. It became a habit with me, and I carried this ledger sheetin my pocket when I went to the stores so everybody always knew exactly where they stood.

For several years the company was just me and the managers in the stores. Most of them came to usfrom variety stores, and they turned into the greatest bunch of discount merchants anybody ever saw. Weall worked together, but each of them had lots of freedom to try all kinds of crazy things themselves.

The closest thing we had to an operations manager was Don Whitaker, the guy I hired from TG&Y outin Abilene to be our first Wal-Mart manager. After that, he became our first regional manager. Don hadbarely finished high school, if that, and he had terrible grammar. He threw people off sometimes becausehe only had one eye, and he looked at you sort of funny. But he was one of the finest people I have everknown in my life. Everybody called him Whitaker, and he was a hard-working, practical, smart fellow.

He had a great big heart, but he was gruff and he scared all the young folks to death. There was neverany question that he was the boss, and when he wanted something done, believe me it got done. I singlehim out here because Don Whitaker was very, very important in the early development of the company,establishing the philosophy of Let's be out front. Let's do it right. Let's get it done now and get on with it.

CLAUDE HARRIS,WAL-MART'S FIRST BUYER:

"Sam is very sharp on being able to read people and their personalities, and their integrity, and he didn'tmake any mistakes back there picking people, if I do say so myself. Really, back early, one bad managercould have pulled us under. When you're only making $8,000 or maybe $12,000 a year net in a store, itwould have only taken one or two managers who were dishonest to lose the whole company. Sam wouldmeet them in the stores where they worked, and invite them down to look at his stores. You know, he's avery persuasive man; he could charm a bird out of a tree. And he and Helen would have you out to thehouse and serve ice cream, and they'd always ask if you and your family went to church. He was sogood at evaluating and selecting these fellows. He wasn't just looking for store managers. I think he wasselecting people he thought he could go forward with. He was progressive. He knew that he neededsomething, and he was looking for it, and he was getting it every step of the way."We found Claude over in Memphis running a Woolworth store. He was from Muskogee, Oklahoma,and about one-quarter Indian, and he had started with Woolworth out of high school. None of thesefellows like Don or Claude had any college, and they didn't want me hiring any college men. They had theidea that college graduates wouldn't get down and scrub floors and wash windows. The classic training inthose days was to put a two-wheeleryou know, a cart that you carry merchandise oninto a guy's handswithin the first thirty minutes he came to work and get him pushing freight out of the back room. They allcame out of these variety stores with the same background and the same kind of philosophy andeducation. And we looked for the action-oriented, do-it-now, go type of folks.

Claude had four or five kids and was probably making $12,000 a year, maybe $10,000. I hauled up infront of his soda fountain one day and started talking to him. I found out that he had been able to save onhis salary, and I usually felt that if a fellow could manage his own finances, he would be more successfulmanaging one of our stores. We put him into our variety store on the east side of the square inFayetteville, so he had to compete against our other store on the west side of the square, which was runby Charlie Cate, and supervised by Charlie Baum at the time. That was a real test because nobody wasmore competitive than Charlie Baumhe would compete with a buzzsaw. But Claude was so skillful andnice that Charlie had to get along with him to some degree.

CLAUDE HARRIS:

"My store wasn't making much money, and we were starting to get competition from Gibson's, whichalso had a little store on the square down there. It was obvious that their discounting thing was working,and they were pulling everybody in with their health and beauty aidsHBA we call it. So I thought, 'Well,why don't I try that in my variety store' I changed the whole store around and got McKesson-Robbinsdown in price and put in a bunch of over-the-counter drugs. It was the first discount department in ourcompany, the health and beauty aids department at the east side of the square in Fayetteville. But I likedto have lost my best friend over that one. Charlie Baum liked to have had a heart attack. He thought Iwas trying to undercut him. You got to understand that Charlie is one of the most competitive peoplewho ever lived. He'll fight you tooth and toenail at bridge, or anything. I was just trying to see where itmight lead us. Anyway, Sam knew all about it, and he said, 'Go ahead and try it.' He would always trythings like that. He was always open to suggestions, and that's one reason he's been such a success. He'sstill that way."When I started buying for Wal-Mart, I would often take Claude along with me. Pretty soon, we madehim Wal-Mart's general merchandise manager. He didn't have any more experience at being a generalmerchandise manager than the guy off the street. He was a store manager, but we didn't have anybodyelse so he became general merchandise manager. I don't even know when we finally brought our firstprofessional buyer, or even someone who had ever had any buying experience, into the company, but itwas years later.

I guess the thing those early managers and I all had the most in common was that we all lovedmerchandising. Don't get me wrong. Our early stores weren't all that well merchandised. By that, I meanwe didn't necessarily have the best assortment of merchandise available, all displayed seductively.

Because remember, we didn't have any real distribution system, and we had to buy where we could. Butwe all loved to find unusual items and the store managers had a lot of freedom to try different things.

CHARLIE CATE:

"Sam had us send our sales report in every week, and along with it we had to send in a Best SellingItem. I mean wehad to. What he was doing was teaching us to look for what's selling all the time. Youhad to look because you had to send in this report every week, and if you reported that nothing wasselling well, Mr. Walton would not be happy. He would think you weren't studying your merchandise,and in that case he'd come study it for you. He's been that way ever since I first met him in 1954."It's almost embarrassing to admit this, but it's true: there hasn't been a day in my adult life when I haven'tspent some time thinking about merchandising. I suspect I have emphasized item merchandising and theimportance of promoting items to a greater degree than most any other retail management person in thiscountry. It has been an absolute passion of mine. It is what I enjoy doing as much as anything in thebusiness. I really love to pick an itemmaybe the most basic merchandiseand then call attention to it. Weused to say you could sell anything if you hung it from the ceiling. So we would buy huge quantities ofsomething and dramatize it. We would blow it out of there when everybody knew we would have onlysold a few had we just left it in the normal store position. It is one of the things that has set our companyapart from the very beginning and really made us difficult to compete with. And, man, in the early days ofWal-Mart it really got crazy sometimes.

PHIL GREEN, EARLY WAL-MART MANAGER:

"Me and Sam used to have a big time picking items. We'd go buy a Dallas newspaper and a Little Rocknewspaper and a Fort Smith newspaper, and he'd say, 'Well now, Phil, let's make us up some kind of anad for this weekend.' So we'd look around the store and find a big display of socks or a big display ofpanties, or a wastebasket, or a broom, or a big old stack of motor oil. We'd pick out, say, twenty items,and then we'd sit down on the floor with a pair of scissors and go through those newspapers until wefound some store that had run oil, and we'd just cut out the oil can and paste it on there and write'Pennzoil 30W' and stick our price on it. And we'd do the same thing for the socks and the panties andthe wastebasket just make up our own ad out of everybody else's ads in those newspapers. But itworked! Because we made real hot prices. He'd say there was no use running an ad everybody else wasrunning for the same price, or why would they come in Sam was a dime store man so at first he wantedto make a certain percentage of profit on everything. But he came around to the idea that a real hot itemwould really bring them in the store so we finally started running things like toothpaste for sixteen cents atube. Then we'd have to worry about getting enough of it in stock."A little later on, Phil ran what became one of the most famous item promotions in our history. We senthim down to open store number 52 in Hot Springs, Arkansasthe first store we ever opened in a townthat already had a Kmart. Phil got there and decided Kmart had been getting away with some pretty highprices in the absence of any discounting competition. So he worked up a detergent promotion that turnedinto the world's largest display ever of Tide, or maybe Cheersome detergent. He worked out a deal toget about $1.00 off a case if he would buy some absolutely ridiculous amount of detergent, somethinglike 3,500 cases of the giant-sized box. Then he ran it as an ad promotion for, say, $1.99 a box, off fromthe usual $3.97. Well, when all of us in the Bentonville office saw how much he'd bought, we reallythought old Phil had completely gone over the dam. This was an unbelievable amount of soap. It made upa pyramid of detergent boxes that ran twelve to eighteen cases highall the way to the ceiling, and it was75 or 100 feet long, which took up the whole aisle across the back of the store, and then it was about 12feet wide so you could hardly get past it. I think a lot of companies would have fired Phil for that one, butwe always felt we had to try some of this crazy stuff.

PHIL GREEN:

"Mr. Sam usually let me do whatever I wanted on these promotions because he figured I wasn't going toscrew it up, but on this one he came down and said, 'Why did you buy so much You can't sell all ofthis!' But the thing was so big it made the news, and everybody came to look at it, and it was all gone in aweek. I had another one that scared them up in Bentonville too. This guy from Murray of Ohio called oneday and said he had 200 Murray 8 horsepower riding mowers available at the end of the season, and hecould let us have them for $175. Did we want any And I said, 'Yeah, I'll take 200.' And he said,'Twohundred!' We'd been selling them for $447, I think. So when they came in we unpacked every one ofthem and lined them all up out in front of the store, twenty-five in a row, eight rows deep. Ran a chainthrough them and put a big sign up that said: '8 h.p. Murray Tractors, $199.' Sold every one of them. Iguess I was just always a promoter, and being an early Wal-Mart manager was as good a place topromote as there ever was."I'll tell you, Phil not only liked to swim upstream, he liked to do it with weights strapped on just to showhe could do it. Things may not be quite as wild today as they once were, but being a Wal-Mart managerisstill a great place to promote items because it is such a part of our heritage, and it is a part we hadbetter always hold on to. Over the years, I've had so much fun with this, and it really is amazing howmuch merchandise you can move with just a little promotion. Folks always ask me what are some of thebig moments I remember in the history of Wal-Mart, and I usually say, oh, when we passed a billiondollars in sales, or 10 billion, or whatever. But the truth is, some of my fondest memories are of plain oldeveryday items that we sold a ton of by presenting nicely on endcaps (displays at the end of aisles)or ontables out in action alley (the big horizontal aisle running across a store just behind the checkoutcounters). I guess real merchants are like real fishermen: we have a special place in our memories for afew of the big ones.

I realize this may sound boring to most of you, but one of my best items ever was a mattress pad calleda Bedmate. I think I picked this one up one day by going out and talking to one of those salesmen waitingin the lobbywhich is something I like to do from time to time just to keep in touch. At the time I don'tthink we even carried mattress pads, but somehow or another I felt it was an unexplored item or an itemwe should have. So we bought a bunch of the pads, lowered the price and the margin a little bit,displayed them prominently, and it has become one of the most fantastic items we have ever had in ourstores. I had somebody check for me the other day, and since we introduced the Bedmate in 1980,we've sold over five and a half million of those doggoned things.

Another day I walked out into the lobby and began talking with this salesman from the AladdinCompany, the folks who make Thermos bottles. He had his samples with him, and I asked him the usualquestion, what do you have that is real hot that we could promote successfully And he had a half-gallonred and blue Thermos bottle that looked real handsome and he said, "This will make a great special.

We'll give you this kind of price and you can sell it for such-and-such." I said, "Let's talk about it." So Igot him down a little more, ran it at an even lower price, and we went crazy with that thing. We soldcarloads of that Thermos by shooting it into the stores.

For a while there I got to thinking that maybe I was just a genius at picking these items, they all did sowell. But I finally realized that because I was the chairman, and because they knew I'd be coming intotheir stores sooner or later, our associates would get at it on those items I chose and move those thingsright on out. I learned I had to be careful the time we promoted the Moon Pies. These gooeymarshmallow snacks, which are real popular in the South, were another one of my great items. I got onto them in Tennessee, where I ran into a department head, a woman who had been selling Moon Pies inan unbelievable way just by putting them out where folks would notice them. Well, I knew they weren'tbeing pushed across Wal-Mart because I hardly ever saw them around in the stores. So I took her idea,came back, got with the buyer, called the company, and said, "Hey, what if I make the Moon Pie myitem, ship it to all our stores, and sell it five for $1.00 instead of 23 cents apiece" They went for it andcame down in their price to 12  cents apiece. We charged 20 cents and sold 500,000 Moon Pies, or$100,000 worth, in one week. Company-wide, it was a real winner. The problem was everybody gotcarried away with my item and we shipped them to Wisconsin. Those people up there never heard ofMoon Pies before, and they weren't too interested in learning about them. It was the kind of mistake wehad to watch out for once we got so big.

DAVID GLASS:

"We have this executive VPI (Volume Producing Item) contest, you know, but it's really hard tocompete with Sam on it because it is just unbelievable the compliance he gets. I think the ChattanoogaBakery, which makes Moon Pies, made him their man of the year. If they didn't, they should have. Noone in history has ever even dreamed you could sell Moon Pies like that. But see, if he picks an item, he'llsay he wants a table in front of the check stands, and he wants fifteen cases of Moon Pies there brokendown into vanilla, chocolate, and caramel, in whatever ratios he decides they're going to sell. ThatBedmate thing was ordinarily a side-counter itemmaybe you stock four on a side counter and they sell afew a month. Well, Sam takes a table in action alley, designs the sign himself, and makes a rule that youhave to keep the thing full of Bedmates. Of course, it just exploded. Ask him about his minnow bucket,though. That was his worst item ever. That was the same year I won the contest with Seneca AppleJuice. It was just sensational. It sold tons. So I would go to the stores, and get them to take that minnowbucket up front to the people greeter at the door, put ice in it, ice down the apple juice, and give awaysamples out of his minnow bucket. I particularly did it in stores I knew he was going to visit. It drove himcrazy, and he got off that minnow bucket pretty quick.

"We have a lot of fun with all this item promotion, but here's what it's really all about. The philosophy itteaches, which rubs off on all the associates and the store managers and the department heads, is thatyour stores are full of items that can explode into big volume and big profits if you are just smart enoughto identify them and take the trouble to promote them. It has been a real key to helping this companydramatically increase its sales per square foot. If you are going to show the kind of double-digitcomparable store sales increases that we show every year, and grow a company the way we've grownours, you have to be merchandise driven. Otherwise, you become like everybody else. I can name you alot of retailers who were originally merchandise driven, but somehow lost it over the years. In retail, youare either operations drivenwhere your main thrust is toward reducing expenses and improvingefficiencyor you are merchandise driven. The ones that are truly merchandise driven can always workon improving operations. But the ones that are operations driven tend to level off and begin todeteriorate. So Sam's item promotion mania is a great game and we all have a lot of fun with it, but it isalso at the heart of what creates our extraordinary high sales per square foot, which enable us todominate our competition."By the way, I'm promoting an item in the stores this year that I think is a real winner: a halogen carheadlight for only $10.94. I teamed up on it with Jack Welch, the CEO of General Electric. It's a goodexample of how we're cooperating with our big vendors these days at the highest levels.

In the early days of Wal-Mart, this period we've been talking about, I really believe our emphasis onitem promotion helped us to make up for a lot of shortcomings we hadan unsophisticated buyingprogram, a less than ideal merchandise assortment, and practically no back-office support. It wasanother way of swimming upstream. We made up for what we didn't have by being merchants.

The only other reason the thing held together back then is that from the very start we would get all ourmanagers together once a week and critique ourselvesthat was really our buying organization, a bunchof store managers getting together early Saturday morning, maybe in Bentonville, or maybe in some motelroom somewhere. We would review what we had bought and see how many dollars we had committedto it. We would plan promotions and plan the items we intended to buy. Really, we were planning ourmerchandising programs. And it worked so well that over the years, as we grew and built the company, itjust became part of our culture. I guess that was the forerunner of our Saturday morning meetings. Wewanted everybody to know what was going on and everybody to be aware of the mistakes we made.

When somebody made a bad mistakewhether it was myself or anybody elsewe talked about it,admitted it, tried to figure out how to correct it, and then moved on to the next day's work.

Another way we tried hard to make up for our lack of experience and sophistication was to spend asmuch time as we could checking out the competition. It's something I did from the beginning, and it'ssomething I insisted all our managers do.

CHARLIE CATE:

"I remember him saying over and over again: go in and check our competition. Checkeveryone who isour competition. And don't look for the bad. Look for the good. If you get one good idea, that's onemore than you went into the store with, and we must try to incorporate it into our company. We're reallynot concerned with what they're doing wrong, we're concerned with what they're doing right, andeveryone is doing something right."CLARENCE LEIS:

"When Gibson's first came into Rogers, we practically lived between the two stores. My assistants, JohnJacobs and Larry English, would go over there and walk through their store trying to memorize prices.

Then they would come out and write them all down. But there was a great big open trash bin out behindthat store, and at night, after both stores were closed, John and Larry would go over to Gibson's and getdown in their trash and check as many prices as they could find."I guess we had very little capacity for embarrassment back in those days. We paid absolutely noattention whatsoever to the way things were supposed to be done, you know, the way the rules of retailsaid it had to be done. You should have seen us on some of those early buying trips to New York. Wehad hired this wholesaler from Springfield, Missouri, a guy named Jim Haik, to work with us as sort of anagent. We had bought goods from him, so we said we needed someone to hold our hand and take usaround New York to get some merchandise. Jim was a good guy, a straight guy. He took Don Whitakerand me around and introduced us to his sources. He would say, 'These are guys from a little chain downin Arkansas, and they are good people.' We bought dresses and blouses and girls' and infants' and,again, we were mostly item buyers. We didn't buy like other chains, where a buyer specializes in one lineof merchandise and just buys that one line. I don't think any of those guys in New York really understoodour thinking, but we were a store whose profit and volume had to be driven by finding real bargains onthings we could promote out in the sticks. And we did. I usually found my best buys in men's shirts froma guy named Harry Criss at Colonial Manufacturing. He would give us special treatment, meeting us athis showrooms by seven in the morning so we would have extra time to work the street. I alwaysappreciated that, and I bought a lot of shirts from Harry Criss over the years.

BUD WALTON:

"I'll never forget those buying trips. Four, five, six of us might go at a time: Sam, me, Don Whitaker, PhilGreen, Claude Harris, Gary Reinboth. We had this budget, and we knew we could spend X amount ofdollars, whatever it was. We would have $10,000 for this department, or $20,000 for that one, right ondown the line. So here we were, a bunch of guys from Arkansas wandering around New York City. Itwas all new to me. I had never been to New York City. Sam would split us up into pairssome wouldbuy domestics, others ladies' tops and bottoms, whatever.

"So one day he says, 'Bud, you and Don Whitaker go buy men's department.' Well, neither one of ushad ever bought men's before. We were mostly hardlines merchants, who didn't know much aboutclothes. We went down to the Empire State Building where all the men's clothes manufacturers were, andI will never forget that day as long as I live. I had never seen anything like it. We got real carried awayand just bought sweaters, pants, all kinds of stuff. Then at night we would get together back at our hotelroom and see what we'd spent. Most of the time we would have overbought and somebody would haveto go back the next day and cancel a few orders."GARY REINBOTH:

"From the very beginning, Sam was always trying to instill in us that you just didn't go to New York androll with the flow. We always walked everywhere. We never took cabs. And Sam had an equation forthe trips: our expenses should never exceed 1 percent of our purchases, so we would all crowd in theselittle hotel rooms somewhere down around Madison Square Garden.

"He was always trying to get somebody to work with us early in the morning or late at night. To get NewYorkers to do that is something really difficult, you know, because they all catch the train and they've gottheir rules about everything. But Sam would always find somebody to visit with us at night. For one thing,he wanted the trips to be as short as possible. For another, he wanted to make sure we were working allthe time.

"Anyway, we would split up and go to all these different showrooms. We'd walk in, and they'd say,'Who are you with'

"And we'd say, 'We're with Walton's.'

" 'Oh yeah, where are you located'

" 'Arkansas.'

" 'What town'

" 'Bentonville, Arkansas.'

"Then they'd always say, 'Where in the world is Bentonville, Arkansas'

"And Don Whitaker, with a straight face, would always say, 'Next to Rogers.'

"Then, the guy would say, 'Excuse me, I need to get something out of the back room.'

"And old Whitaker would say, 'You don't need to check us out with Dun and Bradstreet. We're thesame as General Motors.'

"Then the guy would come back and say, 'Well, I found you in there, and you do have good credit. Sowhat can I show you'

"We never finished up until about twelve-thirty at night, and we'd all go out for a beer except Mr.

Walton. He'd say, 'I'll meet you for breakfast at six o'clock.' And we'd say, 'Mr. Walton, there's noreason to meet that early. We can't even get into the buildings that early.' And he'd just say, 'We'll findsomething to do.'

"The next morning he would talk some janitor or somebody into letting us in the building, and we'd besitting there outside the showroom when those folks started coming in to work. Like I said, I think hewas trying to make a point: just because we're in New York doesn't mean we have to start doing thingstheir way."I expect Gary's right about my trying to make a point. Because wherever we've been, we've always triedto instill in our folks the idea that we at Wal-Mart have our own way of doing things. It may be different,and it may take some folks a while to adjust to it at first. But it's straight and honest and basically prettysimple to figure out if you want to. And whether or not other folks want to accommodate us, we prettymuch stick to what we believe in because it's proven to be very, very successful.

We started out swimming upstream, and it's made us strong and lean and alert, and we've enjoyed thetrip. We sure don't see any reason now to turn around and join the rest of the pack headed downcurrent.
Chapter 5 Raising a Family
　　"As kids, we all worked for the company in one way or another. I got to work behind the candy counteror run the popcorn stand when I was five years old. The business was part of life, and it was alwaysincluded in the dinner conversation. We heard a lot about the debt it took to open new stores, and Iworried about it. I remember confiding to my girlfriend one timecryingand saying, 'I don't know whatwe're going to do. My daddy owes so much money, and he won't quit opening stores.'"ALICE WALTONIn the early years, before Wal-Mart, I don't think our family was much different from most other familiesof that era. Helen and I had made pretty deliberate plans; we wanted four kids, and Helen said she'd liketo have them all by the time she was thirty so she could enjoy her grown children and her grandkids. Sureenough, by the time we left Newport, we had four kids: three boysRob, John, and Jimand a baby girl,Alice.

One of the reasons Helen insisted all along on our living in a small town, I'm sure, is so we could raisethe kids with the same values she and I had been exposed to in our youth. And we did, except it wasn'tthe Depression, and we never had to worry about having enough to go around at the dinner table.

Another goal of ours was to create the kind of family togetherness Helen had grown up with. I've alreadytold you how much the Robsons influenced Helen and me in the organization of our finances, but really Ithink their successful, happy, prosperous family was just an all-round inspiration for the kind of family Iwanted as a young man, and, of course, it was the only kind of family Helen ever considered.

I have fond memories of my own boyhood, yet it pains me to talk about one part of it. But becauseHelen thinks it had an important influence on me, I'll mention it briefly. The simple truth is that Mother andDad were two of the most quarrelsome people who ever lived together. I loved them both dearly, andthey were two wonderful individuals, but they were always at odds, and they really only stayed togetherbecause of Bud and me. After we were grown, they even split up and went their separate ways for awhile. During the war, for example, Mother moved to California to work in the defense plants. Butgrowing up as the oldest child, I felt like I took a lot of the brunt of this domestic discord. I'm not exactlysure how this situation affected my personalityunless it was partly a motivation to stay so busy all thetimebut I swore early on that if I ever had a family, I would never expose it to that kind of squabbling.

So Helen and I did the best we could to promote a sense of togetherness in the family, and we madesure our children had a chance to participate in the same sorts of things we did as kids. They were inScouts, and for a time I was a scoutmaster. All the boys played football and did well. In fact, they eachmade the all-state team, and when Jim was about to graduate I remember the coach being quoted aroundtown to the effect that he couldn't face the prospect of a team without a Walton, so he was trying to talkAlice into going out for football. She probably wouldn't have been half bad either. I always tried to behome on Friday nights so I would miss very few of their games. They threw paper routes; you know howstrongly I felt about that experience as training. Alice was involved with horse shows at a very early age.

And, of course, we all went to church and Sunday school. I was a Sunday school teacher there for awhile too.

Helen walton:

"Sam did teach Sunday school for a while, but even then he had unusual work habits. During one periodin Newport, he would work until ten on Saturday night, and then he'd get up and go right back in Sundaymorning. We were supposed to be taking turns about getting the kids to Sunday school, and to get fourlittle kids dressed for church with nobody to help me was a little unreal. It's true that we had less timewith Sam after Wal-Mart, but don't get the idea that he wasn't working most of the time before that."Through our combined efforts the kids received your everyday heartland upbringing, based on the sameold bedrock values: a belief in the importance of hard work, honesty, neighborliness, and thrift. Helenbore more than her share of raising the kids, and I worked long hours, at least six days a week. Saturdaywas our big store day, and I worked all day Saturday and Saturday night too. As far as I'm concerned,our values really took. The only thing that might have made our family different was that, as Alice said,everybody was involved in working around the stores.

Rob walton:

"We always worked in the stores. I would sweep the floors and carry boxes after school, and evenmore in the summer. I remember just barely having a driver's license and driving a truckload ofmerchandise one night up to that Ben Franklin in Saint Robert, which we all knew to be the best BenFranklin in the world. In those days, we all got an allowance too, and it was less than some of ourfriends. I don't know that we particularly felt deprived, but we didn't have a lot of money. Dad wasalwaysfrugal is probably a good word for it. But he always let us invest in those stores, and I had aninvestment in that Saint Robert store so I came out real well on that. It paid for my house and variousotherDad would call themextravagances."I guess the kids thought of themselves as slave labor back then, but we didn't work them that hard. Wejust taught them the value of work. And besides, I needed the helpat the store and at home. I didn'thave time to mow the lawn, and why should I anyway, with three strapping boys and a healthy girlavailable for chores. And it wasn't all work. Helen and I made it a point to take the whole family out andspend time traveling or camping together. Sometimes the kids thought of these trips as forced marches,but I think that time we spent together has had a lot to do with our close relationship as a family today.

We have a lot of good memories of traveling all over the country, especially in this one fine old DeSotostation wagon.

JIM WALTON:

"Dad always said you've got to stay flexible. We never went on a family trip nor have we ever heard of abusiness trip in which the schedule wasn't changed at least once after the trip was underway. Later, we allsnickered at some writers who viewed Dad as a grand strategist who intuitively developed complex plansand implemented them with precision. Dad thrived on change, and no decision was ever sacred."HELEN WALTON:

"Sam wasn't so tied up year-round until Wal-Mart started. During the Ben Franklin days, we took amonth off every year. In fifty-six, I remember we did the whole state of Arkansas. We went to the parks,camped out, and we all fell in love with this state because we really got to know it. That was a marvelous,wonderful time. Then one year we took a long trip to Yellowstone, another year we went to Mesa Verdeand the Grand Canyon, and another time we took a long journey up the East Coast. We took a car fullof kids and all our camping equipment strapped on everywhere, and I loved it. Camping was reallyimportant in our lives. Of course, we always had to stop and look at storesany kind of storeson theway to wherever we were headed. You know, we would go through a good town, and he knew aboutsome store there. I would sit in the car with the kids, who, of course, would say, 'Oh no, Daddy, notanother store...' We just got used to it. Later on, Sam never went by a Kmart that he didn't stop andlook at it."ALICE WALTON:

"It was great. We would get in the station wagon four brats and the dogstrap the canoe on top andhitch up a homemade trailer behind, and take off for a different part of the country every summer. Wewould always do it as long as Dad could stop and see his stores along the way. He would usually get ussituated, set up camp, and then Mother would stay at camp with us while he took off to look at stores.

We learned to work together, and everybody had their chores, and at night we prayed together.

"You know, it's interesting. I know Dad worked incredible hours, and I know he traveled a lot, but Inever really felt like he was gone much. He went out of his way to spend time with us, and he was fun tobe with. He loved to play baseball with us. I tagged along with him on his trips a good bit, and I still visitstores because of it. When I got into junior high and high school, he would take me to my horse shows.

Mother thought he was staying and watching, but Dad and I had a pact. He would drop me off, and Iwould show my horses, while he would go look at stores. The store thing was always a part of it. Itwasn't that he wasn't supportive or fair. It was just something he had to do, and we understood it."ROB WALTON:

"I remember Dad visiting stores, but I don't remember the store visits as imposing or interfering with thetrips because mostly I remember the trips as being really good times.

"On the trip to the Grand Tetons, we had an opportunity to take what was a very expensivefor thattimepack trip up into the mountains to a fishing camp and stay there for a few days. But that was goingto use up all our money, and we had to take a family vote to decide whether to do that or not. Wedecided to do it, and it was fun. But after we had spent all our money on the big trip, we made a quickstop in the Black Hills and hiked it on home in a hurry.

"I especially remember the trip East. We went through the Carolinas and headed up the coast. It wasMother and Dad and all four kids and one scroungy dog named Tiny. We rolled into New York City in astation wagon with a canoe on top and a camping trailer on the backthat was the first time any of us kidshad ever been there. I have one really special memory of that trip. We went to seeCamelot, with theoriginal castJulie Andrews, Richard Burton, Roddy McDowall, and Robert Gouletand we were allwearing Bermuda shorts."Of course, what they say is true. I was visiting stores all the time, and I still do it today. In feet, we'vevisited them all over the world, and gotten some great ideas that wayas well as a few that didn't workout so well. Like working weekends, it's just something you have to do if you want to be successful in theretail business. I'm glad my kids remember the good times and don't seem to resent me too much for myabsences and distractions over the years. I think maybe one reason they don't have too much resentmentis that Helen and I always involved them in the business and kept them informed right from the startI hadno idea, incidentally, that Alice was so frightened of debt as a little girl, but there are certainly moreirrational things she could have feared. They may not have wanted to go visit all those stores while wewere on vacation, but they had some idea why I was doing it. They worked in the stores, invested in thestores, and shopped in the stores.

HELEN WALTON:

"At that first Bentonville store I was part of the shrinkage [unaccounted-for inventory losses usuallycaused by theft]. If I needed something, I just got it and took it home with me. I didn't even think aboutpaying for it. It wasn't good business at all. I mean, people would see me picking up things and theyprobably thought, well, I'll pick up some too. I remember it was difficult for me when we went into theWal-Mart business from the Five and Dime. I had to start paying for things, and it was a real shock.

"Also, at Christmastime, we would get a list from the welfare office of some children who weren't goingto have Santa Claus. We'd get the ages and sizes and that sort of thing. I remember one night we tookour children into the store after it was closed and gave them that list and told them to go around and pickout things for them because we wanted them to have some sense of what was going on outside ourprivileged little family. It was a small town, and we were a real small-town kind of operation."One thing I never didwhich I'm really proud of was to push any of my kids too hard. I knew I was afairly overactive fellow, and I didn't expect them to try to be just like me. Also, I let them know theywere welcome to come into our business, but that they would have to work as hard as I didthey wouldhave to commit to being merchants. Rob went to law school and became our first company lawyer. Hedid most of the work to take us public, and has been involved with the senior management of thecompany ever sinceas an officer and board member.

Jim learned a lot about real estateand the art of negotiationfrom his uncle Bud. After Bud sort ofstepped back from his involvement with locating and buying store sites, Jim took over. He was reallygood at it, and they still tell stories about him flying into some small town, unfolding his bicycle, andpedaling around looking for a good site. He never told anybody who he was, and he got some greatdeals. Now he's running Walton Enterprises, the family partnership, and I think he's almost as tight with adollar as I am.

Among other things, Walton Enterprises owns banks in several towns around here. Jim and a partnerown the local newspaper, theDaily Record. The story of buying theRecord shows just how far we'vecome from those days when Helen could just sashay through the store and pick up what she wantedapractice, by the way, that I always frowned on. Back before we went public with Wal-Mart, I bought thenewspaper figuring that we would have a cheap place to print our circulars. I think I only paid $65,000for that old paper. When we went public, though, some New York lawyers came down and told us wehad to sell the paper to Wal-Mart because otherwise we would be taking advantage of the publiccompany if we continued to print the circulars. So we sold it to Wal-Mart at cost, about $110,000 bythen. Well, years later, Jim decides he wants to buy the paper. So we had an outside consultant come inand tell Wal-Mart what it was worth. Jim and his partner paid $1.1 million for that darned paper. It'sbeen marginally profitable at best, and it quit printing Wal-Mart circulars years ago. The point I'm tryingto make is that we as a family have bent over backward not to take advantage of Wal-Mart, not to pressour ownership position unfairly, and everybody in the company knows it.

Alice and John worked for a little while at Wal-Mart, but have both branched out into independentbusinesses of their own. Alice tried her hand as a buyer, but didn't care for it too much, and now she'sgot her own investment company, The Llama Company, down in Fayetteville. In some ways, I believeshe's the most like mea maverickbut even more volatile than I am. John, who was a Green Beret medicin Vietnam, became our second company pilotI was the first. He's the most independent of the bunchand the only one who doesn't live here in Arkansas, and he's a tremendous individual. He and his familylive out West, where he designs and builds sailboats, and he also runs a large crop-dusting business,which is owned by Walton Enterprises. We're all pilots, so it's real easy for us to get together on amoment's notice.

HELEN WALTON:

"One way in which Sam and my dad were really different. My dad was always talking to me about howI should live, how I should work, and challenging me to do this and that. I don't know that Sam did thatvery much with our children. I probably did it, and they got enough from me. He probably saw that andkept his mouth shut."ALICE WALTON:

"When we were growing up, Dad was really very accepting. If you made A's and B's, Mother was theone who would press us with, 'I made all A's, and I know you can do it.' Dad was more, well, This iswhat I made. A's and B's are pretty good.'"JOHN WALTON:

"I remember asking Dad for permission to climb a bluff overlooking the Buffalo River. He said, 'Doanything you're big enough to do.' What an exhilarating challenge of judgment and confidence booster fora twelve-year-old. Later, when I was a young man trying to find my way in the world, he gave me anopen invitation to join the Wal-Mart team, but never a hint of pressure. What a wonderful way to growup."Now, as I said, one of the reasons I fell for Helen in the first place was that she was her ownwomanand she has not proved a disappointment in that category. For example, one of the things I'mfamous for around our company is absolutely insisting that all our executives and managers here inBentonville attend our Saturday morning meeting. One of the reasons I like it is that if all our folks outthere in the stores have to work on Saturday, I think those of us back here in the general office shouldshow up on Saturday too. Plus, as I've said, if you don't want to work weekends, you shouldn't be inretail.

But Helen will tell anybody who asks her what she thinks of the Saturday morning meeting.

HELEN WALTON:

"I think it is a shame that a lot of those fathers and mothers who have children involved in things likeathletic programs can't be there to support them because they have to go to the Saturday morningmeeting. I don't blame people at all for complaining about them."As a merchant, I've always tried to stay fairly neutral publicly on controversial political issues, eventhough I obviously have opinions, but Helen is one who's going to answer bluntly about what she believesin if questioned. Really, she's a bit of a feminist, I think, not unlike my mother. And I guess we've caught alittle heat from time to time. Some of her causes aren't all that popular with some of these fairly extremegroups. But I'll tell you this: she doesn't ask me what she should think, and I'd be the last person on earthto try to tell her. We had one really ugly fight in our marriageearly onover what kind of car to buy. Iwas a Chevy man, and she was from a Ford family. Nobody won that one, but we both learned howstubborn we could be, and we haven't gotten into anything like that since. We have been happy together,but we've stayed independent to pursue our own interests as well.

One big strain on the family that I've already talked about was this whole richest man in Americabusiness. I don't know if Helen ever really forgave me for putting us in the position to be dragged intothat.

HELEN WALTON:

"What I hate is being the object of curiosity. People are so curious about everything, and so we are justpublic conversation. The whole thing still makes me mad when I think about it. I mean, I hate it."Helen's right, of course, but I think we've mostly come to terms with all the commotion caused by ourunwillingly becoming a semipublic family. And we've enjoyed a few of the things it's enabled us to do.

Our kids just shrug it off. I don't think it has affected our kids too much because it all happened graduallyto them, and they were raised so basically, with good fundamental values.

I do admit to worrying sometimes about future generations of the Waltons. I know it's unrealistic of meto expect them all to get up and throw paper routes, and I know it's something I can't control. But I'dhate to see any descendants of mine fall into the category of what I'd call "idle rich"a group I've neverhad much use for. I really hope that somehow the values both Helen and I, and our kids, have alwaysembraced can be passed on down through the generations. And even if these little future Waltons don'tfeel the need to work from dawn on into the night to stay ahead of the bill collector, I hope they'll feelcompelled to do something productive and useful and challenging with their lives. Maybe it's time for aWalton to start thinking about going into medical research and working on cures for cancer, or figuringout new ways to bring culture and education to the underprivileged, or becoming missionaries for freeenterprise in the Third World. Or maybeand this is strictly my ideathere's another Walton merchantlurking in the wings somewhere down the line.
Chapter 6 Recruiting the Team
　　"I kept saying, Sam, we're making a good living. Why go out, why expand so much more The storesare getting farther and farther away. After the seventeenth store, though, I realized there wasn't going tobe any stopping it."HELEN WALTONAs much as we must have looked like promoters in the early goingwith our donkey rides and ridingmowers out in the parking lots, and mountains of Tide, or whatever, piled up inside the storeswhatnobody realized, including a few of our own managers at the time, was that we were really trying from thebeginning to become the very best operatorsthe most professional managersthat we could. There's noquestion that I have the personality of a promoter. That personality, and our somewhat unorthodox styleat Wal-Mart, probably confused people at the outset. In fact, I have occasionally heard myself comparedto P. T. Barnum because of the way I love to get in front of a crowd and talk something upan idea, astore, a product, the whole companywhatever I happen to be focused on right then. But underneath thatpersonality, I have always had the soul of an operator, somebody who wants to make things work well,then better, then the best they possibly can. So I guess when folks saw me walking around scribblingnotes on my coffee-stained yellow legal pad, or hauling boxes of ladies' lingerie into the stores out of mystation wagon, maybe they didn't take me that seriously. They assumed we couldn't be in it for the longhaul. Some folks no doubt figured we were a little fly-by-nightyou know, in the discount business todaybut out selling cars or swampland tomorrow. I think that misunderstanding worked to our advantage for along time, and enabled Wal-Mart to fly under everybody's radar until we were too far along to catch.

Truth be told, discounting attracted mostly promoters in the beginningpeople who had been in thedistribution center business or who were real estate promoters, guys who weren't really even aspiringmerchants but who saw a huge opportunity. You didn't have to be a genius to see discounting as a newtrend that was going to sweep the country, and all kinds of folks came jumping into it with all fourfeetwherever they could arrive firstCedar Rapids, Iowa, or Springfield, Missouri, it didn't matter. Theywould take a carbon copy of somebody's store in Connecticut or Boston, hire some buyers and somesupervisors who were supposed to know the business, and start opening up stores. From about 1958until around 1970, it was phenomenally successful.

Anybody who has ever known anything about me knows I was never in anything for the short haul; Ialways wanted to build as fine a retailing organization as I could. But in those early daysbefore, and justafter, we opened the first Wal-MartI got to know a lot of those promoters. As I told you, I ran thecountry studying the discounting concept, visiting every store and company headquarters I could find.

The first ones I saw were the mill stores in the East, where the whole thing started. Ann & Hope was inProvidence, Rhode Island, and there were others in Massachusetts and across New England. I went allover up there looking at Giant stores and Mammoth Mart and Arlan's. Another one I learned a lot fromwas Sol Price, a great operator who had started Fed-Mart out in southern California in 1955. I madefriends with Sol's son-in-law, who was running a distribution center in Houston, and talking with himhelped me sort out some of my thinking on distributionwhich would eventually become another key toWal-Mart's success. I guess I've stolenI actually prefer the word "borrowed"as many ideas from SolPrice as from anybody else in the business. For example, it's true that Bob Bogle came up with the nameWal-Mart in the airplane that day, but the reason I went for it right away wasn't that the sign wascheaper. I really liked Sol's Fed-Mart name so I latched right on to Wal-Mart. I do not believe Kmartexisted at that time.

I read in some trade publication not long ago that of the top 100 discounters who were in business in1976, 76 of them have disappeared. Many of these started with more capital and visibility than we did, inlarger cities with much greater opportunities. They were bright stars for a moment, and then they faded. Istarted thinking about what really brought them down, and why we kept going. It all boils down to nottaking care of their customers, not minding their stores, not having folks in their stores with goodattitudes, and that was because they never really even tried to take care of their own people. If you wantthe people in the stores to take care of the customers, you have to make sure you're taking care of thepeople in the stores. That's the most important single ingredient of Wal-Mart's success.

Most of these early guys were very egotistical people who loved to drive big Cadillacs and fly around intheir jets and vacation on their yachts, and some of them lived in houses like I'd never even thought aboutbefore. I remember going to dinner at one of their houses, and we got picked up by this limousine thatmust have had room for fourteen people. Man, they were living high. And they could afford to back thenbecause this discounting thing was working so well. Customers just flocked to their stores, and thesefellows were covered up in cash. Most of them could still be around today if they had followed somebasic principles about running good stores. There are a lot of ways to build strong companies. They don'thave to be done the Wal-Mart way, or my way, or anybody else's way. But you do have to work at it.

And somewhere along the line, these folks stopped short of setting the goals and paying the price thatneeded to be paid. Maybe it wasn't the Cadillacs and the yachts, maybe they just decided it wasn't worthit. But whatever it was, they just didn't stay close enough to their business, they sort of chose to get overon the other side of the road.

They expanded quickly without building the organizations and the supportsuch as distribution centersneeded to expand those companies. They didn't get out into their stores to see what was going on. ThenKmart got their machine in gear and began to do it better and better. I remember going in their storesI'llbet I've been in more Kmarts than anybodyand I would really envy their merchandise mix and the waythey presented it. So much about their stores was superior to ours back then that sometimes I felt like wecouldn't compete. Of course that didn't stop us from trying. And Target came along and did a fine job,taking the whole idea a little more upscale. As these big operators became more organized, thecompetition grew a lot more difficult. That's when all those guys who were failing to meet their customers'

needs and who didn't build strong organizationsall those promotersstarted to fall apart and, eventually,fall out.

Actually, during this whole early period, Wal-Mart was too small and insignificant for any of the big boysto notice, and most of the promoters weren't out in our area so we weren't competitive. That helped meget access to a lot of information about how they were doing things. I probably visited more headquartersoffices of more discounters than anybody elseever. I would just show up and say, "Hi, I'm Sam Waltonfrom Bentonville, Arkansas. We've got a few stores out there, and I'd like to visit with Mr.

So-and-So"whoever the head of the company was"about his business." And as often as not, they'd letme in, maybe out of curiosity, and I'd ask lots of questions about pricing and distribution, whatever. Ilearned a lot that way.

KURT BARNARD, RETAILING CONSULTANT:

"I was executive vice president of the discounters' trade association, working in my New York officeone day in 1967. My secretary said there was a man out front who wanted to join our group. I said Iwould give him ten minutes. So in comes this short, wiry man with a deep tan and a tennis racket underhis arm. He introduced himself as Sam Walton from Arkansas. I didn't know what to think. When hemeets you, he looks at youhead cocked to one side, forehead slightly creasedand he proceeds toextract every piece of information in your possession. He always makes little notes. And he pushes onand on. After two and a half hours, he left, and I was totally drained. I wasn't sure what I had just met,but I was sure we would hear more from him."Looking at everybody else's companies made me feel we were definitely headed in the right direction.

But as we developed, we began to feel a little out of control. In the late sixties, we had more than adozen Wal-Marts and fourteen or fifteen variety stores, which is a pretty good-sized company to berunning with three ladies, myself, and Don Whitaker in the office, and a manager in each store. I alreadytold you what scrubby buyers we were. We had a lot of people with little or no experience, or notenough knowledge of how bigger operations actually worked. I made up my mind that we had to getsomebody with management under his belt. I had hired Gary Reinboth from J. J.

Newberry, a big variety chain that was having some problems at the time, so I asked him if he knewanybody, and he told me about this guy up in Omaha named Ferold Arend. He was Newberry's districtmanager and head of merchandise for the whole Midwest, so Bud and I flew out to see him. We talkedhim and his wife into coming down and looking at our operation.

Ferold arend, wal-mart's first vice president of operations, and later its president:

"In the middle of 1966, Wal-Mart No. 5 was under construction in Conway, Arkansas, and Sam was allexcited and said, 'I've got to show you these plans.' So he loaded my wife and me in his plane and weflew down there. The store had a cotton mill on one side and a stockyard on the other, and it was in aterrible neighborhood. My first thought was: This is not a very good place for a store.' I also thought theBentonville store didn't seem to have any organization to the way it was run. Let's just say I wasn't veryimpressed with the whole Sam Walton operation at that time. I told him I wasn't interested.

"Later on, after that Conway Wal-Mart opened up, Sam called me and told me what the sales were. Ithought, 'My gosh, that store did as much in one day as some of our bigger stores do in a month.' Andthen he told me he was only paying ninety cents a square foot. And I thought, 'He must have somethingthere.' About that time, Newberry's decided to reorganize and I was going to have to move to a newdivision. So I thought, 'Well, if I'm going to have to start over in a company where I've worked fortwenty-one years, why not look at something I'm really interested in' and that was discounting and SamWalton.

"Here I was coming in as vice president, and it took some getting used to. The offices were still up onthe square in Bentonville, and Sam had just got through remodeling themwhich I'm sure was a greatimprovementbut in my opinion they weren't much. The offices were in an old narrow hallwayupstairssome were over the barbershop and others were over an attorney's office. The floor sagged upthere, about four inches from the wall to the center. And they had some partitions and some woodpaneling, and they were real little offices. It was very close-knit up there."Even if he couldn't tell it by the office we gave him, bringing Ferold in was an important step for ourcompany. I knew we had to get better organized than we were. We still had to build a basic merchandiseassortment, and a real replenishment system. We had lists of items we were supposed to carry, and wewere dependent on the people in the stores to keep good records of everything manuallythis was at atime when quite a few people were beginning to go into computerization. I had read a lot about that, andI was curious. I made up my mind I was going to learn something about IBM computers. So I enrolled inan IBM school for retailers in Poughkeepsie, New York. One of the speakers was a guy from theNational Mass Retailers' Institute (NMRI), the discounters' trade association, a guy named Abe Marks.

ABE MARKS, HEAD OF HARTFIELD ZODY'S, AND FIRST PRESIDENT, NMRI:

"I was sitting there at the conference reading the paper, and I had a feeling somebody was standing overme, so I look up and there's this grayish gentleman standing there in a black suit carrying an attach case.

And I said to myself, 'Who is this guy He looks like an undertaker.'

"He asks me if I'm Abe Marks and I say, 'Yes, I am.'

" 'Let me introduce myself, my name is Sam Walton,' he says. 'I'm only a little fellow from Bentonville,Arkansas, and I'm in the retail business.'

"I say, 'You'll have to pardon me, Sam, I thought I knew everybody and every company in the retailbusiness, but I never heard of Sam Walton. What did you say the name of your company is again"" 'Wal-Mart Stores,' he says.

"So I say, 'Well, welcome to the fraternity of discount merchants. I'm sure you'll enjoy the conferenceand getting acquainted socially with everyone.'

" 'Well, to be perfectly honest with you, Mr. Marks, I didn't come here to socialize, I came here to meetyou. I know you're a CPA and you're able to keep confidences, and I really wanted your opinion onwhat I am doing now.' So he opens up this attach case, and, I swear, he had every article I had everwritten and every speech I had ever given in there. I'm thinking, 'This is a very thorough man.' Then hehands me an accountant's working column sheet, showing all his operating categories all written out byhand.

"Then he says: 'Tell me what's wrong. What am I doing wrong'

"I look at these numbersthis was in 1966and I don't believe what I'm seeing. He's got a handful ofstores and he's doing about $10 million a year with some incredible margin. An unbelievableperformance!

"So I look at it, and I say, 'What are you doing wrong Samif I may call you SamI'll tell you what youare doing wrong.' I handed back his papers and I closed his attach case, and I said to him, 'Being hereis wrong, Sam. Don't unpack your bags. Go down, catch a cab, go back to the airport and go back towhere you came from and keep doing exactly what you are doing. There is nothing that can possiblyimprove what you are doing. You are a genius.' That's how I met Sam Walton."Abe invited me to join the NMRI and it turned out to be quite a valuable association for me. I was onthe board for about fifteen years, and made some terrific contacts and generous friends. I visited withAbe a number of times at his New York offices, and he was a very open guy. He shared with me how heused computers to control his merchandise.

ABE MARKS:

"Our system was rudimentary by today's standards, but it was very advanced for the 1960s. Very fewcompanies controlled their merchandise the way we did. Sam spent a lot of time reviewing theseoperations and he brought some of his people up to review them. He has just been a master of taking thebest out of everything and adapting it to his own needs.

"What we helped him with in the early days was really logistics. It's like in the Army. You can movetroops all over the world, but unless you have the capacity to supply them with ammunition and food,there's no sense putting them out there. Sam understood that. He knew that he was already in what thetrade calls an 'absentee ownership' situation. That just means you're putting your stores out where you, asmanagement, aren't. If he wanted to grow he had to learn to control it. So to service these stores you'vegot to have timely information: How much merchandise is in the store What is it What's selling andwhat's not What is to be ordered, marked down, replaced To get more technical, that helps youcontrol what we call turn, or inventory turnoverthe ratio of sales to inventory. That's a key. The moreyou turn your inventory, the less capital is required. And all this involves getting the merchandise to thestore at the right time, communicating how it's being priced and how it's being marked down, whatever.

Logistics.

"Anyway, the man's a genius. He realizedeven at the rudimentary level he was on in 1966, operatingthose few stores that he hadthat he couldn't expand beyond that horizon unless he had the ability tocapture this information on paper so that he could control his operations, no matter where they might be.

He became, really, the best utilizer of information to control absentee ownerships that there's ever been.

Which gave him the ability to open as many stores as he opens, and run them as well as he runs them,and to be as profitable as he makes them.

"You've got to realize this too. By being at that conference, he was absolutely in the right place at theright time. There were no such things in those days as minicomputers and microcomputers. He was reallyten years away from the computer world coming. But he was preparing himself. And this is a veryimportant point: without the computer, Sam Walton could not have done what he's done. He could nothave built a retailing empire the size of what he's built, the way he built it. He's done a lot of other thingsright, too, but he could not have done it without the computer. It would have been impossible."Much as I hate to admit to something like that, I expect Abe is probably right. His memory's pretty goodabout why I was at that conference, too. I wanted to show him my books, and I wanted to ask himabout merchandise control. But I knew I'd never be any whizbang computer guy myself, so I had anotherreason for going to that school: I was looking to hire a good, bright systems person, and I figured I mightfind one there. As it happened, there were all sorts of bright people in that school. Dale Wormana veryastute retailer from the Fred Meyer company out in Portland and now a good friendwas there, as wasArlie Lazarus, who became president of Herb Fisher's Jamesway Corp. And, of course, that's where Ifirst met Ron Mayer, then the smart young chief financial officer at Duckwall Stores in Abilene, Kansas. Itargeted him as the guy we needed at Wal-Mart, and started wooing him right there. Like so many ofthem, he wasn't interested just then in moving to Bentonville, Arkansas, to work for somebody he knewnext to nothing about. Later on, we changed his mind.

But I had another problem on my mind when I went up there: distribution. All these other guys, like AbeMarks, were in large urban markets, and their stores were being supplied by big distributors. Kmart andWoolco were using the same distribution system that was supplying their thousands of variety stores. Sohere we were out in the sticks with nobody to distribute to our stores, which meant basically that ourmanagers would order from salesmen and then some day or other a truck from somewhere would comealong and drop off the merchandise. Even at the stage we were in, this was totally unworkable. A lot ofour stores weren't big enough to order whole pallets of merchandise, so we had rented that old garage indowntown Bentonville as our warehouse. We would have big shipments delivered there, then unpackthem and repack them into smaller quantities. Then we'd call the trucklines to come get them and takethem to the stores. It was expensive and inefficient. Somewhere in that period, Ferold and I had hiredanother fellow from Newberry's, Bob Thornton, who had been running a distribution center for them inOmaha, with the promise that we were going to build a distribution center for him to run.

BOB THORNTON:

"He hired me with the full understanding that I was going to put together a warehouse and distributionsystem. I accepted the job, moved down here, and started drawing some plans. Then one day heproceeds to tell me he doesn't know for sure whether we really need a warehouse yet or not. It upset meto no end because that was really the only field I wanted to be into. I said, 'Gee, Sam, I want to run awarehouse.' For about six months to a year there, I just worked doing various things around thecompany, and in my spare time I drew up plans for a distribution center. There wasn't room for me in theoffice so they knocked a hole through the wall and went into the upstairs of the shoe store next door. Itwas kind of like an attic, my office, with no heat or air conditioning in it. We had one old toilet for a restroom, with a screen-door hook on the door. And there were about twenty-five people working there bynow. Sam would come by every so often and tell me to keep working on drawing those warehouseplans, but I could see he wasn't sure about it at all."I knew we needed a warehouse. I just wanted to make sure we got the kind we needed, and at this timetoo, remember, we were financing everything ourselves. We were borrowing heavily to open new stores.

But anyway, there was one guy at that same IBM schoola fellow up in Green Bay, Wisconsinwho wasthe only one who had a warehouse, a distribution center. He invited me to go look at it. So when I gothome from the school, I threw Don Whitaker and Ferold and Bob Thornton and some other folkstherewere six of us, I rememberinto a Beechcraft Baron I was flying in those days, and hauled us up to GreenBay, Wisconsin. We went through this warehouse, saw how they did it, took a lot of notes on everything.

It was computerized, one of the first computerized warehouses I know anything about.

After that trip, I knew we had to build one, and everybody was pressuring me for a new general office,so we bought fifteen acres on a farm right outside Bentonville, where we still are today, for about$25,000. Bob was in charge of building us a new 15,000-foot general office, which I thought would lastus forever, and a 60;000-foot warehouse, which I thought was too big, but Ferold convinced me weneeded it.

BOB THORNTON:

"As I recall, my blueprint for the warehouse called for 100,000 square feet, which to me was veryminimal. Then Sam decided to get an architect involved. When I got to look at the drawing, I thought,'Well, this can't be right. It's only 60,000 square feet.' So I went to tell Sam about it, and he said, 'Well, Icalled the architect and told him to cut it back. I just don't think we need that 100,000 square feet, Bob.'

"Another thing. I had designed that distribution center around an in-floor towline system, you know, atrack that moves carts around the floor. Sam says, 'Well, Bob, I just don't think we can do that. We can'tspend that kind of money.' At that point, I literally didn't know how to run a warehouse without one so Ijust said, 'Hey, Sam, if we don't have a towline system, then you don't need me because I don't knowwhat to do without it.' So he gave in to that. The truth is, Sam never didanything in size or volume untilhe actually had to. He always played it close to the belt."It's true enough that I was nervous about spending any unnecessary money in those days. We weregenerating as much financing for growth as we could from the profits of the stores, but we were alsoborrowing everything we could. I was taking on a lot of personal debt to grow the companyitapproached $2 million, which was a lot of money at the time. The debt was beginning to weigh on me.

By now I no longer had any doubt that we were really on to something. We had expanded to MissouriSikeston was our first store there. And we'd put stores in Neosho and West Plains. We'd gone toClare-more, OklahomaHelen's hometown. Our first seven or eight Wal-Marts were showingspectacular results. Once we got it going, it was hard to see why we should quit. The thing was, youcould see the potential so clearly. The profits and the sales were there but we needed to get betterorganized and come up with a more sensible way to finance the growth. I needed someone to help mewith systems and distribution.

I had stayed in touch with Ron Mayer, and I kept after him to work for us. Finally, I talked him intocoming down to look over our operations, and then darned near killed him before he ever had a chanceto sign on. We were flying around in my Beech Baron, looking at stores, and we were on our way in toland at Carthage, Missouriheaded for store number 12. There are two intersecting runways at Carthage,and as I touched down on one of them, all of a sudden up ahead we saw this plane on the other runway,right at the intersection, and we were headed straight at him. I hadn't seen him or heard him on the radio.

I didn't know where he came from. I gave that Baron all the power it had and we just barely made it overthe top of the other plane. Then we circled around and landed. This was Ron's first trip with me, and whoknows what he must have thought. But somehow, I talked him into coming to work with us anyway. Hejoined Wal-Mart in 1968 as vice president for finance and distribution.

Even though it may surprise some people, I have to say that I consider the time Ron was at thecompany, from 1968 until 1976 (when he left under some fairly unpleasant circumstances for both of us),to be the most important period of development in Wal-Mart's history. We had a good thing goingbefore Ron arrived, but he, and some of the people he brought on board, like Royce Chambers, our firstdata processing manager, gave the company its first sophisticated systems. And those systems were thebeginnings of a management method which allowed us to stay real close to our stores even as our growthexploded.

We were forced to be ahead of our time in distribution and in communication because our stores weresitting out there in tiny little towns and we had to stay in touch and keep them supplied. Ron started theprograms that eventually improved our in-store communications system. Building on the groundworkalready laid by Ferold Arend, Ron also took over distribution and began to design and build a systemthat would enable us to grow as fast as we could come up with the money. He was the main force thatmoved us away from the old drop shipment method, in which a store ordered directly from themanufacturer and had the merchandise delivered directly to the store by common carrier. He pushed usin some new directions, such as merchandise assembly, in which we would order centrally for every storeand then assemble their orders at the distribution center, and also cross-docking, in which preassembledorders for individual stores would be received on one side of our warehouse and leave out the other.

From Ron Mayer's arrival on, we as a company have been ahead of most other retailers in investing insophisticated equipment and technology. The funny thing is, everybody at Wal-Mart knows that I'vefought all these technology expenditures as hard as I could. All these guys love to talk about how I neverwanted any of this technology, and how they had to lay down their life to get it. The truth is, I did want it,I knew we needed it, but I just couldn't bring myself to say, "Okay, sure, spend what you need." I alwaysquestioned everything. It was important to me to make them think that maybe the technology wasn't asgood as they thought it was, or that maybe it really wasn't the end-all they promised it would be. It seemsto me they try just a little harder and check into things a little bit closer if they think they might have achance to prove me wrong. If I really hadn't wanted the technology, I wouldn't have sprung the moneyloose to pay for it.

By the late sixties, we were really well positioned for serious growth. We had a retail concept webelieved in, the core of a professional management team, and the foundations of systems which wouldsupport growth. In 1968, we had fourteen variety stores and thirteen Wal-Marts. In 1969, we hadfourteen variety stores and eighteen Wal-Marts. And we were raring to go. I couldn't resist taking thatnext step to see how far we could go. And I always figured we would slow down or stop when weweren't as profitable as we should be.

It was around that time that Bud and Ivery quietlybegan to think about taking the company public.
Chapter 7 Taking the Company Public
　　"When we went on the stock market, it didn't mean anything to some of us country boys. The chairmanalways said I came across the Red River barefooted and hunting a job, which is almost the way it was. Ididn't even know what stock was. But I bought some, thank God, because Phil Green said, Hey, youbuy some of that stock, boy.' I bought it and I kept it because I believed in Mr. Walton, and I believed inmy store. It's real simple. I believed him when he said we could do all these things with the company.

And we did."al miles,first assistant manager, store number 6, Fayetteville, Arkansas, now a retired Wal-MartexecutiveFrom the time I took out my first bank loanthe $1,800 to buy that ice cream machine for the BenFranklin down in NewportI was never really comfortable with debt. But I recognized it as a necessity ofdoing business, and I had gotten pretty good at accumulating it. For a while, I would just go down to thelocal bank and borrow whatever I could to build a store or buy something we needed to grow thebusiness. That practice had gotten me in debt to practically every bank in Arkansas and southernMissouri. They believed in what we had done up to that point, and they believed we would pay them off.

I always did pay them off on time, but sometimes I would borrow from one to pay the other. I hadbought a bank in Bentonville, for about $300,000, just a little old bank with only about $3.5 million indeposits. But it really helped me learn a lot about financing things. I made some new acquaintances andbegan to study more about bankers and how they liked to do business.

I struck;, up a relationship with a guy named Jimmy Jones at Republic Bank down in Dallas, and heloaned us a million dollars. And, of course, I had tried all along to attract some equity investment fromour store managers and a few relatives. So by 1970, we had seventy-eight partners invested in ourcompany, which really wasn't one company, but thirty-two different stores owned by a combination ofdifferent folks. My family owned the lion's share of every store, but Helen and I were also in debt up toour eyeballsseveral million dollars' worth. I never dwell on the negative, but that debt weighed heavy onme. If something happened and everybody decided to call their notes, I kept thinking, we would be sunk.

Maybe that's what being raised in the Depression does to you, but I wanted out of that debt in the worstway.

I had talked a little bit about the idea of taking the company public, seeking advice from people like AbeMarks and some of those other discounters in that association we all belonged to, but I really hadn'tpursued anything seriously. One day in 1969 we got a call from Mike Smith, who said he wanted tocome up and talk to us. Mike worked for Witt and Jack Stephens in Little Rock. Today, Stephens Inc. isthe largest investment banking firm west of the Mississippi, and one of the most respected in the country.

Back then it was mostly a bond house. Jack, by the way, was the fellow who had come in andsuccessfully developed that Little Rock shopping center after I failed. So Mike Smith drove up toBentonville. We were still in those old three rooms of offices over the lawyer's office and the barbershopon the square. I remember Mike climbing those stairs. He is a bit of a renegade himselfhe has a lot oforiginal ideasand during our conversation that day, he planted the seed that maybe we really were doingwell enough to go public, that is, to issue stock in the company and sell it to the public.

MIKE SMITH, STEPHENS INC.:

"I went up there to see them in the fall of 1969, and it was really the height of ambition. We had onlydone one public offering, and I had done it, so I thought I was an expert. Sam was eager to talk becausehe had borrowed all the money he possibly could. I stopped at every Wal-Mart between Little Rock andBentonville so I would know something about his stores. Of course the first thing he did was throw me inthat plane of his and fly us all over Oklahoma and Missouri looking at stores."Not long after that, Bud and I went quail hunting up on the Robson ranch in Oklahoma, and the huntingwas really good. We spent most of that day talking about our options. We wanted to expand, and werealized we weren't generating enough profits both to expand and to pay off our debts. In fact, our cashshortage had forced us to give up five land sites where we had already planned to build new stores, sowe knew we had to do something. Driving back that night, we agreed to seriously explore thepossibilities of going public. It was a huge step for us, and we were concerned about losing control of thecompany. My son Rob had graduated from Columbia University law school the year before and hadgone to work at the biggest law firm in Tulsa. We, the Walton family were his first client. As our lawyer,he also kept track of the various Wal-Mart store partnership agreements, so I asked him to start lookingat all our options.

We still weren't sure we could take the company public. Meanwhile, money was getting tight, and someof our creditors were pressuring us. I flew to Dallas and tried to borrow some more from Republic Bank,whose officers were getting nervous about what they'd already loaned us. They made it clear we had allof their money we were likely to see, and that ended our relationship. By then, Jimmy Jones had movedto a bank in New Orleans, First Commerce, so I flew down there from Dallas to see if he could help us.

Jimmy came up with a $1.5 million loan, which helped us out in the short term, but it really wasn't theanswer to our long-term problem.

For various reasons, including taxes, Rob recommended restructuring our debt, consolidating it into onebig loan for the company. Ron Mayer and I had heard that the Prudential was making loans to a lot ofsmall retail chains, so we made an appointment with one of their loan officers and flew to New York. Bynow we really needed the money, pure and simple. I went to Prudential. I had my predictions all spelledout on my yellow legal pad, and I was sure they were going to loan us the money. I went through myfive-year planmy sales, profits, number of storesand talked about our strategy of going to the smalltowns where there was no competition and told the loan officer how much business we thought there wasout there waiting to be plucked. He didn't buy it at all, told us he didn't think a company like thePrudential could afford to gamble with us. I saved those projections for a long time, and they were allexceeded by 15 to 20 percent in the years to come.

Somehow we had a contact at another insurance company, Mass Mutual, so we went to see them. Theyagreed to lend us a million dollars, and, in turn, we agreed to give them our right arm and our left leg. Wedidn't just pay interest, we had to give them all sorts of stock options in case we did go public. By nowthey had us over a barrel. I had no choice: we had to have the money. When we went public they mademillions and millions on that deal.

By then, I was tired of owing money to people I knew, and I was even more tired of begging moneyfrom strangers. I made up my mind for sure that we were going to take Wal-Mart to the stock market. Ilet Mike Smith and Jack Stephens know we wanted to go ahead with the idea, but I also let them knowthey were going to have to compete for our business, just like I've always made everybody else competefor business with us. Also, I let them know I didn't feel comfortable going with a Little Rock firm; Ithought we needed a Wall Street underwriter. Maybe that was right, and maybe it wasn't. I know Mikeand Jack didn't feel too good about it. But I went running off to New York to see what I could find out.

MIKE SMITH:

"Obviously, we wanted to handle the whole offering, but Sam was always one to shop around. Here'swhat happened the way I remember it: Sam was up in New York on a buying trip, and he decided to godown to Wall Street and hear what some of those guys had to say, just cold callingright off the street.

He knew that White, Weld had taken public a retail chain called Pamida up in Omaha, so he went to visitthem. He introduced himself to the receptionist as Sam Walton of Wal-Mart storeslike he alwaysdoesand said, 'I want to talk to somebody about taking my company public' She said, 'Oh really, whereare you from' And when he told her Bentonville, Arkansas, she said, 'Well, we have a Mr. Remmelhere, and he's from Arkansas. Perhaps he could help you.' And she introduced him to Buck Remmel,who was from Little Rock."I don't really remember how I met Buck, but Mike might have it right. I remember introducing myself tohim and saying something like, "What are the chances that you folks would be interested in backing us onthis offering" Well, he said he would look at it, and, sure enough, they decided they were interested. Istill think that's one reason the offer was so successful, because at the time White, Weld was one of theleading institutional investment banking firms. Not everyone around here agrees with me, but I'm stickingto my opinion.

MIKE SMITH:

"Sam decidedcorrectly at the timethat White, Weld knew more about public offerings than we did, sohe let them have the business. But he told them, 'I hope you'll include the folks at Stephens, becausethey're good friends, and they're good people.' White, Weld asked us if we wanted to take a third of thedeal to their two-thirds. I talked it over with Jack, and he asked me what I thought of the company. Isaid I thought we ought to do it. And we did. Later on, in other offerings, we got a fifty-fifty piece of thedeal along with White, Weld."So Rob started to work on the plan, which was to consolidate all these partnerships into one companyand then sell about 20 percent of it to the public. At the time, our family owned probably 75 percent ofthe company, Bud owned 15 percent or so, some other relatives owned a percentage, Charlie Baumowned some, Willard Walker owned some, Charlie Cate owned some, Claude Harris owned some. Allthose early managers would borrow money from our bank to buy stock in the stores. Willard was themost skillful at getting money. He would cultivate the guys who ran the banks and they'd let him havewhat he wanted. Consequently, he realized fabulous returns on it. He had more ownership than any of themanagers.

Rob Walton:

"Dad had a spread sheet listing all the minority ownerships in the various companies, and the problemwas figuring out on what basis to value them all for the initial offering. As I recall, we basically proposedusing book value. We did not do any kind of sophisticated relative evaluation of the companies whichwould have taken into account earnings and growth projections and all that sort of stuff. But everybodysigned right up. And as far as I know, everybody's happy today with the way it worked out."We were all ready to go at the beginning of 1970, and Ron Mayer and I did a dog and pony show allover the placeLos Angeles, San Francisco, Chicagotelling everybody how great we were going to be.

But before we got the stock issued, the market fell out on us, and we had to postpone the offering. Wewere already having unusual managers' meetings in those days. We would all go fishing together, withoutwives, for four or five days at a time and talk about the business. I remember we were on one of thosetrips to Table Rock Dam, and I had to tell everybody that we were pulling back on the deal. But themarket recovered some, and on October 1, 1970, Wal-Mart became a public company, traded over thecounter. Our prospectus offered 300,000 shares at a price of $15, but it sold for $16.50. It was wellreceived, though not widely held; we only had about 800 shareholders, most of them either institutions orfolks we knew. Those who bought in that offering, or who owned some of those early partnerships andhad them converted in that offering, made an absolute killing.

As everybody today knows, Wal-Mart's stock performance, and the wealth it has created, is a story initself. Just fifteen years ago, the market value of the company was around $135 million; today it's over$50 billion. But here's a better way to look at it: let's say you bought 100 shares back in that originalpublic offering, for $1,650. Since then, we've had nine two-for-one stock splits, so you would have51,200 shares today. Within the last year, it's traded at right under $60 a share. So your investmentwould have been worth right around $3 million at that price. Obviously, our stock has made a lot of folkshappy over the years, and pure and simplethat's where the Walton family net worth has been created.

It's paid off beyond any of our dreams.

Here's a chart that shows the course over the years of that 100 shares:

SHARES/100% SPLITS /MKT. PRICE ON SPLIT DATE200 /May 1971 / $46/47 OTC400 / March 1972 / 46/47 OTC800 / August 1975 / 23 NYSE1,600 / November 1980 / 50 NYSE3,200 / June 1982 / 49  NYSE6,400 / June 1983 / 81  NYSE12,800 / September 1985 / 49  NYSE25,600 / June 1987 / 66  NYSE51,200 / June 1990 / 62 NYSEOne funny memory about that public offering. The day it went through Ron and I were leaving NewYork, and at the airport we met a guy from T. Rowe Price, a money management firm in Baltimore. Wewere so full of ourselves that somehow we made him believe we were going to do well. He went back toBaltimore and bought a pretty large share of that stock for his firm. They held it for ten or fifteen yearsand became the star of their industry. We would split and split, and they would sell and sell. I don't knowhow many millions they made on that stock.

HELEN WALTON:

"I realized before we went public that I didn't want it to happen. I guess if I were going to be mad withSam about anything, it would be over the fact that I always felt we could have gotten by without goingpublic. Nothing about the company ever affected me as deeply, and it was at that point that I decided Ihad to pursue my other interests outside the company. I just hated the idea that we were going to put allour financial interests out there for everybody to see. When you go public, they can ask all kinds ofquestions, and the family gets involved. We just became an open book, and I hated it."Helen's right, of course, about the downside of taking the company public. It did end up bringing us a lotof unwanted attention. But coming back from New York that day, I experienced one of the greatestfeelings of my life, knowing that all our debts were paid off. The Walton family only owned 61 percent ofWal-Mart after that day, but we were able to pay off all those bankers, and from that day on, we haven'tborrowed one dime personally to support Wal-Mart. The company has rolled along on its own andfinanced itself. Going public really turned the company loose to grow, and it took a huge load off me. Wehad another offering later on, trying to get broader ownership of the stock so we could be traded on theNew York Stock Exchange, but as a family we've only sold very limited amounts of Wal-Mart stockoutside of those offerings. I think that has really set us apart, and, as I said, that's the source of our networth. We just kept that stock. Most families somewhere along the line would have said, We don't wantthis rat race. We don't need to do what we are doing. Let somebody else have it. And then either Iwould have retired and backed out of the company and sold it to some Dutch investor or to Kmart orFederated, or somebody like that. But I enjoyed doing what I was doing so much and seeing the thinggrow and develop, and seeing our associates and partners do so well, that I never could quit.

It was always interesting to me that, except for those folks who worked in our company, our stock gotvery little support early on from the folks right here in northwest Arkansas. I always had the feeling thatthe people around here who remembered us when we had one store and three stores, or rememberedme when I was president of the Rotary or the Chamber of Commerce, somehow thought we were doingit with mirrors. They couldn't help but think we were just lucky, that we could not continue long term todo as well as we have done. I don't think it was anything peculiar to this part of the country or me oranything like that. I think it must be human nature that when somebody homegrown gets on to something,the folks around them sometimes are the last to recognize it.

Like any other company, we obviously wanted to keep our stock price up and attract as many newinvestors as we could. And the way we went at that early on was about as unorthodox as everything elsewe've done. Most public companies hold annual stockholders' meetings, and many hold sessions for WallStreet stock analysts, where they tell their company story and try to drum up support for their stock. As Itold you, Mike Smith is an off-the-wall guy with good ideas and suggestions that are somewhatunorthodox. So right after we went public, Mike suggested that we might want to turn our stockholders'

meeting into an event, and we went along with him.

Most meetings are held in some hotel ballroom in a big city, and are pretty quick, formal affairs with thereading of the minutes and the passing of a few shareholder motions. A lot of them, I understand, are heldin places like Wilmington, Delaware, where the companies are incorporated, in the hope that a whole lotof people won't show up. We took the opposite approach. We figured we were already out of the wayenough to discourage anybody from coming, but since we wanted to encourage folks to attend, wescheduled a whole weekend of events for them. We invited folks down from New York, Chicago, orwherever. They paid their own way down and back, but we really showed them a time.

MIKE SMITH:

"It's true that I came up with the idea of making the annual meeting more of an event, but Sam didn't tellyou the whole reason why. I'll never forget Wal-Mart's first annual meeting, or I should say, meetings. Iwent up a day early to help prepare for it, but this friend of Sam'sFred Pickens from Newportgotconfused on the dates and showed up a day early. So Sam decided to go ahead and hold the meeting forFred, right there in his office. The next day we had the official annual meeting: six of us met around a tableof the coffee shop there by the warehouse.

"The next year I said, 'Sam, you're a public company, and we ought to have a real meeting and try to getsome folks to come. Let's do it in Little Rock. You're from Arkansas, and Little Rock is the capital ofArkansas and people can get there a lot easier than they can to Bentonville.' He didn't like it much, but heagreed to it. So we held the second meeting at a motel, the Coachmen's Inn, in Little Rock. Nobodycame. And he said, 'So much for your idea, Mike.' Well, I was getting desperate to get some analystsdown to really start following the company, so I came up with the idea of bringing them all in for aweekend at Bella Vista, which is this nice development in the hills just north of Bentonville, with lots ofgolf courses, tennis courts, and lakes. I still remember Sam's response to the idea when I brought it up:

'Sounds like a big waste of money to me.' But he decided to give it a try."It turned out to be a really good idea. These folks would come down, and we would assign a managerfrom the company to meet them at the airport and drive them around for the weekend. We wanted theseinvestment types from the cities, including a lot of the bankers who were lending money to our companyat the time, to see firsthand what we do and how we do it. We wanted them to get to know ourmanagers as individuals and come to understand our company's principles. And we felt like to do thatthey really had to come to Bentonville and see what kind of people we were, understand our integrity,our dedication, our work ethic, all the ingredients that were enabling us to outperform our competitors.

They couldn't do that back in New York. The values and the approach of most retailers were entirelydifferent from what this crazy bunch in Arkansas was doing, and we wanted them to see it forthemselves. So they would come down and we would have the stockholders' meeting on Friday,followed by a big picnic that night. I remember one lady wore a formal gown to one of our dinners. It gotquite a few curious looks. Then we would get them up early on Saturday morning and have them come toour meeting and listen to us talk merchandising and finance and distribution, or whatever we were dealingwith at the time.

In the early days, it wasn't anything like what it's turned into now, which is the largest, most raucousstockholders' meeting in the world. But it was different. After the meeting on Saturday, we always had aspecial event. One year it was a golf tournament, which is not all that unusual, I guess. But another yearwe went fishing on Bull Shoals Lake. And another year we took everybody on a float trip down SugarCreek. The wildest event I remember was when we all went camping overnight in tents on the banks ofSugar Creek. That was a real fiasco. Remember now, these are a bunch of investment analysts from thebig cities. Well, a coyote started howling, and hoot owls hooting, and half of these analysts stayed up allnight around the campfire because they couldn't sleep. We decided it wasn't the best idea to trysomething like this with folks who weren't accustomed to camping on the rocks in sleeping bags.

MIKE SMITH:

"These get-togethers became a big hit. The Wal-Mart folks would stay up all night barbecuing, and theanalysts or other big shareholders would stay up with them to 'help.' But after a while, things got a littleout of hand for Sam's taste. Some of those Yankees got so drunk floating down Sugar Creek theycouldn't stay in the boat. And some of those fellows barbecuing had a few too many beers. Well, Samisn't a Puritan or a strict teetotaler or anything, but he can't stand for people to get drunk. So he bannedalcohol completely from the events, and, of course, they were never quite the same after that."They did get a little wild for me, I guess. But if nothing else, our meetings generated a lot of talk about usback on Wall Streetnot all of it good, I'm surebut the ones who paid attention understood that we wereserious operators who were in it for the long haul, that we had a disciplined financial philosophy, and thatwe had growth on our minds. They also knew we liked to have fun, and a few of them probably thoughtmaybe we were a little nuts.

Those meetings are just one example of how, in the early days of being a public company, we really didhave to go to greater lengths than most companies to let Wall Street get to know us and understand us.

Partly that was because we operated so differently from everybody else, and partly it was because wewere so isolated from New York, where a lot of folks seem to think you have to be to do business onthe scale and size that we are. And in the process of wooing Wall Street, we met all kinds. We've beenblessed and appreciated by some analysts and dismissed by others who have believed all along that weare just a house of cards waiting to fall down any second.

One of our most loyal followers has been Maggie Gilliam, an analyst for First Boston who has believedin us for years, and she's made her clients an awful lot of money by sticking to those beliefs. Here's anexcerpt from a report, one of my favorites, that she wrote:

MARGARET GILLIAM. FIRST BOSTON:

Wal-Mart is the finest-managed company we have ever followed. We think it is quite likely thefinest-managed company in America, and we know of at least one investor who thinks it is thefinest-managed company in the world. We do not expect to find another Wal-Mart in our lifetime...

On the other hand, I remember another analyst who came down here in the mid-seventies. I'll neverforget her visit. I had been out hunting all day, and I was pretty grubby when I came in to go out to dinnerwith her. My son Jim, who was head of the real estate department in those days, joined us. And he wasnever one for dressing up. Really, he always looks pretty grubby. We took her out, and we wereextremely honest with her. We told her what we felt our weaknesses were at that time, and what some ofour problems were. But we tried to explain our philosophy too, and to get her excited about all thepotential we felt we had. She went back and wrote probably the darkest report on Wal-Mart that hasever been written. The impression you got from reading it was that if you hadn't already sold your stock,it was probably too late.

Over the last ten or fifteen years, most of the analysts who've followed our stock have been consistent intheir support, although they'll go off us temporarily for one reason or another. By and large, though,they've stayed with us.

I don't subscribe much to any of these fancy investing theories, and most people seem surprised to learnthat I've never done much investing in anything except Wal-Mart. I believe the folks who've done thebest with Wal-Mart stock are those who have studied the company, who have understood our strengthsand our management approach, and who, like me, have just decided to invest with us for the long run.

We have a group of longtime investors in Scotland who have done it better maybe than anybody. Backin the early days of our growth, the Stephens people took us to London, where we first attracted theinterest of these folks. They told us right off that they believed in investing for the long term. They saidthat as long as they felt good about the basics of the company, and had confidence in the management,they wouldn't be buying and selling the way many of these fund managers do. Man, they were talking mylanguage. Years after that first trip, we visited with them in Edinburgh, and they really laid it on for us. Wehave a similar group out in California.

And we also have an investor in Francehis name is Pierre, and he's done exactly the same thing. Wealmost drowned him that first year we floated down Sugar Creek, and I was afraid we'd never see himagain. But Pierre started believing, and he started acquiring our stock and recommending it to his Frenchfund members. He's been with us for about fifteen years, and he's had exceptionally good success withour company.

Our long-term investors are happy because we have consistently rewarded them with one of the highestreturns on equity in American business. From 1977 to 1987, our average annual return to investors was46 percent. And even in the middle of the recession, in 1991, we reported a return on equity of morethan 32 percent.

I guess what's annoying to executivesto anybody who tries to spend their time managing a company asbig as thisis these money managers who're always churning their investors' accounts. You know, thestock will get to $40 or $42, and they'll rush in there and say, "Hey, let's sell this thing because it's justtoo high. It's an overvalued stock." Well, to my mind, that doesn't make much sense. As long as we'remanaging our company well, as long as we take care of our people and our customers, keep our eye onthose fundamentals, we are going to be successful. Of course, it takes an observing, discerning person tojudge those fundamentals for himself. If I were a stockholder of Wal-Mart, or considering becoming one,I'd go into ten Wal-Mart stores and ask the folks working there, "How do you feel How's the companytreating you" Their answers would tell me much of what I need to know.

On this same subject, I have frequently been asked if being a widely followed stock has forced us tomanage differently, to think more short term at the expense of long-term strategic planning. The answer isthat we've always had to do a good bit of both. When you're opening 150 stores a year the way we dothese days, a lot of your planning is necessarily short term. But to sustain that kind of growth, youconstantly have to consider what you're going to be doing five years out. I think that the stock marketpressure has driven us to plan further out so that there will be some consistency next year, and the yearafternot only to our profitability but to our operating sales, our gross margins, and those sorts of things.

I've never let myself fret too much about that. We've had some tremendous fluctuations of our stockover time. Sometimes it will shoot up because retailing has become a fashionable sector with theinvestment community. Or it will plunge because somebody writes a report saying that Wal-Mart'sstrategy is all wrong. When we bought a chain of stores called Kuhn's Big K in 1981which took us eastof the Mississippi for the first time in a significant wayseveral reports said we were taking on more thanwe could handle, and that we would never make it once we got to Atlanta or New Orleans. We've hadreports predicting that when we got to St. Louis, or wherever, and met somereal competition, we wouldnever be able to stay profitable. Our demise has been predicted ever since we hit the stock market. Andwhenever one of these big institutional investors reads something like that, and decides he believes it, heunloads a million shares, or 500,000 shares, and in the past that has created some fluctuations in the priceof our stock.

Just a couple of years ago, we had some retail analysts worrying that we couldn't sustain a 20 percentannual growth rate because we were getting so big. At the time, I said I would be tickled to death with20 percent. I mean, when we were doing $25 billion a year in sales, 20 percent was $5 billion, which isbigger in itself than most retailers. But these folks thought a $5 billion increase would be a disaster for us.

In the meantime, look what's happened to the industry. Nowadays, we're heroes because we're stillshowing double-digit growth. If we do 20 percent, it's the lead item on the national news broadcastsbecause they view it as an economic indicator. The point is, all those analysts may have had perfectlylogical theories about why a 20 percent increase would be a disaster for us. But they failed to see that ina big economic downturn, when everybody is suffering, Wal-Mart's fundamental strengths would keep usgoing strong. And we would look great compared to everybody else.

As companies get larger, with a broader following of investors, it becomes awfully tempting to get intothat jet and go up to Detroit or Chicago or New York and speak to the bankers and the people whoown your stock. But since we got our stock jump-started in the beginning, I feel like our time is betterspent with our own people in the stores, rather than off selling the company to outsiders. I don't think anyamount of public relations experts or speeches in New York or Boston means a darn thing to the value ofthe stock over the long haul. I think you get what you're worth. Not that we don't go out of our way tokeep Wall Street up to date on what's going on with the company. For the last few years, in fact, a groupcalled the United Shareholders Association has voted us the number-one company in the U.S. based onour responsiveness to shareholders.

What's really worried me over the years is not our stock price, but that we might someday fail to takecare of our customers, or that our managers might fail to motivate and take care of our associates. I alsowas worried that we might lose the team concept, or fail to keep the family concept viable and realisticand meaningful to our folks as we grow. Those challenges are more real than somebody's theory thatwe're headed down the wrong path.

As business leaders, we absolutely cannot afford to get all caught up in trying to meet the goals thatsome retail analyst or financial institution in New York sets for us on a ten-year plan spit out of acomputer that somebody set to compound at such-and-such a rate. If we do that, we take our eye offthe ball. But if we demonstrate in our sales and our earnings every day, every week, every quarter, thatwe're doing our job in a sound way, we will get the growth we are entitled to, and the market will respectus in a way that we deserve. Our associates and our customersmany of whom are now stockholderstoowill all be better served if we perform consistently over the next ten years, whether it is at a 15percent rate or a 20 percent rate or a 25 percent rate.

If we fail to live up to somebody's hypothetical projection for what we should be doing, I don't care. Itmay knock our stock back a little, but we're in it for the long run. We couldn't care less about what isforecast or what the market says we ought to do. If we listened very seriously to that sort of stuff, wenever would have gone into small-town discounting in the first place.
Chapter 8 Rolling Out the Formula
　　"Sam hired me in 1970 as district manager in charge of new store openings. He had eighteen Wal-Martsand some variety stores doing about $31 million a year. I moved my family, and as the van was unloadingthe furniture into our rented house, they called from the office and said, 'Can you go set up this new storein Missouri' My wife, who had three babies and a moving van to deal with, helped me find someclothes, and I left. I didn't see her again for two weeks. Then there was a managers' meeting so I didn'tsee her for two more weeks. It would be safe to say that in those days we all worked a minimum ofsixteen hours a day."----JACK SHEWMAKER,former president and COO of Wal-MartNow that we were out of debt, we could really do something with our key strategy, which was simply toput good-sized discount stores into little one-horse towns which everybody else was ignoring. In thosedays, Kmart wasn't going to towns below 50,000, and even Gibson's wouldn't go to towns much smallerthan 10,000 or 12,000. We knew our formula was working even in towns smaller than 5,000 people,and there were plenty of those towns out there for us to expand into. When people want to simplify theWal-Mart story, that's usually how they sum up the secret of our success: "Oh, they went into smalltowns when nobody else would." And a long time ago, when we were first being noticed, a lot of folks inthe industry wrote us off as a bunch of country hicks who had stumbled onto this idea by a big accident.

Maybe it was an accident, but that strategy wouldn't have worked at all if we hadn't come up with amethod for implementing it. That method was to saturate a market area by spreading out, then filling in. Inthe early growth years of discounting, a lot of national companies with distribution systems already inplaceKmart, for examplewere growing by sticking stores all over the country. Obviously, we couldn'tsupport anything like that.

But while the big guys were leapfrogging from large city to large city, they became so spread out and soinvolved in real estate and zoning laws and city politics that they left huge pockets of business out therefor us. Our growth strategy was born out of necessity, but at least we recognized it as a strategy prettyearly on. We figured we had to build our stores so that our distribution centers, or warehouses, couldtake care of them, but also so those stores could be controlled. We wanted them within reach of ourdistrict managers, and of ourselves here in Bentonville, so we could get out there and look after them.

Each store had to be within a day's drive of a distribution center. So we would go as far as we couldfrom a warehouse and put in a store. Then we would fill in the map of that territory, state by state, countyseat by county seat, until we had saturated that market area.

We saturated northwest Arkansas. We saturated Oklahoma. We saturated Missouri. We went fromNeosho to Joplin, to Monett and Aurora, to Nevada and Belton, to Harrisonville, and then on to FortScott and Olathe in Kansasand so on. Sometimes we would jump over an area, like when we openedstore number 23 in Ruston, Louisiana, and we didn't have a thing in south Arkansas, which is between usand Ruston. So then we started back-filling south Arkansas. In those days we didn't really plan for thefuture. We just felt like we could keep rolling these stores out this way, and they would keep working, inTennessee, or Kansas, or Nebraskawherever we decided to go. But we did try to think ahead somewhen it came to the cities. We never planned on actually going into the cities. What we did instead wasbuild our stores in a ring around a citypretty far outand wait for the growth to come to us. That strategyworked practically everywhere. We started early with Tulsa, putting stores in Broken Arrow and SandSprings. Around Kansas City, we built in Warrensburg, Belton, and Grandview on the Missouri side oftown and in Bonner Springs and Leavenworth across the river in Kansas. We did the same thing inDallas.

This saturation strategy had all sorts of benefits beyond control and distribution. From the verybeginning, we never believed in spending much money on advertising, and saturation helped us to save afortune in that department. When you move like we did from town to town in these mostly rural areas,word of mouth gets your message out to customers pretty quickly without much advertising. When wehad seventy-five stores in Arkansas, seventy-five in Missouri, eighty in Oklahoma, whatever, peopleknew who we were, and everybody except the merchants who weren't discounting looked forward toour coming to their town. By doing it this way, we usually could get by with distributing just oneadvertising circular a month instead of running a whole lot of newspaper advertising. We've never beenbig advertisers, and, relative to our size today, we still aren't. Just like today, we became our owncompetitors. In the Springfield, Missouri, area, for example, we had forty stores within 100 miles. WhenKmart finally came in there with three stores, they had a rough time going up against our kind of strength.

So for the most part, we just started repeating what worked, stamping out stores cookie-cutter style.

The only decision we had to make was what size format to put in what market. We had five differentstore sizes running from about 30,000 to 60,000 square feetand we would hardly ever pass up anymarket because it was too small. I had traveled so much myself looking at competitors in the variety storebusiness that I had a good feel for the kind of potential in these communities. Bud and I knew what wewanted in the way of locations.

Like so many of the ideas that have made our company work from the beginning, we're still more or lessfollowing this same strategy, although today we've moved into some cities outright. But I think our mainreal estate effort should be directed at getting out in front of expansion and letting the population build outto us. Just like in the beginning, we start around these small towns, people drive past our stores, get toknow us, and become customers. The amazing thing to me is how quickly it works. We have created somany new friends down in FloridaYankee friends, folks who live up Northwho see our stores inFlorida while they're down there for the winter, and they can't wait for us to get up there.

Believe it or not, I get letters all the time asking us to put a store in some place up North because ourcustomers miss us when they go back home. It's the same way in the Rio Grande Valley. All the farmersfrom North Dakota, South Dakota, and Minnesota go down there for the winter and get to know us. Sowe are presold, almost, when we go into some of these areas that are new for us. We're still spreadingout and filling in, and we've got a heck of a long way to go before we saturate territory which weconsider to be basically friendly to Wal-Mart.

There's no question whatsoever that we could not have done what we did back then if I hadn't had myairplanes. I bought that first plane for business, to travel between the stores and keep in touch with whatwas going on. But once we started really rolling out the stores, the airplane turned into a great tool forscouting real estate. We were probably ten years ahead of most other retailers in scouting locations fromthe air, and we got a lot of great ones that way. From up in the air we could check out traffic flows, seewhich way cities and towns were growing, and evaluate the location of the competitionif there was any.

Then we would develop our real estate strategy for that market.

I loved doing it myself. I'd get down low, turn my plane up on its side, and fly right over a town. Oncewe had a spot picked out, we'd land, go find out who owned the property, and try to negotiate the dealright then. That's another good reason I don't like jets. You can't get down low enough to really tellwhat's going on, the way I could in my little planes. Bud and I picked almost all our sites that way untilwe grew to about 120 or 130 stores. I was always proud of our technique and the results we got. Iguarantee you not many principals of retailing companies were flying around sideways studyingdevelopment patterns, but it worked really well for us. Until we had 500 stores, or at least 400 or so, Ikept up with every real estate deal we made and got to view most locations before we signed any kind ofcommitment. A good location, and what we have to pay for it, is so important to the success of a store.

And it's one area of the company in which we've always had family involvement. Jim did it for a while.

And even today, Rob goes on real estate trips and attends every real estate meeting.

Once we found a good location, we just got after it and put up a store there. We built our own fixturesthen, and we still do today. We had what we called a Store Opening Plan, but basically we would call inthe troopsusually we called in all the available assistant managersand put together a store. I'll bet a guylike Al Miles has put together 100 stores and been to over 300 store openings. We had to assemble thefixtures, order the merchandise, and plan the advertisingnot to mention hiring and training the folks to runthe store. We just all dove in and got it done. There are all kinds of stories about those things. Iremember one time I didn't want to spend any money on motels so we all slept in sleeping bags on thefloor of one of our guys' houses. His furniture hadn't gotten there yet.

Ferold Arend made a big difference in the early rollout of Wal-Marts. He was a very organized personin a way that I wasn't. I always told him it was because he was German. But he was the kind of fellowwho, if he had ten things to do in a day, would write them all down and then work to get them done. Hewould double back to see that people did what he told them to do. I never did that as a rule in thosedays. I just kept moving.

I think a powerful sense of needing to take off to the next town or the next store when I'm ready, withoutwasting any time waiting on somebody else, is probably the main reason I never was able to work realwell with pilots. It seemed like they were never ready to go when I was. Anyway, I love the flying, thechallenge of finding my way all over the country, evaluating the weather and making the instrumentapproaches and doing everything myself. But even more than that, I love the independence of being ableto go where I want to, when I want toin a hurry. Plus, I always like to see people working, and thenature of a corporate pilot's job includes a lot of downtime. So, when we first got a few pilots aroundhere I conceived this brilliant idea: "Okay, guys," I said. "If you want to fly airplanes, I want you to gointo the stores and check on our in-stock positions in all our departments when you aren't flying." It madeperfect sense to me. They needed to learn more about the business, they would be helping us, and theycould have had some fun with it. My idea lasted about three months and provoked all kinds of grumbling.

I heard every excuse in the book. We've got to check the weather and make sure the planes are takencare of and all that. Finally, I gave in. And today, our pilots stay in the air about as much as anybody intheir business.

JACK SHEWMAKER:

"The first store we opened after I got there was number 21 in Saint Robert, Missouri. Our store openingcrew was supposed to take possession of a store after construction was complete. It didn't always workout that way. When we took that store, the parking lot wasn't done. I mean, it was gravel and had nostriping, no cording of cars or anything. So the store manager, Gary Reinboth, and I were trying to figureout how to avoid chaos at the opening. Our eyes lit up when we saw this snack bar vendor hauling usedcooking grease in these huge yellow barrels in the back of his truck. So we made a deal with him. Hecould buy all our grease at a good price if we could have all his grease barrels for the grand opening. Wetied flags and rope on them and made a parking lot. That's the way we thought in those days. Samwanted a job done, and he was willing to accept creativity as long as the job got done. Our minds werefreewheeling. We rushed to get things done.

"I remember another opening. We had finally built a new store in Morrilton, Arkansas, out nearInterstate 40, to replace that incredible store Sam was so proud of in the old Coca-Cola plant. My bosswas Ferold Arend, and he told me we were going to set a new record of opening a store in three weeks.

I said okay. But he had made a mistake by a week so we really had a target date of two weeks from theday we began. We tried desperately, but we didn't quite make it. We opened on Thanksgiving Day, andthe store was horrible. I was standing out in front when Sam drove up. He saw the disaster, but he wassmart enough to know how hard we'd been working and that if he told the truth we would have justdisintegrated. He said, The store looks really good, guys.' And he drove away and left us."Obviously, because I have spent as much time as I could out where it counts, in the stores, seeing ifwe're doing the job we should be, it has put a very heavy load on all our executives, especially since Iexpect them to get out in the stores too. My style has always been to lay off a lot of the day-to-dayoperating responsibilities to folks like Ferold Arend and Ron Mayer in the early days, later on to JackShewmaker, and eventually to David Glass and Don Soderquist. So my role has been to pick goodpeople and give them the maximum authority and responsibility.

I've been asked if I was a hands-on manager or an arms-length type. I think really I'm more of amanager by walking and flying around, and in the process I stick my fingers into everything I can to seehow it's coming along. I've let our executives make their decisionsand their mistakesbut I've critiquedand advised them. My appreciation for numbers has kept me close to our operational statements, and toall the other information we have pouring in from so many different places. In that sense, I think my styleas an executive has been pretty much dictated by my talents. I've played to my strengths and relied onothers to make up for my weaknesses.

As I mentioned, I found out early that one of my talents is remembering numbers. I can't recall namesand a lot of other things as well as I would like to. But numbers just stick with me, and always have.

That's why I come in every Saturday morning usually around two or three, and go through all the weeklynumbers. I steal a march on everybody else for the Saturday morning meeting. I can go through thosesheets and look at a store, and even though I haven't been there in a while, I can remind myself ofsomething about it, the manager "maybe, and then I can remember later that they are doing this muchbusiness this week and that their wage cost is such and such. I do this with each store every Saturdaymorning. It usually takes about three hours, but when I'm done I have as good a feel for what's going onin the company as anybody heremaybe better on some days.

But if you asked me am I an organized person, I would have to say flat out no, not at all. Beingorganized would really slow me down. In fact, it would probably render me helpless. I try to keep trackof what I'm supposed to do, and where I'm supposed to be, but it's true I don't keep much of a schedule.

I think my way of operating has more or less driven Loretta Boss, and later Becky Elliott, my twosecretaries, around the bend. My style is pretty haphazard.

LORETTA BOSS PARKER, PERSONAL SECRETARY FOR TWENTY-FIVE YEARS:

"He hasalways been like this. His mind works ten times faster than everybody else's. I mean he just getsgoing and stays two or three jumps ahead, and he's quick to go with what's on his mind. If he getssomething in his mind that needs to be done regardless of what else might have been plannedthe newidea takes priority, and it has to be done now. Everybody has their day scheduled, and thenbang! Hejust calls a meeting on something.

"In the early years, this caused a number of embarrassments. I would make appointments for him andthen tell him about themwe kept two calendars, one on his desk and one on minebut he would justtotally forget. I've had people fly in here from Dallas all set to see him. I'd come in at 8a.m. to meet themand find out he had flown out of town at 5a.m. without telling anybody where he was going. I would justhave to look at this man from Dallas and say, 'He's gone.' So after a few times like that, I finally said, 'I'mnot going to make appointments for you anymore.' And he said, 'Well, that's probably best.' Then hewould make his own appointments and forget about them, and I was still the one who had to give themthe bad news. I couldn't organize him in a quarter of a century, and I don't think anyone else is ever goingto."Except for reading my numbers on Saturday morning and going to our regular meetings, I don't havemuch of a routine for anything else. I always carry my little tape recorder on trips, to record ideas thatcome up in my conversations with the associates. I usually have my yellow legal pad with me, with a listof ten or fifteen things we need to be working on as a company. My list drives the executives around herecrazy, but it's probably one of my more important contributions.

DAVID GLASS:

"When Sam feels a certain way, he is relentless. He will just wear you out. He will bring up an idea, we'llall discuss it and then decide maybe that it's not something we should be doing right nowor ever. Fine.

Case closed. But as long as he is convinced that it is the right thing, it just keeps coming upweek afterweek after weekuntil finally everybody capitulates and says, well, it's easier to do it than to keep fightingthis fight. I guess it could be called management by wearing you down."One way I've managed to keep up with everything on my plate is by coming in to the office really earlyalmost every day, even when I don't have those Saturday numbers to look over. Four-thirty wouldn't beall that unusual a time for me to get started down at the office. That early morning time is tremendouslyvaluable: it's uninterrupted time when I think and plan and sort things out. I write my letters and myarticles forWal-Mart World, our company newsletter.

A. L. JOHNSON, VICE CHAIRMAN, WAL-MART:

"I think one of Sam's greatest strengths is that he is totally unpredictable. He is always his own person,totally independent in his thinking. As a result, he is not a rubber-stamp manager. He neverrubber-stamps anything for anyone.

"Back when I was general merchandise manager, we didn't have much computer support. So everyFriday morning for six years, I would take my columnar pad with all the numbers on it into Sam's officefor him to review. Every morning that I went through those numbers, Sam would jot them down on hisown pad and work through all the calculations himself. I never felt that he didn't trust my judgment. Hejust felt that it was his function to make sure of everything. Sometimes he would work the numbers a littledifferently from the way I had, or argue with some of my conclusions, which kept me on my toes. Thepoint is: I always knew I could not just go in there and lay a sheet of numbers in front of him and expecthim to just accept it.

"As famous as Sam is for being a great motivatorand he deserves even more credit than he's gotten forthathe is equally good at checking on the people he has motivated. You might call his style: managementby looking over your shoulder."I'm always asked if there ever came a point, once we got rolling, when I knew what lay ahead. I don'tthink that I did. All I knew was that wewere rolling and that we were successful. We enjoyed it, and itlooked like something we could continue. We had found a concept, certainly, that the customers liked.

Even back then, I always said at the first sign of it getting out of control, the first time our numbers don'tcome through as they should, we will pull in and put our arms around what we've built. Up to this point,of course, we haven't had to do it.

FEROLD AREND:

"The truth is, we were working with a great idea. It was really easy to develop discounting in those smallcommunities before things got competitive.

There wasn't a lot of competition for us in the early days because nobody was discounting in the smallcommunities. So when we discounted items, it was just an unheard-of concept outside the larger towns.

The customers, of course, weren't dumb. They had friends and relatives in the cities, and they had visitedplaces where discounters were operating, so when they saw this happening in their town, well, shoot,they justflocked to our stores to take advantage of it."I guess Ferold is right about the competitionif you're talking strictly about discounters. But there's aparadox here that I think confused a lot of folks about us for a long time. For twenty years back East,they always said Wal-Mart never had any competition, and that we wouldn't know what to do with itwhen it hit us. They forgot that we had come out of the variety store business, and that the heartland wasthe home ground for practically all the regional variety chains that developed in the U.S. In our BenFranklin days, we had all the competition you could ever want from Sterling and TG&Y and Kuhn's andall those other regionals. So while we may not have had any competition for discounting in those littletowns, we weren't strangers to competition. We were always looking at Gibson's and any other regionalsthat might decide to come our way, and we knew what to do when they did: keep our prices as low aspossible by keeping our costs as low as possible.

Managing that whole period of growth was the most exciting time of all for me personally. Really, therehas never been anything quite like it in the history of retailing. It was the retail equivalent of a real gusher:

the whole thing, as they say in Oklahoma and Texas, just sort of blowed. We were bringing great folkson board to help make it happen, but at that time, I was involved in every phase of the business:

merchandising, real estate, construction, studying the competition, arranging the financing, keeping thebooks everything. We were all working untold hours, and we were tremendously excited about whatwas going on. I'm not sure we even had time to realize just how phenomenal our growth rate in theseventies would look on a chart years later:

STORES SALES1970 32 $ 31 million1972 51 $ 78 million'

1974 78 $ 168 million1976 125 $ 340 million1978 195 $ 678 million1980 276 $ 1.2 billionIn the early seventies, we had formed this cooperative research group among some of us discountersmostly regionalswho didn't compete with one another. Comparing notes with them made me realizejust what an amazing performance Wal-Mart was turning in. I remember they were just astonished. Theycould not believe we could be establishing the number of stores that we were. We would be putting infifty stores a year, when most of our group would be trying to start three, four, five, or six a year. Italways confounded them. They would always ask, "How do you do it There's no way you can be doingthat."But wewere doing it. We just stayed on top of it, and, along with increasing our sales, we increased ourprofitabilityfrom $1.2 million in 1970, to $41 million in 1980. On paper, we really had no right to dowhat we did. We were all pounding sand, and stretching our people and our talents to the absolutemaximum. And don't get me wrong: I'm not saying we didn't have our share of growing pains.

FEROLD AREND:

"More than anything else, we had manpower problemsfinding good people and getting them trained in ahurry. Because we always ran a real tight organization, we had no excess people in the stores so they hadto get real good real fast. Back when I had been at Hested's, and at Newberry's, too, a guy had to haveten years' experience before we'd even consider him to be what we called a manager-in-training. Downhere, Sam would take people with hardly any retail experience, give them six months with us, and if hethought they showed any real potential to merchandise a store and manage people, he'd give them achance. He'd make them an assistant manager. They were the ones who would go around and open allthe new stores, and they would be next in line to manage their own store. In my opinion, most of themweren't anywhere near ready to run stores, but Sam proved me wrong there. He finally convinced me. Ifyou take someone who lacks the experience and the know-how but has the real desire and thewillingness to work his tail off to get the job done, he'll make up for what he lacks. And that proved truenine times out of ten. It was one way we were able to grow so fast."We were trying to put in as many merchandising programs as we could and give our stores as muchsupport as possible during all this growth, but in the early seventies, that Wal-Mart manager was stillpretty much out there on his own when it came to promoting items and moving the merchandise.

THOMAS JEFFERSON, EARLY WAL-MART DISTRICT MANAGER, HIRED FROMSTERLING STORES, LATER. OPERATIONS MANAGER:

"Several times a year, most stores would have a big sidewalk promotion. In those days, we sold aboutas much merchandise off the sidewalks on weekends as we sold inside the store. You know, we'd ropeoff part of the parking lot, get a band, and have maybe a boatload sale. We would take our boatswesold these John boatsput them up on sawhorses, and dump one item into each boat. We'd put big signsup calling them Boatload Sales. They still have sidewalk promotions today, but not like we once did. Itdoesn't work that well anymore."While all this was going on in the early seventies, Ferold Arend and Ron Mayer and Bob Thornton andmyself were still trying to get a handle on how to distribute to a growing number of stores in these smalltowns off the beaten path. It was one of those things that used to drive me crazy. I was always walkingthrough the warehouse in Bentonville saying, "Where does this go" "Who bought this" "We've got toomuch of that!" Meanwhile, the guys out in the stores would be crying for this stuff, and we couldn't get itout to them. I remember being very nervous when everybody decided we needed to buy our own trucks,but we did it. We had two tractors and four trailers, and the folks in the warehouse got to where theythought we needed four tractors and six trailers. I thought that was pretty extreme. So word would getout that I was coming out to the warehouse, and if they had an extra tractor or trailer sitting idle, theywould haul it around to the other side of the building and hide it so I wouldn't know we had anythingempty.

THOMAS JEFFERSON:

"The faster we grew, the further behind we fell. We were always behind with our distribution. We neveropened a warehouse soon enough, and we always had too many stores to service before the warehousewould get opened. Nowadays, I think they stay about one and a half distribution centers out front ofdemand, but back then we had a terrible time getting the freight to the stores. So we were renting outsidewarehouses, which were very expensive to operate, and we just had more than we could handle.

Sometimes we would have five hundred trailers full of merchandise sitting around one of thosewarehouses. And it took time to deal with all that. We couldn't get it out. Then the next day we'd getsixty boxcar loads. We'd have to unload the doggoned boxcars, and here the merchandise they wantedin the stores would be sitting there sometimes a week or a week and a half."It was a big problem, and one that worried me a lot, which is probably why as we moved along in theseventies, I just kept after folks like David Glass, who was still in the discount drug business up inMissouri, and Don Soderquist, who was running Ben Franklin, to come to work for us. I knew they wereboth big talents, and I knew we were going to need all the help we could get in all areasbut especially inthe ones I wasn't all that great at, such as distribution and systems. Like I said before, Ron Mayer hadworked hard on that distribution system, introducing all the concepts like merchandise assembly,cross-docking, and transshipment. But I don't think our distribution system ever really got undercomplete control until David Glass finally relented and came on board in 1976. More than anybody else,he's responsible for building the sophisticated and efficient system we use today.

While Ron and Ferold were helping me run the company, and well before David joined us in themid-seventies, Jack Shewmaker was coming on strong as a big talent. He had done a fantastic job inopening stores. Jack had been the manager of a Kroger SuperCenter which was a concept combininggroceries and general merchandise not unlike our own supercenters today. So he had been a merchant,but he wasn't overly experienced when I hired him. He was in that first wave of college men I had startedto hire, and, being a graduate of Georgia Tech, he had that engineer's love of systems and organizationthat we were still badly in need of. By now, I was really surrounding myself with guys who were good atall the things I tended to just sluff off, like organizing the company to handle the growth explosion we hadstarted. If I hadn't gone after those folks, and kept on doing it, we would have come apart somewherethere in the seventies, or we certainly wouldn't have been able to pull off our really incredible expansion inthe eighties. Getting an early start on all these systems, building a foundation for our distribution centerdevelopment, starting to put data processing into the stores, really saved our bacon later on.

JACK SHEWMAKER:

"Sam and Ferold called me in one day and said, 'We understand you've got some experience in writingpolicy manuals.' I had written some for both Kroger and Coast-to-Coast Hardware Stores out ofMinneapolis. So they said, 'We want you to come in and write up our policies and procedures for us.' Isaid, 'Well, that's nice, but that's not really what I would like to do. I want to work with themerchandising people.' And Sam said, 'Well, we would kind of like you to do it anyway. How long doyou think it will take to do it' I knew from experience it would take six months to a year to properly dothis job. But I said, 'I'll do it in ninety days.' Sam replied, 'You've got sixty days.' Sam never wants towait for anything. He has no patience. That was probably the meld between us. That bias toward action.

Anyway, we published it 360 pages of itin fifty-nine days."As you'll see later, Jack may have been the most controversial guy we ever had in senior management,but he dove right into systematizing things, and he became a great merchant too.

THOMAS JEFFERSON:

"That whole period, Mayer's time of duty, and early Shewmaker, was when we really saw the systemsand computers begin to come into our lives at the operations levelthe store level. We had been usingClass 5 cash registers in all our stores, old hand-crank jobs, you know, which were very slow. Rontalked Sam into buying Singer electric cash registers for the stores, which was a great idea because youcouldn't really have run a business much longer without electric registers. Only trouble was those Singerregisters turned out to be temperamental as hell. Al Miles was the only manager we had who ever reallyfigured out how to work one. So Mayer had the right idea but the wrong register.

"As for in-store computers, you'd have to give Shewmaker the credit for that. Not many of us gavein-store computers much thought. But Shewmaker studied all that stuff, and we would run with whateverhe talked Sam into putting in the stores. It seems like we tried to better ourselves with some new gadgetevery year. That was the beginning of what turned into Wal-Mart's communications system, I guess. Butmost of us were too busy in the stores to even think about where it was all leading."As we moved along in the seventies, we had very definitely become an effective retail entity, and we hadset the stage for the even more phenomenal growth that was going to follow. It's amazing that ourcompetitors didn't catch on to us quicker and try harder to stop us. Whenever we put a Wal-Mart storeinto a town, customers would just flock to us from the variety stores. It didn't take those stores long tofigure out that if they were going to stay in business against this thing Wal-Mart had created, they weregoing to have to go into it themselves. And most of them did eventually convert to discounting. Kuhn'sBig K became a discount chain. Sterling launched its Magic Mart discount chain. And Duckwall wentinto discounting.

Now, most of these guys already had distribution centers and systems in place, while we had to buildone from scratch. So on paper we really didn't stand a chance. What happened was that they didn'treally commit to discounting. They held on to their old variety store concepts too long. They were soaccustomed to getting their 45 percent markup, they never let go. It was hard for them to take a blousethey'd been selling for $8.00, and sell it for $5.00, and only make 30 percent. With our low costs, ourlow expense structures, and our low prices, we were ending an era in the heartland. We shut the door onvariety store thinking.
Chapter 9 Building the Partnership
　　"What you've created here is better than communism, better than socialism could ever be, better eventhan capitalism. I like to call what you've got here 'enlightened consumerism,' where everybody workstogether as a team and the customer is finally king again."----PAUL HARVEY,radio commentator and guest at a Wal-Mart year-end meetingAs much as we love to talk about all the elements that have gone into Wal-Mart'ssuccessmerchandising, distribution, technology, market saturation, real estate strategythe truth is thatnone of that is the real secret to our unbelievable prosperity. What has carried this company so far so fastis the relationship that we, the managers, have been able to enjoy with our associates. By "associates" wemean those employees out in the stores and in the distribution centers and on the trucks who generallyearn an hourly wage for all their hard work. Our relationship with the associates is a partnership in thetruest sense. It's the only reason our company has been able to consistently outperform thecompetitionand even our own expectations.

Now, I would love to tell you that this partnership was all part of my master plan from the beginning, thatas a young man I had some sort of vision of a great retailing company in which all the employees wouldbe awarded a stake in the business. That I saw them having the opportunity to participate in many of thedecisions that would determine the profitability of that business. I would love to tell you that from the verybeginning we always paid our employees better than anyone else paid theirs, and treated them as equals.

I would love to tell you all that, but unfortunately none of it would be true.

In the beginning, I was so chintzy I really didn't pay my employees very well. The managers were fine.

From the time we started branching out into more stores, we always had a partnership with the storemanagers. Those guys I've already told you about, like Willard Walker and Charlie Baum and CharlieCate, all had a piece of their stores' profits from the beginning. But we really didn't do much for the clerksexcept pay them an hourly wage, and I guess that wage was as little as we could get by with at the time.

In fairness to myself, though, that was pretty much the way retail was in those days, especially in theindependent variety store part of the business.

CHARLIE BAUM:

"When I took over the store in Fayetteville, which would have been May of 1955, Sam was paying thegirls fifty cents an hour. After that first paycheck went out, I thought about it and decided, This is for thebirds.' So the next week I raised them to seventy-five cents an hour, and I got a telephone call from Sam.

He said, 'Charlie, we don't give raises of a quarter an hour. We give them a nickel an hour.' But I didn'tcut back. I stayed with the seventy-five cents because those girls were earning it. We were a high-volumestore for those days, making pretty good money."I don't remember beingthat tight, but I guess Charlie's got it about right. We didn't pay much. It wasn'tthat I was intentionally heartless. I wanted everybody to do well for themselves. It's just that in my veryearly days in the business, I was so doggoned competitive, and so determined to do well, that I wasblinded to the most basic truth, really the principle that later became the foundation of Wal-Mart'ssuccess. You see, no matter how you slice it in the retail business, payroll is one of the most importantparts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profitmargin. That was true then, and it's still true today. Back then, though, I was so obsessed with turning in aprofit margin of 6 percent or higher that I ignored some of the basic needs of our people, and I feel badabout it.

The larger truth that I failed to see turned out to be another of those paradoxeslike the discounters'

principle of the less you charge, the more you'll earn. And here it is: the more you share profits with yourassociateswhether it's in salaries or incentives or bonuses or stock discountsthe more profit will accrueto the company. Why Because the way management treats the associates is exactly how the associateswill then treat the customers. And if the associates treat the customers well, the customers will returnagain and again, andthat is where the real profit in this business lies, not in trying to drag strangers intoyour stores for one-time purchases based on splashy sales or expensive advertising. Satisfied, loyal,repeat customers are at the heart of Wal-Mart's spectacular profit margins, and those customers are loyalto us because our associates treat them better than salespeople in other stores do. So, in the wholeWal-Mart scheme of things, the most important contact ever made is between the associate in the storeand the customer.

I didn't catch on to that idea for quite a while. In fact, the biggest single regret in my whole businesscareer is that we didn't include our associates in the initial, managers-only profit-sharing plan when wetook the company public in 1970. But there was nobody around preaching that philosophy in those days,and I guess I was just too worried about my own debt, and in too big a hurry to get somewhere fast.

Today, some of our company's critics would like everybody to believe we started our profit-sharingprogram and other benefits merely as a way to stave off union organizing. The traditional version of whathappened is that the Retail Clerks union organized a strike against us when we opened store number 20in Clinton, Missouri, and another one when we opened store number 25 in Mexico, Missouri, and that inresponse to those troubles we started all these programs to keep the unions out.

That story is only partly true. We did have labor trouble in those two stores, and we did fight the unionslegally and aboveboardand we won. In fact, we've never lost a union organizing election. But the ideafor sharing profits and benefits had come up even before we went public, not from me, but from Helen.

HELEN WALTON:

"We were on a trip, driving someplace, and we were talking about the high salary that Sam was earning,and about all the money and benefits that he was paying the officers of the company in order to keep histop people. He explained that the people in the stores didn't get any of those benefits, and I think it wasthe first time I realized how little the company was doing for them. I suggested to him that unless thosepeople were on board, the top people might not last long either. I remember it because he didn't reallyappreciate my point of view at that time. Later on, I could tell he was thinking about it, and when hebought it, he really bought it."It may be true that our skirmishes with the Retail Clerks and some other unions along thewayconstruction unions at our building sites, and the Teamsters at our distribution centershelped hurryalong our thinking in this direction. The unions, who don't seem to like our company muchmaybebecause they've never had any luck organizing uswant everyone to believe they're the only reason we'veever done anything good for any of our associates. The truth is, once we started experimenting with thisidea of treating our associates as partners, it didn't take long to realize the enormous potential it had forimproving our business. And it didn't take the associates long to figure out how much better off theywould be as the company did better.

I have always believed strongly that we don't need unions at Wal-Mart. Theoretically, I understand theargument that unions try to make, that the associates need someone to represent them and so on. Buthistorically, as unions have developed in this country, they have mostly just been divisive. They have putmanagement on one side of the fence, employees on the other, and themselves in the middle as almost aseparate business, one that depends on division between the other two camps. And divisiveness, bybreaking down direct communication, makes it harder to take care of customers, to be competitive, andto gain market share. The partnership we have at Wal-Martwhich includes profit sharing, incentivebonuses, discount stock purchase plans, and a genuine effort to involve the associates in the business sowe can all pull togetherworks better for both sides than any situation I know of involving unions. I'm notsaying we pay better than anybody, though we're certainly competitive in our industry and in the regionswhere we're operating; we have to be if we want to attract and keep good people. But over the longhaul, our associates build value for themselvesfinancially and otherwiseby believing in the company andkeeping it headed in the right direction. Together, we have ridden this thing pretty darned far.

On the other hand, let me say this: anytime we have ever had real trouble, or the serious possibility of aunion coming into the company, it has been because management has failed, because we have notlistened to our associates, or because we have mistreated them.

I think anytime the employees at a company say they need a union, it's because management has done alousy job of managing and working with their people. Usually, it's directly traceable to what's going on atthe line supervisor levelsomething stupid that some supervisor does, or something good he or shedoesn't do. That was our problem at Clinton and at Mexico. Our managers didn't listen. They weren't asopen with their folks as they should have been. They didn't communicate with them, they didn't share withthem, and consequently, we got in trouble.

We fought those situations using pretty traditional methods. We hired a good labor lawyer, John Tate,who has won a lot of organizing battles over the years, and who has since joined our company. Hisadvice helped me become even more determined to change the relationship between management andthe associates at Wal-Mart: take care of your people, treat them well, involve them, and you won't spendall your time and money hiring labor lawyers to fight the unions. Right after those confrontations, Johnhelped us conduct a management seminar down at Tan-Tar-A resort in Missouri, and soon thereafter welaunched a program called "We Care" designed to let the associates know that when they had problems,we wanted them to come to management and give us a chance to solve them. Our message became"Sure, we are a nonunion company, but we think we are stronger because of it. And because you are ourpartner, we have an open door, and we listen to you, and together we can work out our problems." Theunion, of course, would argue more along the line of "Hey, we can get you a $3.00-an-hour raise. Whydon't you strike"There's been all sorts of debate over why we chose to call our employees "associates," and everybodyand his brother takes credit for it. I don't know. Maybe they're right. But the way I remember it is prettysimple. First of all, in my day, James Cash Penney had called his hourly employees "associates," and Iguess I always had that idea in the back of my head. But the idea to try it at Wal-Mart actually occurredto me on a trip to England.

HELEN WALTON:

"We were on a tennis vacation to England. We were there to see Wimbledon. One day, we werewalking down a street in London, and Sam, of course, stopped to look at a storehe always stopped tolook in stores wherever we wentanywhere in the world, it didn't matter. On that same trip, we lost a lotof our things in Italy when thieves broke into the car while he was looking at a big discount store.

Anyway, he stopped at this one English retailing company, and I remember him saying, 'Look at that sign.

That is great. That's what we should do.' "It was Lewis Company, J. M. Lewis Partnership. They had a partnership with all their associates listedup on the sign. For some reason that whole idea really excited me: a partnership with all our associates.

As soon as we got home, we started calling our store workers "associates" instead of employees. Thatmay not sound like any big deal to some folks, and they're right. It wouldn't have meant a thing if wehadn't taken other actions to make it real, to make it something other than window dressing. The decisionwe reached around that time, to commit ourselves to giving the associates more equitable treatment in thecompany, was without a doubt the single smartest move we ever made at Wal-Mart.

In 1971, we took our first big step: we corrected my big error of the year before, and started aprofit-sharing plan for all the associates. I guess it's the move we made that I'm proudest of, for a numberof reasons. Profit sharing has pretty much been the carrot that's kept Wal-Mart headed forward. Everyassociate of the company who has been with us at least a year, and who works at least 1,000 hours ayear, is eligible for it. Using a formula based on profit growth, we contribute a percentage of everyeligible associate's wages to his or her plan, which the associate can take when they leave thecompanyeither in cash or Wal-Mart stock. There's nothing that unusual about the structure of the plan.

It's the performance I'm so proud of. For the last ten years, the company contributed an average of 6percent of wages to the plan. Last year, for example, Wal-Mart's contribution was $125 million. Now,the folks who administer profit sharingand this includes a committee of associateshave chosen yearafter year to keep the plan invested mostly in Wal-Mart stock, so the thing has grown beyond belief,collectively, and in the individual accounts of a lot of associates. Today, as I write this, profit sharing hasaround $1.8 billion in itequity in the company that belongs to our associate partners.

BOB CLARK, WAL-MART TRUCK DRIVER, BENTONVILLE, ARKANSAS:

"I went to work for Mr. Walton in 1972, when he only had sixteen tractors on the road. The first month,I went to a drivers' safety meeting, and he always came to those. There were about fifteen of us there,and I'll never forget, he said, 'If you'll just stay with me for twenty years, I guarantee you'll have$100,000 in profit sharing.' I thought, 'Big deal. Bob Clark never will see that kind of money in his life.' Iwas worrying about what I was making right then. Well, last time I checked, I had $707,000 in profitsharing, and I see no reason why it won't go up again. I've bought and sold stock over the years, andused it to build on to my home and buy a whole bunch of things. When folks ask me how I like workingfor Wal-Mart, I tell them I drove for another big company for thirteen yearsone they've all heard ofandleft with $700. Then I tell them about my profit sharing and ask them, 'How do you think I feel aboutWal-Mart'"GEORGIA SANDERS, RETIRED HOURLY ASSOCIATE, WAL-MART NO. 12, CLAREMORE,OKLAHOMA:

"I started out in April 1968, and worked as a department head in cameras, electronics, and smallappliances. In the beginning, I made $1.65 an hour, minimum wage. In 1989, when I retired, I wasmaking $8.25 an hour. I took $200,000 in profit sharing when I left, and we invested it pretty well, Ithink. We've done a lot of traveling, bought a new car, and we still have more money than we startedwith. Over the years, I bought and sold some Wal-Mart stock, and it split a lot. I bought my mom ahouse off some of that money. For me, Wal-Mart was just a great place to work."JOYCE MCMURRAY, DISTRICT OFFICE TRAINER AT WAL-MART STORE NO. 54 INSPRINGDALE, ARKANSAS:

"I live and breathe Wal-Mart. Sam always gives so much to the associates, I want to give as much as Ican back in return. I got my fifteen-year pin from him personally. I've had the maximum taken out of mycheck for stock purchases, and I've bought some on the outside too. You cannot imagine how my profitsharing has increased. This year my profit sharing amounts to $475,000. I had originally planned to retirethis year, take my bundle and bail out. But I'm only forty, and I've decided to hang in here for a while. I'mnot sure what we'll do with the money. It's for retirement, of course. But I think we'll also buy a pianoand maybe someday build our dream house. But I'm keeping this stock a long time."JEAN KELLEY, ASSOCIATE IN THE GENERAL OFFICE, WHERE SHE SUPERVISESCARGO CLAIMS:

"I grew up on a farm in Mexico, Missouri, and went to work in store number 25 there when I wastwenty years old. When I came to Bentonville, there were nine people in the traffic department, and nowthere are sixty-one of us. My brother tried to talk me into quitting back in the beginning. He said I couldgo anywhere other than Wal-Mart and make more an hour. Well, in 1981 I had $8,000 in profit sharing.

In 1991, I had $228,000. I told my brother to show me anywhere else I could go and do that, and Iwould change jobs. If you have faith in this company, it's amazing how your loyalty pays off. I'm so glad Istuck to it. My money is going to send my daughter, Ashley, to college."Those are some of my partners, and we've come a long way together. About the same time we startedprofit sharing, we cranked up a lot of other financial partnership programs. We've got an employee stockpurchase plan so associates can buy stock through payroll deductions at a discount of 15 percent offmarket value. Today, more than 80 percent of our associates own Wal-Mart stock, either through profitsharing or on their own, and personally I figure most of the other 20 percent either haven't qualified forprofit sharing yet, or haven't been with us long enough to catch on. Over the years, we've also had avariety of incentive and bonus plans to keep every associate involved in the business as partners.

One of the most successful bonuses has been our shrink incentive plan, which demonstrates thepartnership principle as well as any I know beyond just straight profit sharing. As you may know,shrinkage, or unaccounted-for inventory losstheft, in other words is one of the biggest enemies ofprofitability in the retail business. So in 1980, we decided the best way to control the problem was toshare with the associates any profitability the company gained by reducing it. If a store holds shrinkagebelow the company's goal, every associate in that store gets a bonus that could be as much as $200. Thisis sort of competitive information, but I can tell you that our shrinkage percentage is about half theindustry average. Not only that, it helps our associates feel better about each other, and themselves.

Most people don't enjoy stealing, even the ones who will do it if given the opportunity. And most associates don't want to think that they're working alongside anyone who does enjoy stealing. So under a planlike this, where you're directly rewarded for honesty, there's a real incentive to keep from ignoring anycustomers who might want to walk off with something, or, worse, to allow any of your fellow associatesto fall into that trap. Everybody working in that store becomes a partner in trying to stop shrinkage, andwhen they succeed, theyalong with the company in which they already hold stockshare in the reward.

It all sounds simple enough. And the theories really are pretty basic. None of this leads to a truepartnership unless your managers understand the importance of the associates to the whole process andexecute it sincerely. Lip service won't make a real partnershipnot even with profit sharing. Plenty ofcompanies offer some kind of profit sharing but share absolutely no sense of partnership with theiremployees because they don't really believe those employees are important, and they don't work to leadthem. These days, the real challenge for managers in a business like ours is to become what we callservant leaders. And when they do, the teamthe manager and the associatescan accomplish anything.

Many people have predicted for years that Wal-Mart would lose its way once we got to the toughchallenges of real urban environments. Supposedly, our approach just won't work in neighborhoods withdisenfranchised citizens and underprivileged people who have never been winners. The Wal-Mart waycan't reach folks who have been thieves, and who for the most part haven't felt much pride in their lives.

But I want to tell you about a visit I made to a store near Dallas a couple of years ago: store number 880in Irving, Texas. The store has a very young and very ethnic work force and customer base. And ourmanager there was doing a terrible job with his people. I think maybe he just said to himself, "Well,they're young and they're poor whites and blacks and Mexicans, and they're just going to steal, and Ican't do anything about it." So he was not, very definitely not, being a servant leader.

This store was as bad off as any Wal-Mart I've ever seen. It had the highest shrinkage of any Wal-Marteveraround 6 percent, which for us is unheard of. The store was losing more than a half-million dollars ayear, and we thought we ought to close it. But we had a real maverick named Ed Nagy, who was then adistrict manager. Ed's a fella who's always stepping on toes or breaking one rule or another. He'sconstantly in trouble, and he likes to try new things, and, I have to admit, he reminds me a bit of myself asa youngster. He goes into that store, and he has a talk with the store manager, and he starts training thedepartment heads. And he sets some realistic goals for these folks. And he starts giving them somemotivational talks, explaining how we're different from other companies and they're really missing out onsomething by not participating.

Then he finds out that the associates are just stealing rampant throughout the store, and letting thecustomers steal too because no one has set any controls. No one was checking on the refunds. No onewas checking on the layaways. No one was even checking on the cash registers. If you wanted to steal,you knew you wouldn't get caught. So they started checking on all those things, and they started talkingabout integrity, and they talked about improving sales. Within a year and a half, this store was turnedaround completely. The shrink was down to 2 percent. It started turning a profit, and when I went inthere to visit I think it was one of the proudest moments I've had in forty years of visiting almost twothousand stores. It was just an unbelievable job of an action-oriented, right-thinking motivator stepping inand saving a horrible situation.

Now, why did it work Well, for one thing, Nagy the district managertook a lot of the departmentmanagers out of that store, out of that losing environment, and got them to rubbing shoulders with someof the folks from the successful stores in his district. They had a weekend meeting, and they talked abouttheir departments, and he made these folks participate. Then he had them set their own goals. Andmaybe while they were having lunch with these winners from the other stores, maybe they started todream a little and think a little about how they could improve the mess they were in. He and the othermanagers talked about the numbers with them and began to show them how their jobs and decisionsrelated to those numbers, so they would care about whether their sales were up and not just stand theregoing through the motions. They began to learn a little about merchandising.

But here's the best part. When they put in their controls to try and stop the stealing, they startedchecking every empty box that left the back door. Well, one day they found a big boxa baby buggyboxthat had $400 worth of tapes in it, and they caught the guy at the door with it. So they had a meetingthe next morning, and the manager talked about the woman who discovered the box and caught the thief,and she was a hero. Everybody gave her a big round of applause. The culture was turning around there,in a short period of time. I learned this early on in the variety store business: you've got to give folksresponsibility, you've got to trust them, and then you've got to check on them.

It's true that we have more difficulty in the cities with our approach. We have more trouble coming upwith educated people who want to work in our industry, or with people of the right moral character andintegrity. Folks in small towns in Iowa and Mississippi are more likely to want to work for what we canpay than folks in Houston or Dallas or St. Louis. And, yes, they're probably more likely to buy ourphilosophy in the country than they are in the city. But let me tell you this: a smart, motivational, goodmanager can work what some outsiders call Wal-Mart magic with folks anywhere. It may take moretime. You may have to sift through more people, and you may have to become more skilled with yourhiring practices. But I truly believe that people anywhere will eventually respond to the same sorts ofmotivational techniques we useif they are treated right and are given the opportunities to be properlytrained. If you're good to people, and fair with them, and demanding of them, they will eventually decideyou're on their side.

And I want to tell you something else: Wal-Mart is not a big success merely because we grew up outhere in the country, where people are just naturally friendly and therefore make great retail employees.

It's true that we have many fine associates from the country, but they have had to enter our culture andlearn retailing just like anybody else, and we have spent a good deal of time teaching many of them toovercome their natural shyness and learn to speak up and help our customers. So I think some folksoutside our company may be putting a little too much emphasis on the supposed low quality of workersin the city, and not enough emphasis on the failure of some managers to do their jobs in getting thoseworkers going in the right direction. Years ago, if we hadn't done so well, some of these folks might havesaid you could never build a retailing empire in small-town America because you wouldn't be able toattract a work force that was sophisticated enough.

Another important ingredient that has been in the Wal-Mart partnership from the very beginning hasbeen our very unusual willingness to share most of the numbers of our business with all the associates. It'sthe only way they can possibly do their jobs to the best of their abilitiesto know what's going on in theirbusiness. If I was a little slow to pick up on sharing the profits, we were among the first in ourindustryand are still way out front of almost everybodywith the idea of empowering our associates byrunning the business practically as an open book. I've always told people in the stores what was going onwith the numbers. But after we decided to act like a partnership, we formalized the sharing of informationto a much greater degree.

Sharing information and responsibility is a key to any partnership. It makes people feel responsible andinvolved, and as we've gotten bigger we've really had to accept sharing a lot of our numbers with the restof the world as a consequence of sticking by our philosophy. Everything about us gets to the outside. Inour individual stores, we show them their store's profits, their store's purchases, their store's sales, andtheir store's markdowns. We show them all that on a regular basis, and I'm not talking about just themanagers and the assistant managers. We share that information with every associate, every hourly, everypart-time employee in the stores. Obviously, some of that information flows to the street. But I justbelieve the value of sharing it with our associates is much greater than any downside there may be tosharing it with folks on the outside. It doesn't seem to have hurt us much so far. And, in fact, I've beenreading lately that what we've been doing all along is part of one of the latest big trends in business thesedays: sharing, rather than hoarding, information.

All I know is that nothing ever makes me feel better than when I visit a store and some department headcomes up to me with pride and shows me all her numbers and tells me she's number five in the companybut she plans to be number one next year. I love meeting all these merchants we've got on our team outthere. When they show me an endcap display they've got loaded up with charcoal or baby oil or lunchboxes and then tell me they chose that item because of its high profit margin, and then go on to bragabout all the volume they've done with that item, I get so proud for them I can hardly stand it. I reallymean that. It is just the proudest I get. Because if we, as managers, truly dedicate ourselves to instillingthat thrill of merchandisingthe thrill of buying and selling something at a profitinto every single one of ourassociate-partners, nothing can ever stop us.

Bernie marcus, chairman and co-founder, home depot:

"We feel a great affinity for Sam and Wal-Mart because of the way they treat their people. He's such agreat motivator. But the financial incentives have made a big difference too. We modeled our employeestock ownership plan after Sam's, and it worked for us as well.

"We look at his operationwith what, almost 400,000 peopleand you walk in there, and they're allsmiles. He proved that people can be motivated. The mountain is there, but somebody else has alreadyclimbed it.

"But if you ask Sam how's business, he's never satisfied. He says, 'Bernie, things are really lousy. Ourlines are too long at the cash registers. Our people aren't being helpful enough. I don't know what we'regonna do to get them motivated.' Then you ask some of these CEOs from other retail organizations whoyou know are on the verge of going out of business, and they brag and tell you how great everything is.

Really putting on airs. Not Sam. He is down to earth and knows who he is.

"Without question, Sam Walton is one of the great all-time merchants. Period."Keeping so many people motivated to do the best job possible involves a lot of the different programsand approaches we've developed at Wal-Mart over the years, but none of them would work at allwithout one simple thing that puts it all together: appreciation. All of us like praise. So what we try topractice in our company is to look for things to praise. Look for things that are going right. We want tolet our folks know when they are doing something outstanding, and let them know they are important tous.

You can't praise something that's not done well. You can't be insincere. You have to follow up on thingsthat aren't done well. There is no substitute for being honest with someone and letting them know theydidn't do a good job. All of us profit from being correctedif we're corrected in a positive way. Butthere's no better way to keep someone doing things the right way than by letting him or her know howmuch you appreciate their performance. If you do that one simple thing, human nature will take it fromthere.

ANDY SIMS, MANAGER, WAL-MART NO. 1, ROGERS, ARKANSAS:

"When I started working at Wal-Mart in West Texas, we would anticipate a store visit by the chairmanwith the same sense you get when you're going to meet a great athlete, or a movie star, or a head ofstate. But once he comes in the store, that feeling of awe is overcome by a sort of kinship. He is a masterat erasing that 'larger-than-life' feeling that people have for him. How many heads of state always start theconversation by wanting to know whatyou think What's onyour mind"After a visit, everyone in the store has no doubt that he genuinely appreciates our contributions, nomatter how insignificant. Every associate feels like he or she does make a difference. It's almost likehaving your oldest friend come just to see if you're okay. He never lets us down."There is one more aspect to a true partnership that's worth mentioning: executives who hold themselvesaloof from their associates, who won't listen to their associates when they have a problem, can never betrue partners with them. Often, this is an exhausting and sometimes frustrating part of the management process, but folks who stand on their feet all day stocking shelves or pushing carts of merchandise out of theback room get exhausted and frustrated too, and occasionally they dwell on problems that they just can'tlet go of until they've shared it with somebody who they feel is in a position to find a solution. So, as bigas we are, we have really tried to maintain an open-door policy at Wal-Mart.

DAVID GLASS:

"If you've ever spent any time around Wal-Mart, you may have noticed that it's not unusual forsomebody in Philadelphia, Mississippi, to get in his pickup on the spur of the moment and drive toBentonville, where you can find him sitting in the lobby waiting patiently to see the chairman. Now, really,how many chairmen of $50 billion companies do you know who are totally, 100 percent accessible totheir hourly associates I know lots of people in big companies who have never even seen their chairman,much less visited with him."That's not to suggest that they always like what I have to say. I don't always solve their problems, and Ican't always side with them just because they bring their situation to my attention. But if the associatehappens to be right, it's important to overrule their manager, or whoever they're having the problem withbecause otherwise the open-door policy isn't any good to anybody. The associates would know prettysoon that it was just something we paid lip service to, but didn't really believe. If I'm going to fly aroundall over the country telling these folks they're my partners, Isure owe it to them to at least hear them outwhen they're upset about something.

DEAN SANDERS, EXECUTIVE VICE PRESIDENT OPERATIONS, WAL-MART:

"I've always felt that to Sam, the people in the storesthe managers and the associatesare the kings. Heloves them. And there's no doubt they feel they have an open door to him. He'll go out on store visits,and when he gets back he'll call me and say, 'Give this boy a store to manage. He's ready.' Then I'llexpress some concern about the person's experience level or whatever, and he'll say, 'Give him oneanyway. Let's see how he does.' The other thing, of course, is that he has absolutely no tolerance formanagers mistreating the associates in the stores. When he finds something like that going on, he gets onus about it instantly."So you see, when we say Wal-Mart is a partnership, we really believe it. Partnership involvesmoneywhich is crucial to any business relationshipbut it also involves basic human considerations, suchas respect. Wal-Mart is a spectacular example of what happens when 400,000 people come together asa group, with a real feeling of partnership, and are able, for the most part, to put the needs of theirindividual egos behind the needs of their team.
Chapter 10 Stepping Back
　　'Heaaah, Maggie!' Sam screams from the cab of his truck. 'Cumoon heaah tuhme!' Up top, Sam'sfriend, Royce Beall, a department store owner from Jacksonville, Texas, chuckles. 'Listen to Sama-hollerin',' he says. 'It don't do no good, but he'll yell all day like that.' "SOUTHPOINT magazine, February 1990By the time 1974 rolled around, I have to admit we were feeling pretty good about ouraccomplishments. By anybody's standards, we had built a heck of a regional discount chain, with justunder 100 Wal-Marts open for business in eight states. We were doing nearly $170 million in sales, withmore than $6 million in profits. The stock had split twice, and we were on the New York StockExchange. By now, everybody was sharing the profits so the whole company was pumped up. WallStreet was buying into our strategy, and whatever reservations anyone up there might have had about me,they seemed to think pretty highly of Ron Mayer and the rest of the management team we had in place.

At fifty-six, I was free and clear of debt. My net worth was far greater than I had ever imagined it couldbe when I started out in the retail business. Our kids were out of college and starting up their own lives. Ireally don't see how I could have reasonably expected much more out of life.

If I've given the impression so far that Wal-Mart has occupied most of my competitive energy over theyears, that's not completely accurate. I've pursued my other passions all along, too, mostly quail huntingand tennisand I pursued them both very competitively. A lot of businessmen seem to prefer golf, but Ialways thought it was a little too country club for me and it took up too much time and wasn't reallycompetitive in the same way that tennis is, you know, in a give-and-take, head-to-head way.

Helen walton:

"When we first met, Sam played golf, but he would get terribly frustrated when he made mistakes. Once,when he was in the Army, he was out playing with some of the officers, and I think their colonel wasalong that day. Sam had hit off into the woods. It made him so mad that he broke his club on a tree. Sohe came home that day, threw his clubs down, and said, 'I've had it with golf.' After that, it was mostlytennis for him."I took my racket with me whenever I was flying, and I had friends to play with when I hit their towns.

For some reason, I loved to play around noonwhen the sun was hottestand I guess I was prettyaggressive. I played regularly from the time we got to Bentonville until about two years ago, when mylegs just couldn't cut it anymore.

GEORGE BILLINGSLEY, TENNIS PARTNER:

"For about ten years, Sam and I played tennis at high noonusually on the court over at his house. I thinkhe liked to play during lunch hour because he wouldn't dream of taking any of his associates away fromtheir jobs to play. On the court, he was the most competitive player. He studied his opponents' games,and he knew our strengths and weaknesses as well as his own. If you hit a ball to Sam's forehand, thatpoint was his. He would hit it crosscourt, and it was over.

"He loved the game. He never gave you a point, and he never quit. But he is a fair man. To him, the rulesof tennis, the rules of business, and the rules of life are all the same, and he follows them. As competitiveas he is, he was a wonderful tennis opponentalways gracious in losing and in winning. If he lost, hewould say, 'I just didn't have it today, but you played marvelously.' "LORETTA BOSS PARKER, POPULARLY KNOWN AS THE VICE PRESIDENT FOR TENNIS:

"If Mr. Walton was out on a trip, his idea of making a tennis date would be to radio our aviationdepartment when he was a few minutes out from landing and have them phone me with a time. I wouldget the call at eleven, find him a partner, and he would be playing by noon."So tennis became my outlet for organized competitive sport and exercise. But my real passion outsideWal-Mart has always been my bird hunting. I have to say it's probably my one self-indulgent activity. Iloved it so much that I just made it part of my way of doing business from early on.

I never did that much quail hunting growing up, not until I met Helen's father, who was dead seriousabout it. Anytime I was around Claremore I loved to go out there and hunt with Mr. Robson, or Helen'sbrothers, Frank and Nick. Her dad and I were both much better than average shots, and we got to bepretty competitive over the hunting.

As I mentioned, Bentonville appealed to me because I could hunt quail seasons in four states. So duringthe season, I usually took off almost every day around three or four in the afternoon and went out to do acouple of hours' hunting. I had an old hunting car I'd haul my dogs in, and I'd go find a farm or ranch Iwanted to hunt. I learned early that the best way to get invited back was to go ask permission and offerthe owner a box of chocolate cherries from the store, or, if he preferred it, a take of the game I shot. I'vehunted all over these hills and valleys around here.

JOHN WALTON:

"Until Dad was in his mid-sixties, I really had to struggle to keep up with him. I thought I was in prettygood shape, but my tendency is to kind of walk along, take it easy, and enjoy the outdoors. I'd look up,and Dad would be out of sight. He hunted like Sherman marched through Georgia."When I asked permission to hunt, I always introduced myself as Sam Walton of Sam Walton's varietystore down on the square in Bentonville, and I found that it really helped my business. When these farmfolks would come to town to shop, they'd naturally do business with that fellow who hunted their landand brought them candy. I still meet folks today who tell me their father recalls me coming out to hunttheir land in those days. As we began to expand, and I flew around more, I would throw the dogs in theplane with me so I could hunt between store visits.

I had some crazy times with those dogs out on the road. Usually I made them sleep in the trunk of thecar, but if it was Ol' Roy, who was really more of a pet than a bird dog, I would let him sleep in my roomwith me unbeknownst, I'm afraid, to the Holiday Inn folks. Once he got in a fight with a skunk, and I amashamed to even think of what the next person to get my rental car must have thought happened in thatthing. I held him by his hind legs and half drowned him trying to wash him off in this lake, but we foundout you cannot wash skunk off a dog very easily.

Roy was probably the most overrated bird dog in history. He wasn't much of a hunter at all; he wouldpoint rabbits, for example. But the associates and the customers got a kick out of visiting with him in thestores, and once we put his name and picture on our private label dog food, it sold tons. Another thingabout Roy that was very unusual: he was a great tennis dog. He would go with me to the tennis court andlay there, and whenever the ball went out of the court, over the fence, or whatever, he would go chasingafter it and bring it back to me.

What I really love about hunting is the coordination and the training of the dogs. You have to develop apartnership with them. You have to motivate them, and they have to do their work reasonably well.

FROMSOUTHPOINT MAGAZINE, FEBRUARY 1990:

" 'George! Cuminheaartuhme! You're about to get your butt shot, George,' Sam says. Then, to acompanion: 'I think George might be a good one. He's hunting. He's got his nose into the wind, and he'shunting back and forth. He acts like he knows what he's doing. He may not, but he acts like he does. Hebacked the other dogs, and that was just purely instinctive. And a dog with me has to have someinstincts.'"I pride myself on being able to train my own dogs, and I've never had a dog handler, like some of thesecountry gentlemen friends of mine. I enjoy picking out ordinary setter or pointer pups and working withthem yanking them around and correcting them and yelling at them and being patient with them. They'vegot to learn to find the birds, and then they've got to learn the discipline to hold them and wait for thehunter. I have had some dogs I couldn't handle, and Mr. Robson made a specialty out of resurrecting myfailures. He liked nothing better than to take one of my cast-off dogs and fix it up, then give it back to me.

Aside from training the dogs, I like being outdoors in all kinds of weather. When I'm out there, I'm notthinking about Wal-Mart or Sam's or anything but where the next covey might be. Also, some of my bestfriends are people who like to hunt quail. I'm extremely prejudiced, but I feel like quail hunters aregenerally good sportsmen who've got a balanced respect for conservation and wildlife: things that Icertainly value.

As good as the quail hunting is around home, Bud and I got really taken with Texas quail hunting a fewyears back. We each got leases on ranches way down in south Texas scrub country, not too far north ofthe Rio Grande Valley. My place is about as simple as they come; Bud's is a good bit fancier. His has aswimming pool.

SOUTHPOINT :

"Sam Walton's Campo Chapote is a rustic little cluster of trailer homes out in the vast middle of SouthTexas nowhere. This isn't the quail hunting of rich Southern gentry, the kind with white-coated servantsand engraved Belgian shotguns and matched mules in silver harness hitched to mahogany dog wagons.

Sam calls that variety 'South Georgia quail hunting,' and he's tried it, but it isn't reallyhim. In case theambiente of Campo Chapote hasn't sunk in yet, it is, to put it simply: 'All Things Not Trump.' This is acamp where your host hands you your towel, points you to a bedroom in the trailer, and explains: 'Don'tlet the noise in the ceiling worry you, it's just rats.' "BUD WALTON:

"One time Sam and I got invited to a fancy quail hunt on one of those south Georgia plantations. Theytold us they'd pick us up at this landing strip. So we flew in there, and there were all these corporate jetslined up. Well, this guy in a Mercedes pulls up to get us. You should've seen the look on his face whenSam opened up the back of that plane, and his five dogs came flyin' out of there. They weren't expectinganybody to bring their own dogs. They had to haul them in that Mercedes."As you can see, I'm not all work. I like to play as much as the next guy. And I have to admit, backaround 1974 I was awfully tempted to take more time for myself, -to step back and let Ron Mayer andthe other guys run the company, while I went off to enjoy life. Around that same time, Helen and I wenton some of our overseas trips, although I'm sure I spent most of my time over there nosing around storesand doing business.

So for the first time since I had begun retailing in 1945, I was beginning to back off from the business. Iwas getting slightly less involved in the day-to-day decisions and leaning a bit more on Ron Mayer andFerold Arendour two executive vice presidents. I was still chairman and CEO. Ferold, at age forty-five,ran merchandising, while Ron Mayer, who was only forty, ran finance and distribution. To handle theexplosive growth, we were bringing on new people in the general office. Ron brought in a lot of people tohandle data processing and finance and distribution.

What happened then is the one period in Wal-Mart's history that I am still the least comfortable talkingabout today. But everybody else has had their say on the subject so I'm going to explain the events theway I saw them unfold and be done with it.

As I look back on that period now, I realize I had split the company in half, setting up two factionswhich began to compete fiercely with one another. There was the old guard, including many of the storemanagers, remaining loyal to Ferold, and the new guard, many of whom owed their jobs to Ron. Prettysoon, everybody began to take sides, lining up behind either Ron or Ferold, who didn't get along at all.

What I did nextwhich seems totally out of character for meonly compounded the problem tenfold.

Ferold had been valuable in organizing the company as we began to roll out stores, but because of all thetechnology and sophisticated systems we were needing, I really felt at the time that Ron was absolutelyessential to the company's future. In addition to his ability, he had a lot of ambition. He made it pretty wellknown that his goal, which I respected, was to run a company, preferably Wal-Mart. He told me oneday that if he couldn't run our company, he wanted to get out and run another one. So I thought aboutthat for a few days, and I really worried that we were going to lose Ron. Then I said to myself, "Well, I'mgetting pretty old, and we could probably work together. I'll let him be chairman and CEO, and I'll justenjoy myself, step back a little, and, of course, continue to visit stores."So I became chairman of the Executive Committee. Ron became chairman and CEO of the company.

Ferold became president. I moved out of my office down at the end of what they jokingly call "executiverow," and let Ron have it. I moved into his office. I made up my mind to stay out of his way and let himrun the company, telling myself that I would just check to see how he was getting along. Since I hadreally been letting other people operate the company day to day all along, I thought things would run realwell this way.

Well, I was no more ready to retire in 1974 at the age of fifty-six than the Arkansas sun is ready to startrising out of Oklahoma in the morning. But for a while I did step back and take off a little more time. I'msure to Ron Mayer it must have seemed like I never took off at all. The truth is, I failed at retirementworse than just about anything else I've ever tried. Actually, I knew it was a mistake almost right after Iresigned the chairmanship. I tried to stay out of Ron's way. The problem was that I actually just keptdoing exactly the same thing I had been doing all the time. I wanted to see my ideas keep flowing aroundthe company, but I wanted Ron to be successful in operating the company and building an organization.

Unfortunately, I just couldn't quite stay away from it to that degree. The situation was quite a burden forRon, and would have been for any forty-year-old guy wanting to run his own company, I think.

Meanwhile, the house was dividing up against itself. A lot of the newer, younger guys were lining up onRon's side, and the older bunch who ran the stores were backing Ferold. When I began to sense howdeep this split really was, I got real agitated about it, and then I became even more involved insecond-guessing everybody.

AL MILES, RETIRED EXECUTIVE VICE PRESIDENT, WAL-MART:

"There was this thing between Ron and Ferold. I wasn't too involved personally because I was out in thefield then. But even out there it was very apparent that two camps were building up in the company. Youknow, you almost felt committed to say, Well, I'm on this team, or I'm on that team. We started seeing alooseness in our organization that had never been there, and things none of us liked were starting tohappen regularly. The seriousness of running our stores and taking care of our people wasn't happening.

And most of us district managers would get together and talk on the phone on Saturday mornings, and,you know, we thought we were going to hell in a handbasket. I'm not exaggerating. I mean we really did.

Also, I remember that when Sam started spending more time in the office, he was very, very intense."I kept hoping things would work out. And I should say this: Wal-Mart showed real good numbersduring this whole period. It was never a question of mismanagement. What we had was a semiretiredfounder who didn't want to go away, on top of an old-line bunch of store managers at war with anambitious young guy with big ideas of his own.

FEROLD AREND:

"That period right in there was the only negative I ever experienced in my whole time at the company,which is pretty remarkable in itself. Sam always felt the need for his people to compete with one anotherbecause he thought it brought out the best in them, and most of the time it did. But this was a situationthat just didn't work. When he stepped aside, it created a tough situation for everybody. Ron's peoplewere loyal to him, and mine were loyal to me. Sam was saying, I'll decide the things that needtiebreakers.' That turned out to be a lot more things than he had intended. So once he realized how badlythings were really going, he did something about it."I've always taken most of the blame for this mess I created. But it's also true that I didn't think Ron washandling some things as well as he should. I worried about his people skills, and I felt like the wholeclique thing was really hurting our management at the store end, our most unusual strength. And I guess Iwas pretty unhappy too over some issues of what you'd call personal stylenone of them really all thatunusual in most corporate environments, but different from the way we had always done things aroundWal-Mart.

I agonized over all this. I rarely lose sleep over crises at the office, but this time I did. I didn't want todisappoint Ron, didn't want to lose him. But the company was headed in the wrong direction. So finally Icalled him in one Saturday in June of 1976, thirty months after I had given up the chairman's job, and justsaid simply, "Well, Ron, I thought I was ready to step out, but I see that really I wasn't. I've been soinvolved that in a way it has put you under a real handicap." I told him I wanted to come back in aschairman and CEO, and have him assume another jobvice chairman and chief financial officer, I believe.

My proposal wasn't agreeable to Ron, and I can certainly understand why. He wanted to run thecompany, and when he couldn't he decided to leave us. Nobody believed it at the time, but although Iwas unhappy with some of the things going on under Ron's chairmanship,real unhappy with a few, I triedas hard as I could to convince him to stay and be part of our growth even though he couldn't be chairmanand CEO anymore. I said, "Ron, we are going to miss you, we are going to need you, and I think we'regoing to suffer a lot because you're not here." I offered him everything to stay, but he felt it was time togo.

As disappointed and unhappy as he was, Ron said, "Sam, I know you're going to think that things arefalling apart, and a lot of other people are going to think they're falling apart, but you've got such a strongfield organization here, and such loyalty from the associates and the managers in those stores out there,and such loyal customers, and the company is so sound in its operating philosophies, that I think you'lljust move right down the road." I appreciated his expressing that confidence in us. I know he meant it,and I'll never forget it.

In company lore, that incident became known as the "Saturday night massacre." What followed becameknown as "the exodus." First, a whole group of senior managers who had been part of Ron's teamourfinancial officer, our data processing manager, the guy who was running our distribution centersallwalked out behind him. You can imagine how Wall Street felt about that. A lot of folks wrote us offimmediately. They thought, as they have through the years, that we just didn't have the management tohold the place together.

They assumed that Ron Mayer and all his folks were the reason we'd done well, and they just ignored allthe basics we had in place, all our principles: keeping our costs down, teaching our associates to takecare of our customers, and, frankly, just working our tails off.

Throughout all this turmoil, Jack Shewmaker, one of our brighter, brasher young talents, had beenmaking strong contributions to the company, and I thought he might be just what we needed to get usback on track. But when I named him to be executive v.p. of operations, personnel, andmerchandisepassing over some folks who were older and had been with us longera bunch more of ourmanagers left. It was a real, bona fide exodus, and by the time it was over, I'll bet one third of our seniormanagement was gone. For the first time in a long time, things looked pretty grim. And at that point, Ihave to admit I wasn't sure myself that we could just keep on going like before.

As I said back when we lost that first lease in Newport, most setbacks can be turned into opportunities.

And as things turned out, this setback presented us with one of the great opportunities in our company'shistory. Ever since David Glass and I had met at that awful Wal-Mart opening in Harrison, Arkansas, Ihad been trying to somehow persuade him to work for us. He was a big deal at this discount drug chainup in Springfield, and I was convinced he was one of the finest retail talents I had met. For some time, Ihad been after Ron Mayer to hire David, but he wouldn't do it. So when Ron left, David was the firstperson I went to see, and I finally talked him into coming to Wal-Mart. I'm not saying that with Davidand Jack Shewmaker as executive vice presidentsDavid for finance and distribution, and Jack foroperations and merchandisewe didn't still have some turf fighting left to do between the two sides of thecompany. But, man, we had as much retail talent and firepower together under one roof as any companycould handle.

These two guys are completely different in personality, but they are both whip smart. And with us upagainst it like we were, everybody had to head in the same direction. Once again, Wal-Mart provedeverybody wrong, and we just blew the doors off our previous performances. David made us a strongercompany almost immediately. Ron Mayer may have been the architect of our original distributionsystems, but David Glass, frankly, was much better than Ron at distribution, and that was one of the bigareas of expertise I had been afraid of losing. David also was much better at fine-tuning and honing ouraccounting systems. He, along with Jack, was a powerful advocate for much of the high technology thatkeeps us operating and growing today. And not only did he turn out to be a great chief financial officer,he also proved to be a fine talent with people. This new team was even more talented, more suited forthe job at hand than the previous one.

All along, the history of Wal-Mart has been marked by having the right people in the right job when weneeded them most. We had Whitaker, straight out of the get-after-it-and-stay-after-it old school, to helpus get started; Ferold Arend, a methodical, hardworking German, to get us organized; Ron Mayer, awhiz at computers, to get our systems going; Jack Shewmaker, a brilliant shoot-from-the-hip executivewith a store managers mentality, to blow us out of ruts and push us into new ideas we needed to beworking with; and David Glass, who could step up in a crisis, keep his cool, and eventually get control ofa company that became so big it was hard to comprehend.

From day one, we just always found the folks who had the qualities that neither Bud nor I had. And theyfit into the niches as the company grew. Then every so often, we needed even better talents than wesometimes had on board. And that's when the David Glasses would come along. But there's a time for allthese things. I tried for almost twenty years to hire Don Soderquist away from Ben Franklin. I evenoffered him the presidency one time, and he didn't come. But when we really needed him later on, hefinally joined up and made a great chief operating officer for David's team. At any company, the timecomes when some people need to move along, even if they've made strong contributions. I haveoccasionally been accused of pitting people against one another, but I don't really see it that way. I havealways cross-pollinated folks and let them assume different roles in the company, and that has bruisedsome egos from time to time. But I think everyone needs as much exposure to as many areas of thecompany as they can get, and I think the best executives are those who have touched all the bases andhave the best overall concept of the corporation. I hate to see rivalry develop within our company when itbecomes a personal thing and our folks aren't working together and supporting one another.

Philosophically, we have always said, Submerge your own ambitions and help whoever you can in thecompany. Work together as a team.
Chapter 11 Creating a Culture
　　' "Sam's establishment of the Walton culture throughout the company was the key to the whole thing. It'sjust incomparable. He is the greatest | businessman of this century."HARRY CUNNINGHAM, :founded Kmart Stores while CEO of S. S. Kresge Co.

Not many companies out there gather several hundred of their executives, managers, and associatestogether every Saturday morning at seven-thirty to talk about business. Even fewer would begin such ameeting by having their chairman call the Hogs. That's one of my favorite ways to wake everybody up,by doing the University of Arkansas's Razorback cheer, real early on a Saturday. You probably have tobe there to appreciate the full effect, but it goes like this:

Whoooooooooooooooooooo Pig. Sooey! Whooooooooooooooooooooooooooo Pig. Sooey!

Whoooooooooooooooooooooooooooooooo Pig.

Sooey! RAZORBACKS!!!!!

And if I'm leading the cheer, you'd better believe we do it loud. I have another cheer I lead whenever Ivisit a store: our own Wal-Mart cheer. The associates did it for President and Mrs. Bush when they werehere in Bentonville not long ago, and you could see by the look on their faces that they weren't used tothis kind of enthusiasm. For those of you who don't know, it goes like this:

Give Me a W!

Give Me an A!

Give Me an L!

Give Me a Squiggly!

(Here, everybody sort of does the twist.)Give Me an M!

Give Me an A!

Give Me an R!

Give Me a T!

What's that spellWal-Mart!

What's that spellWal-Mart!

Who's number oneTHE CUSTOMER!

I know most companies don't have cheers, and most board chairmen probably wouldn't lead them evenif they did. But then most companies don't have folks like Mike "Possum" Johnson, who entertained usone Saturday morning back when he was safety director by taking on challengers in a no-holds-barredpersimmon-seed-spitting contest, using Robert Rhoads, our company general counsel, as the officialtarget. Most companies also don't have a gospel group called the Singing Truck Drivers, or amanagement singing group called Jimmy Walker and the Accountants.

My feeling is that just because we work so hard, we don't have to go around with long faces all the time,taking ourselves seriously, pretending we're lost in thought over weighty problems. At Wal-Mart, if youhave some important business problem on your mind, you should be bringing it out in the open at aFriday morning session called the merchandising meeting or at the Saturday morning meeting, so we canall try to solve it together. But while we're doing all this work, we like to have a good time. It's sort of a"whistle while you work" philosophy, and we not only have a heck of a good time with it, we work betterbecause of it. We build spirit and excitement. We capture the attention of our folks and keep theminterested, simply because they never know what's coming next. We break down barriers, which helps uscommunicate better with one another. And we make our people feel part of a family in which no one istoo important or too puffed up to lead a cheer or be the butt of a jokeor the target in apersimmon-seed-spitting contest.

We don't pretend to have invented the idea of a strong corporate culture, and we've been aware of a lotof the others that have come before us. In the early days of IBM, some of the things Tom Watson didwith his slogans and group activities weren't all that different from the things we do. And, as I've said,we've certainly borrowed every good idea we've come across. Helen and I picked up several ideas on atrip we took to Korea and Japan in 1975. A lot of the things they do over there are very easy to apply todoing business over here. Culturally, things seem so differentlike sitting on the floor eating eels andsnailsbut people are people, and what motivates one group generally will motivate another.

HELEN WALTON:

"Sam took me out to see this tennis ball factory, somewhere east of Seoul. The company sold balls toWal-Mart, I guess, and they treated us very well. It was the dirtiest place I ever saw in my life, but Samwas very impressed. It was the first place he ever saw a group of workers have a company cheer. Andhe liked the idea of everybody doing calisthenics together at the beginning of the day. He couldn't wait toget home and try those ideas out in the stores and at the Saturday morning meeting."Back in 1984, people outside the company began to realize just how different we folks at Wal-Mart are.

That was the year I lost a bet to David Glass and had to pay up by wearing a grass skirt and doing thehula on Wall Street. I thought I would slip down there and dance, and David would videotape it so hecould prove to everyone back at the Saturday morning meeting that I really did it, but when we got there,it turned out David had hired a truckload of real hula dancers and ukulele playersand he had alerted thenewspapers and TV networks. We had all kinds of trouble with the police about permits, and thedancers' union wouldn't let them dance without heaters because it was so cold, and we finally had to getpermission from the head of Merrill Lynch to dance on his steps. Eventually, though, I slipped on thegrass skirt and the Hawaiian shirt and the leis over my suit and did what I think was a pretty fair hula. Itwas too good a picture to pass up, I guessthis crazy chairman of the board from Arkansas in this sillycostumeand it ran everywhere. It was one of the few times one of our company stunts reallyembarrassed me. But at Wal-Mart, when you make a bet like I didthat we couldn't possibly produce apretax profit of more than 8 percentyou always pay up. Doing the hula was nothing compared towrestling a bear, which is what Bob Schneider, once a warehouse manager in Palestine, Texas, had to doafter he lost a bet with his crew that they couldn't beat a production record.

Most folks probably thought we just had a wacky chairman who was pulling a pretty primitive publicitystunt. What they didn't realize is that this sort of stuff goes on all the time at Wal-Mart. It's part of ourculture, and it runs through everything we do. Whether it's Saturday morning meetings or stockholders'

meetings or store openings or just normal days, we always have tried to make life as interesting and asunpredictable as we can, and to make Wal-Mart a fun proposition. We're constantly doing crazy thingsto capture the attention of our folks and lead them to think up surprises of their own. We like to see themdo wild things in the stores that are fun for the customers and fun for the associates. If you're committedto the Wal-Mart partnership and its core values, the culture encourages you to think up all sorts of ideasthat break the mold and fight monotony.

We know that our anticsour company cheers or our songs or my hulacan sometimes be pretty corny,or hokey. We couldn't care less. Sure, it's a little strange for a vice president to dress in pink tights and along blond wig and ride a white horse around the Bentonville town square, as Charlie Self did in 1987,after he lost a Saturday morning meeting bet that December sales wouldn't top $1.3 billion. And it is oddfor a former executive like Ron Loveless to come out of retirement at every year-end meeting andpresent his annual LEIR report, the Loveless Economic Indicator Report, based on the number of edibledead chickens found on the roadsidewith charts and graphs and the whole bit. (The harder times are,the fewer edibles you find on the roadside.)Maybe it is a little hokey to surprise your president with the gift of a live pig, but that's what a Sam'sClub crew did to David Glass at one meeting to kick off a sales competition with a football theme. Theytold him they had planned to give him a pigskin, then decided, what the heck, why not leave the pig in it.

For that matter, how many other $50 billion companies would have their president put on overalls and astraw hat and ride a donkey around a parking lot That's what we made David do at the Harrison storeto make up for having toldFortune magazine his story about the donkey and the watermelons at thatstore's 1964 opening. Who knows what our competitors thought when they got their issue ofDiscountStore News that week and saw our president sitting on a jackass right there on the front pageSome of this culture grew naturally out of our small-town beginnings. Back then, we tried literally tocreate a carnival atmosphere in our stores. We were only in small towns then, and often there wasn't awhole lot else to do for entertainment that could beat going to the Wal-Mart. As I told you, we'd havethese huge sidewalk sales, and we'd have bands and little circuses in our parking lots to get folks to thosesales. We'd have plate drops, where we'd write the names of prizes on paper plates and sail them off theroofs of the stores. We'd have balloon drops. We'd have Moonlight Madness sales, which usually wouldbegin after normal closing hours and maybe last until midnight, with some new bargain or promotion beingannounced every few minutes.

We'd play shopping-cart bingowhere each shopping cart has a number, and if your number is called,you get a discount on whatever you have in the cart. At store openings, we'd stand on the servicecounters and give away boxes of candy to the customers who had traveled the farthest to get there. Aslong as it Was fun, we'd try it. Occasionally it blew up in our face.

One year, on George Washington's birthday, Phil Green (remember the world's largest Tide display)ran an ad saying his Fayetteville store was selling a television set for twenty-two centsthe birthday beingon February 22. The only hitch was that before you could buy that television set you had to find it first.

Phil had hidden it somewhere in the store, and the first person to find it, got it. When Phil arrived at thestore that morning, there was such a crowd out front that you couldn't even see the doors. I think all ofFayetteville was there, and a lot of them had been there all night. Our folks had to go in through the back.

When they finally opened the front doors, there was a stampede like you wouldn't believe: five hundredor six hundred people tearing through that store looking for one twenty-two-cent television set. Phil solda ton that day, but the place was so totally out of control that even he admitted playing hide-and-seekwith merchandise was a terrible idea.

As we've grown, we've gotten away from the circus approach, but we've made it a point to keepencouraging the spirit of fun in the stores. We want the associates and the management to do thingstogether that contribute to the community and make them feel like a team, even if they don't directly relateto selling or promoting our merchandise. Here are a few of the crazy kinds of things I'm talking about:

Our Fairbury, Nebraska, store has a "precision shopping-cart drill team" that marches in local parades.

The members all wear Wal-Mart smocks and push their carts through a routine of whirls, twirls, circles,and crossovers.

Our Cedartown, Georgia, store holds a kiss-the-pig contest to raise money for charity. They set outjars with each manager's name on them, and the manager whose jar winds up with the most donationshas to kiss a pig.

Our New Iberia, Louisiana, store fields a cheer-leading squad called the Shrinkettes. Their cheers dealmostly with, what else cutting shrinkage: "WHAT DO YOU DO ABOUT SHRINKAGE CRUSH IT!

CRUSH IT!" The Shrinkettes stole the show at one of our annual meetings with cheers like:

"CALIFORNIA ORANGES, TEXAS CACTUS, WE THINK KMART COULD USE SOMEPRACTICE!"Our Fitzgerald, Georgia, store won first place in the Irwin County Sweet Potato Parade with a floatfeaturing seven associates dressed as fruits and vegetables grown in south Georgia. As they passed thejudging stand, the homegrown fruits and vegetables did a homegrown Wal-Mart cheer.

Managers: from our Ozark, Missouri, store dressed up in pink tutus, got on the back of a flatbed truck,and cruised the town square on Friday night, the peak time for teenage cruisers, and somehow managedto raise money for charity by doing it.

As you can see, we thrive on a lot of the traditions of small-town America, especially parades withmarching bands, cheerleaders, drill teams, and floats. Most of us grew up with it, and we've found that itcan be even more fun when you're an adult who usually spends all your time working. We love all kindsof contests, and we hold them all the time for everything from poetry to singing to beautiful babies. Welike theme days, where everyone in the store dresses up in costume. Our Ardmore, Oklahoma, storepiled hay in front of the store one day, mixed $36 in coins in itand let the kids dive into it. More of ourstores than you would believe hold ladies' fashion shows using ugly old men from the stores as models.

Some of our people greetersthe associates who meet our customers as they come in the dooruse theirhigh-profile positions to have a little fun. Artie Hopper, the greeter in Huntsville, Arkansas, dresses in adifferent costume for every holidayincluding Hawgfest, a local celebration.

Then there's the World Championship Moon Pie Eating Contest.

I already told you how I pushed Moon Pies as my item one year and sold $6 million worth. But theMoon Pie contest started back in 1985, when John Love, an assistant manager at the time in Oneonta,Alabama, accidentally ordered four or five times more Moon Pies than he intended to and found himselfup to his eyeballs in them. Desperate, John came up with the idea of a Moon Pie Eating Contest as a wayto move the Moon Pies out before they went bad on him. Who would have thought something like thatwould catch on Now it's an annual event, held every fallon the second Saturday in Octoberin theparking lot of our Oneonta store. It draws spectators from several states and has been written up innewspapers and covered by television literally all over the world. As of this writing, by the way, theworld record for Moon Pie eating is sixteen double deckers in ten minutes. It was set in 1990 by a guynamed Mort Hurst, who bills himself as "the Godzilla of Gluttony."Corny How could you get any cornier than that But when folks get together and do this sort of sillystuff it's really impossible to measure just how good it is for their morale. To know that you're supposedto have a good time, that there's no place for stuffed shirts, or at least that they always get theircomeuppance, is a very uplifting thing for all of us.

Take our Saturday morning meetings, for example. Without a little entertainment and a sense of theunpredictable, how in the world could we ever have gotten those hundreds of peoplemost of ourmanagers and some associates from the general offices here in Bentonvilleto get up every Saturdaymorning and actually come in here with smiles on their faces If they knew all they could expect in thatmeeting was somebody droning on about comparative numbers, followed by a serious lecture on theproblems of our business, could we have kept the meeting alive No way. No matter how strongly I feltabout the necessity of that meeting, the folks would have revolted, and even if we still held it, it wouldn'tbe any good at all. As it is, the Saturday morning meeting is at the very heart of the Wal-Mart culture.

Don't get me wrong. We don't get up and go down there just to have fun. That Saturday morningmeeting is very much about business. Its purpose is to let everyone know what the rest of the company isup to. If we can, we find heroes among our associates in the stores and bring them in to Bentonville,where we praise them in front of the whole meeting. Everybody likes praise, and we look for everychance we can to heap it on somebody. But I don't like to go to the meeting and hear about just the goodthings that are happening. I like to hear what our weaknesses are, where we aren't doing as well as weshould and why. I like to see aproblem come up and then hear suggestions as to how it can be corrected.

If we decide we're doing something wrong, and the solution is obvious, we can order changes right thenand carry them out over the weekend, while most everybody else in the retail business is off.

The Saturday morning meeting is where we discuss and debate much of our philosophy and ourmanagement strategy: it is the focal point of all our communications efforts. It's where we share ideaswe've picked up from various places. And while it's not the most exciting part of the meeting, sometimesI like to read from management articles that pertain to our business. Two of our executives, WesleyWright and Colon Washburn, seem to read just about everything there is in the way of managementliterature, and they're constantly calling useful articles or books to my attention. At the meeting, we'll talkabout competitors, specifically, but also in general. For example, we'll spend ten minutes talking abouthow Wal-Mart can compete successfully with all the good specialty retailers coming onto the scene. It'soften the place where we first decide to try things that seem unattainable. And instead of everybodyshouting it down right away, we try to figure out how to make it work. That's exactly how I ended updancing the hula on Wall Street, by making that bet at a Saturday morning meeting. And, as embarrassingas it was to have to dance on Wall Street, believe me, achieving a pretax profit of more than 8 percent,when most everybody else in the retail industry averages about half that, made it well worth the red face.

AL MILES:

"The great thing about the Saturday morning meeting is how totally unpredictable it is. Sometimes youget your soul bared in there. By that I mean somebody may not have been doing their job so well, andthey don't get publicly castigated, but they get gently chided in front of everybody. Or it can be a form ofcounseling. I'll never forget the chairman saying to me one time in front of everybody that I ought to stopand think sometimes before I talked. And I had it coming. I was being really derogatory in my remarks,really sticking it to another division of the company pretty hard, and it wasn't the right place to do it. Iwas publicly counseled in that meeting and it stuck.

"Another time, the chairman decided I was going to have to stand up there and sing 'Red River Valley' ata meeting three weeks away. He knew I couldn't carry a tune in a bucket but he made a bigger andbigger deal out of it every week until finally I had to put a group together to sing it so nobody would hearonly me. I always figured he just wanted to force me into doing something in public that I wasn't so goodat, and that way I had to eat a little humble pie. Anyway, I believe those meetings are managed fun, and Ithink the chairman manages them very discreetly. He knows when he wants it to be serious, and heknows when he wants it to be fun. Sometimes it's very democratic, and sometimes it's very dictatorial.

But he uses it for basically three purposes: to share information, to lighten everybody's load, and to rallythe troops. Believe it or not, the majority of our folks wouldn't miss a Saturday morning meeting foranything."For the meeting to work, it has to be something of a show. We don't ever want to let it becomepredictable. One day, we might do a few calisthenics. Another day we might sing. Or maybe do theRazorback cheer. We don't want to plan it all out. We just want it to unfold. It is so unconventional that Idon't think anyone could really duplicate it even if they wanted to. We have lots of guests, and our folksnever know who's going to be there. One day we might have an executive from a company we dobusiness with. It might be somebody they never heard of from some small entrepreneurial outfit with agood idea, or it might be somebody like Jack Welch, the CEO of GE. On the other hand, it might be thecomedian Jonathan Winters, who started coming to promote Hefty Bags, one of our vendors' products,and has returned several times. He really cracks everybody up. One time we had a mock boxing matchbetween Sugar Ray Leonard and me. We ask a lot of athletes to join us. Sidney Moncrief, an NBA starand former Razorback great, is one of my favorites, and Fran Tarkenton, the former NFL quarterback,who does a lot of motivational talks, has also spoken at the meeting. Just recently, Garth Brooks, thecountry singer from Oklahoma, dropped by Wal-Mart for a visit with some of our folks.

DON SODERQUIST:

"One of the real values of our meeting is its spontaneity. We never really have an agenda. Of course thechairman always has his yellow legal pad with notes scribbled on it of things he wants to discuss, andsome of the rest of us do the same thing. But one of the things Sam will do is just call someone up at thestart and say, 'Okay, you conduct the whole meeting today.' And that meeting will take on the personalityof whoever's running it. That way, there's always a sense of anticipation. Something unusual may happen,or somebody may pull off something great."From the time we started the Saturday meeting, with just four or five store managers getting togethersomewhere to talk merchandising, it has been a very difficult thing to develop, and there's been a lot ofopposition to it, including from my own wife, who I've already told you believes it's unfair to take ourfolks away from their families on Saturday mornings. There have definitely been times when our folkswould have voted it out if we had given them the opportunity. But as I've said, I believe Saturday work ispart of the commitment that comes with choosing a career in retail. I can't see asking our folks in thestores to make that sacrifice while our managers are off playing golf.

Very few outsiders ever get to see our Saturday meetings. So the event that gives people the mostinsight into our corporate culture, the place where they really get a chance to see the Wal-Mart chemistryin action, is our annual stockholders' meeting. I told you how it began as an attempt to do somethingdifferent for the analysts, taking them on float trips and making them camp out. But since then it's growninto what is probably the largest corporate annual meeting in the world. It's gotten so big nowwith over10,000 shareholders and gueststhat we hold it down in Fayetteville at Barnhill Arena, the University ofArkansas's basketball coliseum. Soon we'll be holding it in the new Bud Walton Arena they're buildingdown there, and I know my brother will really take a lot of pride in that.

In some ways, our annual meeting is a bigger version of the kind of show we have on Saturdaymornings. We have entertainers, like Reba McEntire, the popular country singer, and we have guestspeakers. In other ways, it's a lot like the meetings of many companiesonly louder. We makepresentations to the shareholders, which focus on our accomplishments over the past year and on ourgoals and plans for the coming one. But what I think really sets our meeting apart is the degree to whichwe involve our associates, who, after all, are some of our most important shareholders.

We have always included as many store managers and associates as possible in our annual meeting, tolet them see the scope of the whole company and grasp the big picture. We started out letting every storeand every distribution center elect an associate to represent them at the meeting. Because we've gottenso big now, I'm sorry to say we've had to stagger the thing. The distribution centers and the Sam's Clubsstill send someone every year, but Wal-Mart Stores only send a delegate every other year.

Really, the official part of the meeting takes a backseat to everything else we do, and a couple of timeswe've been having so much fun that we've actually forgotten to convene the real meeting. We gather ourassociates early on Friday morning, around seven o'clock, for a real rousing warm-up, a premeetingmeeting. We do our cheers and our songs, and raise all sorts of cain. We salute retirees. We bring in allthe department managers whose departments have the highest percentage of sales relative to their stores'

overall sales. And we recognize the department managers who have the highest sales companywide. Wecall up the truck drivers who've won the safety awards for the best driving records, and we honor them.

We applaud associates who have created particularly successful displays, or who have won one of ourVPI (Volume Producing Item) contests, and we honor them. The point is that we're not there to honorour shareholders as much as we are to let them meet the folks who are responsible for the amazingreturns on their investments year after year.

After the meeting, Helen and I invite all the associates who attendabout 2,500 of themover to ourhouse for a big picnic lunch catered by our own Wal-Mart cafeteria. It's a lot of pressure on Helen; notmany wives would put up with that kind of crowd streaming through the yard and the house, but I thinkit's one of the best things we do, and in the end both Helen and I really enjoy it a lot. It gives us a chanceto visit with many of our associates who we would otherwise never get to see in a social setting like that.

They tend to be the leaders in their stores, which is how they get elected to come. And even with thatcrush of people there, I still have the opportunity to ask them, "How are we doing at Litchfield, Illinois"Or "How's your manager working out in Branson, Missouri" And in a very short time, I can get a prettygood idea from their level of enthusiasm just how things are going in a particular store, and if I hearsomething I don't like, I just might be out there visiting it within the next week or two.

When the whole thing is over, the guest associates are sent a videotape of the meeting, and they'resupposed to share that, and their impressions of the meeting, with their associates who didn't get to go.

And, of course, we write a detailed account of the meeting in our company newspaper,Wal-Mart World,so everybody gets a chance to read exactly what we did. We like to think that this kind of meeting bringsus all closer together, and creates the feeling that we are a family committed to one common interest.

We want our associates to know and feel how much we, as managers and major shareholders,appreciate everything they are doing to make Wal-Mart the great company that it is.

A strong corporate culture with its own unique personality, on top of the profit-sharing partnership we'vecreated, gives us a pretty sharp competitive edge. But a culture like ours can create some problems of itsown too. The main one that comes to mind is a resistance to change. When folks buy into a way of doingthings, and really believe it's the best way, they develop a tendency to think that's exactly the way thingsshould always be done. So I've made it my own personal mission to ensure that constant change is a vitalpart of the Wal-Mart culture itself. I've forced changesometimes for change's sake aloneat every turn inour company's development. In fact, I think one of the greatest strengths of Wal-Mart's ingrained cultureis its ability to drop everything and turn on a dime.

We're great at that kind of change when it comes to operating challenges, but sometimes not so great onmatters that have more to do with the culture of the company. In the early days, for example, all our oldvariety store managers had a tremendous prejudice against us hiring college boys because they didn'tthink they would work hard enough. Three of the first ones we hiredBill Fields, Dean Sanders, andColon Wash-burnare still with us and, in fact, are among our brightest stars. But they had a heck of atime fitting in at first and could probably tell some real horror stories.

BILL FIELDS, EXECUTIVE VICE PRESIDENTMERCHANDISING AND SALES,WAL-MART:

"I had been with the company about five days, and we were opening a store in Idabel, Oklahoma. Wehad thirteen days to open it, which is still a record. They worked me about 125 hours or more the firstweek. The second week it was getting worse. Then Samwho knew who I was because I was a localBentonville boycomes walking up to me and says, 'Who hired you' I told him that Ferold Arend had,and he said, 'Well, do you think you'll ever be a merchant' Just the way he said it made me mad enoughto want to quit. Then Don Whitaker came walking up to me and looked at me almost like he smelledsomething bad, and said, 'Who in thehell hired you' At the time, it didn't seem like going to college wasmuch of an advantage in this company. We really had to prove ourselves to those old guys."Obviously if we were going to grow, we had to bring in college-educated folks. But at first, the culturetried to reject them. And now that we have even more complicated needsin technology, finance,marketing, legal, whateverour demand for a more sophisticated work force is growing all the time. Allthis requires some basic changes in the way we think about ourselves, about who's a good Wal-Mart hirefor tomorrow and about what we can do for the folks already on board. That's one reason Helen and Istarted the Walton Institute down at the University of Arkansas in Fort Smith. It's a place where ourmanagers can go and get exposure to some of the educational opportunities they may not have hadearlier on. Also, we as a company need to do whatever we can to encourage and help our associatesearn their college degrees. We need these folks to get the best training they possibly can. It opens uptheir career opportunities, and it benefits us.

Traditionally, we've had this attitude that if you wanted to be a manager at Wal-Mart, you basically hadto be willing to move on a moment's notice. You get a call that says you're going to open a new store500 miles away, you don't ask questions. You just pack and go, then sometime later you worry aboutselling your house and moving your family. Maybe that was necessary back in the old days, and maybe itwas more rigid than it needed to be. Now, though, it's not really appropriate anymore for severalreasons. First, as the company grows bigger, we need to find more ways to stay in touch with thecommunities where we operate, and one of the best ways to do that is by hiring locally, developingmanagers locally, and letting them have a career in their home communityif they perform. Second, theold way really put good, smart women at a disadvantage in our company because at that time theyweren't as free to pick up and move as many men were. Now I've seen the light on the opportunities wemissed out on with women. (I have to admit that Helen and my daughter Alice have helped me comearound to this way of thinking.)In the old days, retailers felt the same way about women that they did about college boys, only more so.

In addition to thinking women weren't free to move, they didn't think women could handle anything butthe clerk jobs because the managers usually did so much physical laborunloading trucks and haulingmerchandise out of the stockroom on a two-wheeler, mopping the floors and cleaning the windows ifnecessary. Nowadays, the industry has waked up to the fact that women make great retailers. So we atWal-Mart, along with everybody else, have to do everything we possibly can to recruit and attractwomen.

One other aspect of the Wal-Mart culture which has attracted some attention is simply a matter oflifestyle, but it is one that has bothered me ever since we began to be really successful. The fact is, a lotof folks in our company have made an awful lot of money. We've had lots and lots of millionaires in ourranks. And it just drives me crazy when they flaunt it. Maybe it's none of my business, but I've doneeverything I can to discourage our folks from getting too extravagant with their homes and theirautomobiles and their lifestyles. As I said earlier, I just don't believe the lifestyle here in Bentonville shouldbe much different than what would be high moderate income in most other places. But from time to timeI've had a hard time holding back folks who have never had the opportunity to get their hands on the kindof money they've made with their Wal-Mart stock holdings. Every now and then somebody will dosomething particularly showy, and I don't hesitate to rant and rave about it at the Saturday morningmeeting. And a lot of times, folks who just can't hold back will go ahead and leave the company.

It goes back to what I said about learning to value a dollar as a kid. I don't think that big mansions andflashy cars are what the Wal-Mart culture is supposed to be about. It's great to have the money to fallback on, and I'm glad some of these folks have been able to take off and go fishing at a fairly early age.

That's fine with me. But if you get too caught up in that good life, it's probably time to move on, simplybecause you lose touch with what your mind is supposed to be concentrating on: serving the customer.
Chapter 12 Making the Customer Number One
　　"Sam Walton understands better than anyone else that no business can exist without customers. He livesby his credo, which is to make the customer the centerpiece of all his efforts. And in the process ofserving Wal-Mart's customers to perfection (not quite perfection, he would say), he also servesWal-Mart's associates, its share owners, its communities, and the rest of its stakeholders in anextraordinary fashionalmost without parallel in American business."----ROBERTO C. GOIZUETA,chairman and CEO, the Coca-Cola CompanyFor my whole career in retail, I have stuck by one guiding principle. It's a simple one, and I haverepeated it over and over and over in this book until I'm sure you're sick to death of it. But I'm going tosay it again anyway: the secret of successful retailing is to give your customers what they want. Andreally, if you think about it from your point of view as a customer, you want everything: a wide assortmentof good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy;friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience. Youlove it when you visit a store that somehow exceeds your expectations, and you hate it when a storeinconveniences you, or gives you a hard time, or just pretends you're invisible.

I learned this lesson as a merchant in small towns, which is where I've spent my whole life. For those ofyou who've been around as long as I have, and who spent your early days in small towns too, it's nothard to remember how different small-town life was in the first half of this century. Newport was a prettyprosperous little town with a fairly competitive retail environment, but it's still a good example of howthings worked back then. It was a cotton town, which meant that a lot of the folks who shopped therereally lived outside of town on farms. Most of the men worked long hours in the fields, and most of thewomen worked at home. Very few women held jobs in those days, although a lot of them had workedduring the war, and they were beginning to think about going back to work when they got their familiespretty well underway.

The town itself had several small department stores, including, as I mentioned earlier, a Penney's and fora while that little Eagle Store I opened up. It also had a couple of good variety storesmine and JohnDunham's Sterling Store. There were drugstores, hardware stores, tire and auto storeslike Firestone andWestern Autoand little family grocery stores. In lots of little towns, you didn't even have many one-stopgroceries. You might have one shop that specialized in butchering meat, another that carried good freshvegetables, and maybe another that would wring a chicken's neck and dress it for you right there behindthe counter while you waited.

Folks back then weren't accustomed to all the variety and abundance of goods and services that wehave available today. During the Depression, few of us had enough money to shop very often, and duringWorld War II, everythingmeat, butter, tires, shoes, gasoline, sugarwas rationed. But by the time Istarted out, the shortages were pretty much over, and the economy was growing. Compared to theDepression we had been used to, boom times had arrived.

In a farm-to-market town like Newport, the big shopping day was always Saturday. That's when thewhole family would drive to town and spend a few hoursmaybe the whole daywalking around lookingfor what they needed in all the stores. Something had to attract them to a particular store, maybe acombination of things: the storekeeper's personality, the freshness of the goods, the pricesan ice creammachine. We thrived in that competitive environment.

When we arrived in the much smaller town of Bentonville in 1950, we found almost no spirit ofcompetition. A few retailers were scattered around the square, but each of them had sort of carved outtheir niche, and that was that. If a store didn't have something the customer wanted, he or she would justhave to drive to Rogers, or Springdale, or very possibly on into Fayetteville. Using some of the things wehad learned in Newport, I'd have to say we changed that way of thinking right off and generally sparkedup the atmosphere around town.

ALICE WALTON:

"Saturdays around the Bentonville square were really something special. Dad always had somethinggoing on out on the sidewalks or even in the streets, and there was always a crowd. That's where SantaClaus would come, and that's where we had all the parades. To me, as a kid, it seemed like we had acircus or a carnival going on almost every weekend. I loved Saturdays. I had my popcorn machine outon the sidewalk, and I was covered up in business. Everybody wanted some of that popcorn, and ofcourse a lot of my customers would go on into the store. It was a great way to grow up."As you recall, Fayetteville was where we opened our second store after Bentonville. And it was alsowhere we encountered our first discounter competition Gibson's. We knew from then on that the retailbusiness was going to be changing in major ways for years to come, and we wanted to be part of it. Weknew early on that variety stores weren't going to be as big a factor in the future as they had been in thepast, and we were heavily invested in them. The important thing to recognize, though, is that none of thiswas taking place in a vacuum. In the fifties and sixties, everything about America was changing rapidly.

All the kids who had grown up on farms and in small towns had come home from World War II orKorea and moved to the cities where all the jobs were. Except they weren't really moving to the cities;they were moving to the suburbs and commuting into the cities to work. It seemed like every family hadat least one carand many had twoand the country had started building its interstate highway system, allof which changed a lot of the traditional ways Americans were accustomed to doing business.

The downtowns of big cities started to lose population and business to the suburbs, and the bigdowntown department stores had to follow their customers and build branch stores out in the suburbanmalls. Traditional diners and cafes suffered because of the new car-oriented chains like McDonald's andBurger King, and the old city variety stores like Woolworth's and McCrory's just got smashed by Kmartand some of the other big discounters. The oil companies stuck service stations on practically every othercorner, and pretty soon something called convenience stores7-Elevens and suchcame along andstarted filling up the other corners. It was when all this began that Bud and I had opened that BenFranklin in the shopping center at Ruskin Heights, that big new subdivision community outside KansasCity.

For the most part up where we werein the small towns of northwest Arkansas, Missouri, Oklahoma,and Kansasyou didn't see much of the mall construction and fast food neon that you saw everywhereelse. McDonald's didn't go into the small towns, and neither did Kmart. You saw the small-towncommercial centers start to sort of shrivel up. A lot of our customer base had moved on, and the oneswho remained behind weren't stupid consumers. If they had something big to buysay a ridinglawnmowerthey wouldn't hesitate to drive fifty miles to get it if they thought they could save $100. Notonly that, but with the introduction of TV and new postwar car models, being modern had become a bigthing. Everybody wanted to feel up-to-date, and if they knew Kroger or somebody had a big newgrocery store in Tulsa or somewhere they'd drive in there to shop it. When they saw that the prices werelower and the selection was better, they would go back again and again, until somebody brought asupermarket to their town.

It was this kind of strong customer demand in the small towns that made it possible for Wal-Mart to getstarted in the first place, that enabled our stores to thrive immediately, and that eventually made itpossible to spread the idea pretty much all over the country. For many years, we lived entirely off theprinciple that customers in the country and in small towns are, just like their relatives who left the farmand moved to the city: they want a good deal as much as anybody. When we arrived in these little townsoffering low prices every day, satisfaction guaranteed, and hours that were realistic for the way peoplewanted to shop, we passed right by that old variety store competition, with its 45 percent markups,limited selection, and limited hours.

Wal-Mart No. 18 is as good an example as there is of how it worked. That store opened in 1969, and itmarked our return to Newport, Arkansas, nineteen years after we had basically been run out of town. Bythen, I was long over what had happened to us down there, and I didn't have revenge in mind. It was alogical town for us to expand into, and I admit that it did feel mighty good to be back in business downthere. I knew it was a town where we would do well. As it happened, we did extraordinarily well withour Newport Wal-Mart, and it wasn't too long before the old Ben Franklin store I had run on FrontStreet had to close its doors. You can't say we ran that guythe landlord's sonout of business. Hiscustomers were the ones who shut him down. They voted with their feet.

Quite a few smaller stores have gone out of business during the time of Wal-Mart's growth. Somepeople have tried to turn it into this big controversy, sort of a "Save the Small-Town Merchants" deal,like they were whales or whooping cranes or something that has the right to be protected.

Of all the notions I've heard about Wal-Mart, none has ever baffled me more than this idea that we aresomehow the enemy of small-town America. Nothing could be further from the truth: Wal-Mart hasactually kept quite a number of small towns from becoming practically extinct by offering low prices andsaving literally billions of dollars for the people who live there, as well as by creating hundreds ofthousands of jobs in our stores.

I don't have any trouble understanding why some merchant who's having a hard time competing with uswouldn't be too happy about our being there. What I haven't been able to figure at all is these peoplewho have decided we're somehow responsible for the decline of the small town. My guess is that a lot ofthese critics are folks who grew up in small towns and then deserted them for the big cities decades ago.

Now when they come home for a visit, it makes them sad that the old town square isn't exactly like it waswhen they left it back in 1954. It's almost like they want their hometown to be stuck in time, anold-fashioned place filled with old-fashioned people doing business the old-fashioned way. Somehow,small-town populations weren't supposed to move out into their own suburbs, and they weren't supposedto go out to the intersections of highways and build malls with lots of free parking. That's just not the waysome of these people remember their old towns. But folks who grew up in big cities feel the same wayabout what's happened to their cities over the last forty or fifty years. A lot of the stores and the movietheaters and the restaurants that they remember loving as kids have boarded up and either gone out ofbusiness or moved to the suburbs too.

I think what happened to Wal-Mart in all this is that we got to be a certain size and became so wellknown as the small-town merchants that we became an easy target. Certain folks figured they couldcreate a niche for themselves, a platform from which to express their views about small-town America,by zeroing in on us. The whole thing taught me a lesson about the way the national media seems to think.

When you start out as an unknown quantity with just a dream and a commitment, you couldn't buy amention of your company in one of these publications. When you become moderately successful, theystill ignore you unless something bad happens to you. Then, the more successful you become, the moresuspicious they become of you. And if you ever become a large-scale success, it's Katie bar the door.

Suddenly, you make a very convenient villain because everybody seems to love shooting at who's on top.

As an old-time small-town merchant, I can tell you that nobody has more love for the heyday of thesmalltown retailing era than I do. That's one of the reasons we chose to put our little Wal-Mart museumon the square in Bentonville. It's in the old Walton's Five and Dime building, and it tries to capture a littlebit of the old dime store feel.

But I can also tell you this: if we had gotten smug about our early success, and said, "Well, we're thebest merchant in town," and just kept doing everything exactly the way we were doing it, somebody elsewould have come along and given our customers what they wanted, and we would be out of businesstoday. I don't know who it would have been. Maybe Gibson's or TG&Y would have pulled it off. But Isuspect it would have been a combination of Kmart and Target, which, like McDonald's, would haverolled out into the small towns once they began to saturate their big-city markets.

What happened was absolutely a necessary and inevitable evolution in retailing, as inevitable as thereplacement of the buggy by the car and the disappearance of the buggy whip makers. The small storeswere just destined to disappear, at least in the numbers they once existed, because the whole thing isdriven by the customers, who are free to choose where to shop.

Don soderquist:

"We've never been very sympathetic to this whole small-town argument. What's happened to thesmall-town merchant isn't any different from what happened when supermarkets first appeared in thefifties. The whole point of retailing is to serve the customer. If you're a merchant with no competition, youcan charge high prices, open late, close early, and shut down on Wednesday and Saturday afternoons.

You can do exactly what you've always done and probably be just fine. But when competition comesalong, don't expect your customers to stick with you for old times' sake. There are plenty of ways tocompete successfully with Wal-Mart or any other big retailer. The principle behind all those ways ispretty basic: you have to focus on something the customer wants, and then deliver it."I don't want to be too critical of small-town merchants, but the truth is that a lot of these folks justweren't doing a very good job of taking care of their customers before we, or somebody else, came inand offered something new. And they didn't do a very good job of reacting to our arrival either. Youknow, there have been articles, and even one little book, written on how to compete with us. And I'vegot a few suggestions of my own.

Unless small merchants are already doing a great job, they'll probably have to rethink theirmerchandising and advertising and promotional programs once a discounter arrives on the scene. Theyneed to avoid coming at us head-on, and do their own thing better than we do ours. It doesn't make anysense to try to underprice Wal-Mart on something like toothpaste. That's not what the customer islooking to a small store for anyway. Most independents are best off, I think, doing what I prided myselfon doing for so many years as a storekeeper: getting out on the floor and meeting every one of thecustomers. Let them know how much you appreciate them, and ring that cash register yourself. That littlepersonal touch is so important for an independent merchant because no matter how hard Wal-Mart triesto duplicate itand we try awfully hard we can't really do it.

I think in the case of variety stores, they have to completely reposition themselves, something like theway Don Soderquist did when he was president of Ben Franklin. He saw that there just wasn't any futurein competing with Wal-Mart and Kmart so he started converting a lot of their variety stores into craftstores. They offered a much bigger assortment of craft merchandise than any Wal-Mart could, and theyheld classes in things like pottery and flower arranging, services we could never think about providing. Itworked. They stayed in business in the small towns and have been quite successful with many of thosestores. The same thing can be done with fabrics: offer higher quality material and throw in some sewingclasses. Or ladies' apparel. I don't care how many Wal-Marts come to town, there are always niches thatwe can't reachnot that we won't try. Just like everybody else, in order to survive, we need to keepchanging the things we do. Now in the case of hardware stores, I don't deny that we've been hard onsome of them too, but if they're in a decent location they shouldn't have that much trouble with Wal-Mart.

It's the one kind of store for which I have the least sympathy because, frankly, a good smart hardwarestore operator can just beat us to death if he thinks about what he's doing and commits to putting up afight. If he gets his assortment right and makes sure his salespeople have excellent knowledge of theproducts and how to use them, and goes out of his way to take care of his customers, he can keep plentyof business away from us. We don't have nearly the assortment of a hardware storeplumbing suppliesand electrical equipment and specialty tools. And not all of our folks can explain how to fix a leaky faucetor rewire a lamp the way folks in a hardware store should be able to. Our paint customers don't getwaited on much either. They have to pick out their own paint and then walk around with it looking for therest of the things they want. The same is true in sporting goods, where the customer can't expect to getnearly the same kind of service from us as from a specialty store.

Don soderquist:

"I have personally competed with Wal-Mart, so I know it can be done. You develop a uniqueness, aniche, and then you capitalize on it. And let me tell you, not all small merchants in these little towns hateus. Some of them have learned to feed off us rather successfully.

"Shortly after we opened a Wal-Mart in Wheat Ridge, Colorado, I had a lady come up to me and say,Oh, I just want to thank you so much for coming here. This is the best thing that could have everhappened.' I thanked her and asked her what she did there in town, and she said, 'Well, I run a paintstore right over here, just down in this mall.'

"She went on to say that the day our store opened turned out to be the biggest day she had ever hadsince her paint store opened. 'You're pulling all these people into our shopping center. And the neatestthing happened to me Saturday. A man came in looking for a particular kind of paint and said he knewwe had it. He said he knew because he'd been in the Wal-Mart looking for it, and the paint departmentmanager told him we had it and sent him on over. I thought that was wonderful.'"Our guy sent the customer along to the paint store because it was the right thing to do. He was takingcare of the customer. What makes me sad these daysand a little angry toois that some of these storesare starting to shut down before we come to a town. They hear we're coming, and they close up beforewe ever even get there. We get a bad rap for that, but to my mind somebody who'll close his store justbecause he hears competition's coming is somebody who must know he's not doing much of a job,somebody who probably shouldn't have been in the retail business to begin with.

For all the press about Wal-Mart being at odds with small towns, I am positive that we are mostwelcome in almost every community where we do business. That's partly because of our economiccontribution. But it's also because we go out of our way to instill a sense of community involvement in ourstore management and associates so that they'll be even better citizens. We know that some of our storemanagers do a better job at this than others, and it's a constant effort to make everyone work oncommunity involvement. We already have community scholarship programs and matching charity grantprograms, but we're working hard every day to improve the ways in which we give back to thecommunities we're in. If we ever let our sense of being hometown merchants slip too far, we run the riskof damaging what we think is a unique relationship with our customers.

When we meet opposition to a prospective store site, we try to work with the opponents to see if wecan reasonably satisfy them. Occasionally, we will change a proposed location, or make someconcessions if they make sense to us. Today, though, we have almost adopted the position that if somecommunity, for whatever reason, doesn't want us in there, we aren't interested in going in and creating afuss. I encourage us to walk away from this kind of trouble because there are just too many other goodtowns out there who do want us. For every one that doesn't, I'd say we have another two hundredbegging us to come to their town. Wal-Mart wants to go where it's wanted. I've always said that thesimplest test of how right we are on this issue would be to go into any town where we've been for acouple of years and let everyone vote on whether they wanted us there or not. My Lord, they'd go crazyif we left. In fact, every now and then we do have to close up a store someplace because we just can'tmake it profitable, and the outcry is something awful. It's another part of the price you pay for success.

Small-town merchants, by the way, aren't the only groups we've gotten into controversies with bysticking to our philosophy of putting the customer ahead of everything else. On the surface, the idea ofserving the customer sounds so simple, so logical, and so obvious. But from the very beginning, the waywe have practiced it has been so radical that it has frequently gotten us into trouble with what folks call"the system." In the early days, the department stores put a lot of pressure on vendors to keep them fromselling to discounters like us because they hated what we were doing: offering our customers prices muchlower than theirs. In some states, the department stores used so-called "fair trade" laws to try and blockdiscounters from doing business at all.

Our vendors resented us for prying the lowest prices out of them. And some manufacturers'

representativesindependent sales agents who generally work on commission to represent severaldifferent manufacturershave complained about some of our practices. We don't have any problem withthe idea of paying a middleman a commission on a sale, if his services add value to the purchasingprocess by making it more efficient.

But from the days when I was hauling that little trailer over into Tennessee to buy panties and shirts andavoid paying Butler Brothers' markup, our philosophy on this has always been simple: we are the agentsfor our customers. And to do the best job possible, we've got to become the most efficient deliverer ofmerchandise that we can. Sometimes that can best be accomplished by purchasing goods directly fromthe manufacturer. And other times, direct purchase simply doesn't work. In those cases, we need to usemiddlemen to deal with smaller manufacturers and make the process more efficient. What we believe instrongly is our right to make that decisionwhether to buy directly or from a repbased on what it takesto best serve our customers.

This controversy is another case, I think, of a group of people believing for some reason that they're justentitled to take a piece of the action, no matter how little they contribute to the transaction or what itmeans to the customer. The argument is as simple as the small-town merchant controversy. If Americanbusiness is going to prevail, and be competitive, we're going to have to get accustomed to the idea thatbusiness conditions change, and that survivors have to adapt to those changing conditions. Business is acompetitive endeavor, and job security lasts only as long as the customer is satisfied. Nobody owesanybody else a living.

To understand Wal-Mart's point of view on middlemen, and our relationship with our vendors, you haveto look back to our beginnings in the discount business. In the early days of the industry, mostdiscounters were served entirely by middlemen, jobbers, or distributors who came in and said to thoseold promoters, "We'll keep your shelves filled for 15 percent of the gross." In other words, the price onevery item included a 15 percent commission to the jobber for supplying the merchandise. That's how thefast-buck promoters got into the business without even having to think much like merchants. They tookwhat the jobbers gave them, added on the 15 percent, and still under-priced the department stores by along shot.

But as I mentioned, we couldn't find anybody who wanted to run their trucks sixty or seventy miles outof the way into these little towns where we were operating. We were totally ignored by the distributorsand the jobbers. That's not only how we came to build our own distribution system, it's also how we gotused to beating the heck out of everybody on prices. We had a time getting good merchandise for ourstores back then, but our cost of acquiring the goods was rock bottombecause we sat out there withabsolutely no help from distributors. And because we got used to doing everything on our own, we havealways resented paying anyone just for the pleasure of doing business with him.

CLAUDE HARRIS:

"There's a difference between being tough and being obnoxious. But every buyer has to be tough. That'sthe job. I always told the buyers: 'You're not negotiating for Wal-Mart, you're negotiating for yourcustomer. And your customer deserves the best price you can get. Don't ever feel sorry for a vendor. Heknows what he can sell for, and we want his bottom price.'

"And that's what we did, and what Wal-Mart still does. We would tell the vendors, 'Don't leave in anyroom for a kickback because we don't do that here. And we don't want your advertising program oryour delivery program. Our truck will pick it up at your warehouse. Now what is your best price' And ifthey told me it's a dollar, I would say, 'Fine, I'll consider it, but I'm going to go to your competitor, and ifhe says 90 cents, he's going to get the business. So make sure a dollar is your best price.' If that's beinghard-nosed, then we ought to be as hard-nosed as we can be. You have to be fair and upfront andhonest, but you have to drive your bargain because you're dealing for millions and millions of customerswho expect the best price they can get. If you buy that thing for $1.25, you've just bought somebodyelse's inefficiency.

"We used to get in some terrific fights. You have to be just as tough as they are. You can't let them getby with anything because they are going to take care of themselves, and your job is to take care of thecustomer. I'd threaten Procter & Gamble with not carrying their merchandise, and they'd say, 'Oh, youcan't get by without carrying our merchandise.' And I'd say, 'You watch me put it on a side counter, andI'll put Colgate on the endcap at a penny less, and you just watch me.' They got offended and went toSam, and he said, 'Whatever Claude says, that's what it's going to be.' Well, now we have a real goodrelationship with Procter & Gamble. It's a model that everybody talks about. But let me tell you, onereason for that is that they learned to respect us. They learned that they couldn't bulldoze us likeeverybody else, and that when we said we were representing the customer, we were dead serious."In those days, of course, we desperately needed Procter & Gamble's product, whereas they could havegotten along just fine without us. Today, we are their largest customer. But it really wasn't until 1987 thatwe began to turn a basically adversarial vendor/retailer relationship into one that we like to think is thewave of the future: a win-win partnership between two big companies both trying to serve the samecustomer. Believe it or not, as big as we had become by then, I don't believe Wal-Mart had ever beencalled on by a corporate officer of P&G. We just let our buyers slug it out with their salesmen and bothsides lived with the results.

Then one day my close friend and longtime tennis buddy here in Bentonville, George Billingsley, calledme up and asked me to join him on a canoe trip down the Spring River. He said he was bringing along anold friend named Lou Pritchett, who was a vice president with P&G at the time, and who wanted to meetme and talk about some things relating to our two companies. So I went along, and it turned out to be themost productive float trip I ever took with George.

LOU PRITCHETT:

"During that time on the river, we both decided that the entire relationship between vendor and retailerwas at issue. Both focused on the end-user the customerbut each did it independently of the other. Nosharing of information, no planning together, no systems coordination. We were simply two giant entitiesgoing our separate ways, oblivious to the excess costs created by this obsolete system. We werecommunicating, in effect, by slipping notes under the door.

"As a result, we assembled the top ten officers of both companies in Bentonville for two days ofsoul-searching and thinking, and within three months we had created a P&G/Wal-Mart team to build awhole new kind of vendor-retailer relationship. We formed a partnership to conduct our business, withone of the most important outcomes being that we started sharing information by computer. P&G couldmonitor Wal-Mart's sales and inventory data, and then use that information to make its own productionand shipping plans with a great deal more efficiency. We broke new ground by using informationtechnology to manage our business together, instead of just to audit it."Following the P&G/Wal-Mart partnership, many other companies began to view the supplier as animportant partner. The partnership was also a model for many of our other vendor relationships. In oursituation today, we are obsessed with quality as well as price, and, as big as we are, the only way we canpossibly get that combination is to sit down with our vendors and work out the costs and margins andplan everything together. By doing that, we give the manufacturer the advantage of knowing what ourneeds are going to be a year out, or six months out, or even two yearsout. Then, as long as they arehonest with us and try to lower their costs as much as they can and keep turning out a product that thecustomers want, we can stay with them. We both win, and most important, the customer wins too. Theadded efficiency of the whole process enables the manufacturer to reduce its costs, which allows us tolower our prices.

One thing we don't ever want to do, though, is let all these complex strategic issues between us andother big companiesor these controversies like small-town merchants and middlemenget in the way ofour thinking like customers, which may be the most basic way in which we make the customer numberone.

DAVID GLASS:

"I was in a store recently where a manager and an assistant manager were taking a department managerthrough her department. They were saying, 'If you were a customer, how would you buy that item' Shewas cramped for space and had put this item out of reach of the average customer. And they kept going.

'If you were a customer, what related items would you want to buy with this And how would you findthem'

"I loved it. So many times we overcomplicate this business. You can take computer reports, velocityreports, any kind of reports you want to and go lay out your counters by computer. But if you simplythink like a customer, you will do a better job of merchandise presentation and selection than any otherway. It's not always easy. To think like a customer, you have to think about details. Whoever said 'retailis detail' is absolutely 100 percent right. On the other hand it's simple. If the customers are the bosses, allyou have to do is please them."I couldn't agree with David more. Everything we've done since we started Wal-Mart has been devotedto this idea that the customer is our boss. The controversies it has led us into have surprised me, butthey've been easy to live with because we have never doubted our philosophy that the customer comesahead of everything else.
Chapter 13 Meeting the Competition
　　"Sam phoned to tell me he was going to start a wholesale-club. It was no surprise. He is notorious forlooking at what everybody else does, taking the best of it, and then making it better."SOL PRICE,founder1955Fed-Mart, and founder1976Price ClubI don't know what would have happened to Wal-Mart if we had laid low and never stirred up thecompetition. My guess is that we would have remained a strictly regional operator. Then, eventually, Ithink we would have been forced to sell out to some national chain looking for a quick way to expandinto the heartland market. Maybe there would have been 100 or 150 Wal-Marts on the street for awhile, but today they would all have Kmart or Target signs in front of them, and I would have become afull-time bird hunter.

We'll never know, because we chose the other route. We decided that instead of avoiding ourcompetitors, or waiting for them to come to us, we would meet them head-on. It was one of the smarteststrategic decisions we ever made. In fact, if our story doesn't prove anything else about the free marketsystem, it erases any doubt that spirited competition is good for businessnot just customers, but thecompanies which have to compete with one another too. Our competitors have honed and sharpened usto an edge we wouldn't have without them. We wouldn't be nearly as good as we are today withoutKmart, and I think they would admit we've made them a better retailer. One reason Sears fell so far offthe pace is that they wouldn't admit for the longest time that Wal-Mart and Kmart were their realcompetition. They ignored both of us, and we both blew right by them.

BUD WALTON:

"Competition is very definitely what made Wal-Martfrom the very beginning. There's not an individualin these whole United States who has been in more retail storesall types of retail stores too, not justdiscount storesthan Sam Walton. Make that all over the world. He's been in stores in Australia andSouth America, Europe and Asia and South Africa. His mind is just so inquisitive when it comes to thisbusiness. And there may not be anything he enjoys more than going into a competitor's store trying tolearn something from it."At first, we only butted heads with other regional discounters, like Gibson's and the Magic Mart discountdivision of Sterling. We didn't compete directly with Kmart. To put things into perspective, compareKmart and Wal-Mart after they had both been on the street for ten years. Our fifty-plus Wal-Marts andeleven variety stores were doing about $80 million a year in sales compared to Kmart's five hundredstores doing more than $3 billion a year. But Kmart had interested me ever since the first store went up in1962. I was in their stores constantly because they were the laboratory, and they were better than wewere. I spent a heck of a lot of my time wandering through their stores talking to their people and tryingto figure out how they did things.

For a long time, I had been itching to try our luck against them, and finally, in 1972, we saw a perfectopportunity in Hot Springs, Arkansasa much larger city than we were accustomed to moving into butstill close to home and full of customers we understood. We saw Kmart sitting there all alone, reallyhaving their way with the market. They had no competition, and their prices and margins were so highthat they almost weren't even discounting. We sent Phil Green in to open store number 52, which, youmay remember, is where he stirred up all the fuss with the world's largest Tide display and all his otheroutrageous promotions. He cut prices to the bone and stole a bunch of Kmart's customers.

Coincidentally, it was right about that time that Harry Cunningham chose to retire as the CEO of Kmart,which he had founded while he was chairman of S. S. Kresge. This was a big break for us. Harry wasreally the guy who, in just ten years, had legitimized the discount industry and made Kmart into the modelfor us allthough my good friend, John Geisse, who helped found the Target and Venture stores, wasanother pioneer way ahead of his time.

HARRY CUNNINGHAM:

"From the time anybody first noticed Sam, it was obvious he had adopted almost all of the originalKmart ideas. I always had great admiration for the way he implementedand later enlarged onthoseideas. Much later on, when I was retired but still a Kmart board member, I tried to advise the company'smanagement of just what a serious threat I thought he was. But it wasn't until fairly recently that they tookhim seriously."I guess we really were a flea attacking an elephant, and the elephant didn't respond right away. MaybeHarry's right. Maybe they didn't take us seriously until much later. But I always believed it made themmad, our going in on them like that in Hot Springs. Just a few years later, around 1976 and 1977, wedefinitely got the message that Kmartwith 1,000 storesthought Wal-Martwith 150had gotten too bigfor its britches. All of a sudden they took a direct shot right into our backyard, by opening up in four ofour better towns: Jefferson City and Poplar Bluff, Missouri; and Fayetteville and Rogers, Arkansas. Theywere expanding like that all over the country at the time, and all the regional discounters were worried. In1976, we had a session of our discounters' trade group in Phoenix, and a lot of guys were talking aboutways to avoid competing with Kmart directly. I got a little mad, and told everybody they ought to standup and fight them. I made it clear we planned to.

HERB FISHER, FOUNDER, CHAIRMAN, AND CEO, JAMESWAY CORPORATION:

"Kmart was opening so many stores it was regarded as the Genghis Khan of the discounting business.

Sam has always been clear about his attitude: 'Meet them head-on. Competition will make us a bettercompany.'

"He is that way with everyone. Personally, he's such a fine, unassuming, quiet gentleman. But he's alwayspicking your brain, and he always has a notebook or that tape recorder. He'll learn everything you know,but he shares his information freely with you in return.

"Now, of course, he's a competitor to James-way. But he wouldn't ever apologize for that. He thinks itmakes us a better company. And he's right."Something else happened in late 1976 which really helped us gear up for competition. A research groupset up by a bunch of us regional discounterswho at the time didn't compete in each other'sterritorieshad its first meeting here in Bentonville. Guys like Herb Fisher of Jamesway, and Herb Gillmanof Ames, and Dale Worman of Fred Meyer all came down here and went through our stores to give ustheir opinion of how they thought we were doing. And, man, what they had to say really shocked us.

Nick white, executive vice president, wal-mart:

"Bill Fields was running the Rogers store, Dean Sanders was running Siloam Springs, and I was runningSpringdaleall close to Bentonvilleso we were all on the tour. These guysthe presidents of all thesecompaniesthey just ripped our stores apart, telling us how poorly we dideverything. The signing isn'tworth a damn.' 'You've got your prices too high on this.' This stuff isn't even priced.' 'You've got toomuch of this and not enough of that.' I mean, it was really critical."That was really a turning point in our business. We listened to everything they had to say, and made hugeadjustments based on those critiques. It helped us gear up for any competition, especially Kmart, whoseattack on us was probably the best single external event in Wal-Mart's history. We pulled ourselvestogether and designed a big plana promotional program and a people program and a merchandisingprogramfor how we were going to react. Since our run on Kmart in Hot Springs had turned out well,we were confident we could compete.

THOMAS JEFFERSON:

"Kmart really took us on in about 1977, and I remember Little Rock particularly. They took us on therein North Little Rock, where store number 7 had been one of our better stores. They got aggressive, andwe fought back. We told our manager there, 'No matter what, don't let them undersell you at all, onanything.' I remember he called me one Saturday night and said, 'You know, we have Crest toothpastedown to six cents a tube now.' And I said, 'Well, just keep it there and see what they do.' They didn'tlower it any more than that, and we both just kept it at six cents. Finally, they backed off. I alwaysthought they learned something about us at that storethat we don't bend easybecause they never cameat us with that degree of price cutting anywhere else."We got so much better so quickly it was hard to believe. We totally stood Kmart off in those smalltowns of ours. Almost from the beginning, they weren't very successful at taking our customers away inJeff City and Poplar Bluff. Once Kmart arrived, we, worked even harder at pleasing our customers, andthey stayed loyal. This gave us a great surge of confidence in ourselves.

But at the time, remember, our sales were about 5 percent of Kmart's. And we had recently sufferedthat exodus of executives following the Ron Mayer departure. So we were having a heck of a timeconvincing Wall Street to stick with us. A lot of people didn't think we could stand up toreal competition.

One analyst, Margo Alexander of Mitchell Hutchins Inc., really worried about the exodus in her reporton Wal-Mart. She wondered if it wouldn't discourage other executives from coming on board. She saidthey might see an inevitable conflict with "the entrepreneur who will never be satisfied with another personrunning 'his' company," in other words, me. She also questioned whether I, having retired once, was ascommitted to running the business as I had been previously.

Here's some of what she wrote about us in January of 1977:

One of the key elements in Wal-Mart's success has been the lack of competition in its small, ruralmarkets ... It is clearly easier to operate in this kind of situation than in a competitive one: pricing need notbe so sharp, and the "right" merchandise is less critical, simply because customers have no alternative . . .

Although Wal-Mart says its stores compete effectively against Kmart, the company will avoid a Kmart ifpossible. While we don't expect Kresge to stage any massive invasion of Wal-Mart's existing territory,Kresge could logically act to contain Wal-Mart's geographical expansion . . . Assuming somecontainment policy on Kresge's part, Wal-Mart could run into serious problems in the next few years.

We would very much like to recommend purchase of the stock . . . Unfortunately, however, the future ofthe company appears uncertain, and we think that Wal-Mart is one of those threshold companies thatruns the risk of stumbling.

Reports like that one didn't help us much, but the truth is that her analysis of the situation wasn'tnecessarily as wrong as it looks today. All those things could have come true. She missed a few keypoints, though. Her biggest mistake was the uncertainty she felt about the management team that followedRon Mayer. As I said earlier, having David Glass and Jack Shewmaker both on board in senior positionsgave us about as much talent under one roof as any one retailer could ever hope to have. In recent years,I've taken a lot of pride in the fact that our fastest expansionthe greatest growth period in the history ofretailactually came after everybody thought our goose was cooked and ready to be eaten by the Kmartfolks from Detroit.

Another point missed by Margo Alexander and others was that a very fortunate thing happened to us onthe competitive front: Kmart was developing its own problems. Toward the end of 1976, they hadpurchased more than two hundred store locations left over from the defunct Grant's chain, and they hadtheir hands full trying to make that work. Not only that, they seemed to have a management philosophy atthe time of avoiding all change, something that never works in this business. I'm sure that worrying aboutWal-Mart fell way down on their priority list, and I occasionally think back to how lucky we were not tohave had to face Harry Cunninghamor Kmart's current management teamduring that period.

Regardless of what was going on at Kmart, the new team we had in place in Bentonville by the lateseventies had us well positioned for the next decade of growth. It was around this same time that many ofthe high-flying promoters in the discounting business began to struggle for their lives. The nationaleconomy weakened in the mid-seventies, and the intense competition among the real merchants began todrive the fast-buck types out of the business. The more efficient Kmart, Target, Wal-Mart, and some ofthe regionals became, and the more we bumped into each other in competitive situations, the more wewere able to lower prices.

The percentage of gross margin in this industryreally, the markup on merchandisehas dropped steadilyfrom around 35 percent in the early sixties to only 22 percent today. Almost all of that representsincreased value and savings to the customers who shop discount stores. So the guys who weren't runningefficient operations, who had taken on lots of debt and were living high and not taking care of theirassociates, who weren't scrambling around to get the best deals on merchandise and passing those dealson to their customers, these guys got into trouble. When we saw Kmart headed right after us in 1976 and1977, we decided we could pick up some speed in our expansion efforts by acquiring some strugglingdiscounters.

Because Wal-Mart had always been such a homegrown operation, this whole period sparked a lot ofphilosophical debate around our offices, and, frankly, I changed sides so often that I drove everybodyinvolved pretty crazy. I didn't have many problems at all with our first real acquisition, which came in1977. My brother Bud and David Glass negotiated a deal to buy a small chain called Mohr Valuediscount stores up in Illinois. Their stores had been averaging $3 million to $5 million a year per store,and it seemed like a good way to put a beachhead into some new territory. We closed five stores andconverted the remaining sixteen to Wal-Marts, and it wasn't much of a shock to our system.

It sure didn't slow us down any because two years later, in 1979, with about 230 stores on the street,we hit a billion dollars in sales for the first time. Of all the milestones we ever reached, that one probablyimpressed me the most. I have to admit, I was amazed that Wal-Mart had turned into a billion-dollarcompany. But I couldn't see any logic to stopping there, and right about then another acquisitionopportunity came our way.

This one was a good bit more disruptive, but it helped us make a geographic leap that was very important to our expansion. A lot of people back East who don't know much about Wal-Mart still think of ustoday as a "Southern" discount operator. Maybe it's because we're in Arkansas, which most people thinkof as a Southern state, even though where we are is really more Midwestern. Or maybe it's because ofour downhome image. But the truth is that until 1981, we had almost no stores east of the Mississippi.

We were big in Arkansas, Louisiana, Mississippi, and Texas, but had nothing in Tennessee, Alabama,Georgia, or the Carolinas. We weren't much of a competitor in the South at all.

On the other hand, Kuhn's Big K stores had become a good-sized player in the South. Based inNashville, Tennessee, Kuhn's had started as a single variety store back sometime before 1920. JackKuhn and his brother Gus had converted the company into a discounter, made an acquisition or two, andgrown it into a chain of 112 stores, concentrated in Tennessee, but also doing business in Kentucky,Alabama, Georgia, and South Carolinaall states where we thought we could do well. We were a goodbit bigger than they were, but the two of us had been watching each other pretty closely. It was sort oflike the old variety store days when one chain, like TG&Y, wouldn't go into the territory of another chain,like Hested's. We knew that one way or another we had to head on into the South, and I guess westirred them up by crossing the Mississippi and opening a store in Jackson, Tennessee. They retaliated byopening stores in West Helena and Blytheville, Arkansas. The truth is, we were closing in on Kuhn's andreally doing a better job than they were. In fact, they were beginning to falter. They had taken on somedebt and built a fancy headquarters building. And they were showing some losses.

I had a heck of a time making up my mind what to do. I wanted to get into that territory before Kmart orsomebody else woke up and stole our thunder there. It seemed like a great competitive move to make.

But we'd never bitten off anything close to this size before, and we didn't know what it would be liketrying to digest it. We went round and round on it. We were on again, off again for probably two years.

Finally, the Executive Committee sat down to vote on it one morning, and it came out split right down themiddle, fifty-fifty. It was just as well because it gave me the opportunity to take the ultimate responsibilityfor the decision. The whole thing had been really cloudy all along, with a lot of arguing. Finally, I voted todo it. We didn't know how to go about folding Kuhn's into Wal-Mart, but we put Paul Carter in chargeand he commuted back and forth between Nashville and Bentonville for quite a while.

PAUL CARTER., EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,WAL-MART:

"It was one of the few times we ever saw the chairman use his prerogative and say, 'We are going to dothis.' It was a new kind of proposition for Wal-Mart. At first we thought we were going to run everythingfrom Nashville, as a separate division. Then we changed our minds and decided to close all their officesdown and bring everything over here. It was the furthest out we'd ever been geographically, and, lookingback, I guess the decision to run it from here had a big influence on how we've run the company eversince, with all the regional managers based in Bentonville.

"I went over there to Big K weighing 190 pounds and came back at 165. It was a struggle for all of usinvolved, and a stretch for the whole company. But I'm not sure that's not good for every organization atsome point. Jack Shewmaker took the situation as an opportunity to learn and implement a lot aboutcommunications in a spread-out situation. Hard as it was, the Big K thing was really good for thiscompany. It was like a caterpillar that turns into a butterfly. As a company, we were really ready to flyafter we emerged from that one."We closed down some of Kuhn's money-losing stores, and for the first time we tried to supply ourstores using an outside company, a third-party distributor, which didn't work at all. But once we figuredout how to handle it, the acquisition put us in a great position for growth. We exploded from that pointon, almost always opening 100 new stores a year, and more than 150 in some years. I think the Kuhn'sdeal gave us a new confidence that we could conquer anything.

I don't know how the folks around our executive offices see me, and I know they get frustrated with theway I make everybody go back and forth on so many issues that come up. But I see myself as being alittle more inclined than most of them are to take chances. On something like the Kuhn's decision, I try toplay a "what-if" game with the numbersbut it's generally my gut that makes the final decision. If it feelsright, I tend to go for it, and if it doesn't, I back off.

Sometimes, of course, that leads me into mistakes.

Back in the early eighties, for example, I traveled all over the world looking at global competition inretailing. I went to Germany, France, Italy, South Africa, Great Britain, Australia, and South America,and saw several concepts which interested me. I was impressed with the giant Carrefours stores in Brazil,which got me started on a campaign to bring home a concept called Hypermartgiant stores withgroceries and general merchandise under one roof. I checked them out in Europe and came back pushingthe concept hard. I argued that everybody except the U.S. was successful with this concept and weshould get in on the ground floor with it. I was certain this was where the next competitive battlefieldwould be.

Eventually, we opened two Hypermarts in the DallasFort Worth area, one in Topeka, and one inKansas City. By now we had gotten enough respect in the business so that Kmart jumped right in behindus with their own Hypermart concept called American Fare. Our Hypermarts weren't disasters, but theywere disappointments. They were marginally profitable stores, and they taught us what our next stepshould be in combining grocery and general merchandisinga smaller concept called the Supercenter. ButI was mistaken in my vision of the potential the Hypermart held in this country.

We conducted other similar, but less publicized, experiments that didn't work out so well either. Our dotDiscount Drug concept grew to twenty-five stores before we decided it wasn't going to be profitableenough. And we tried one home improvement center called Save Mor in the building which had housedthe original Wal-Mart in Rogers, which was also not a success. As David Glass says about me, once Idecide I'm wrong, I'm ready to move on to something else.

But when one of our experiments works, watch out. Take Sam's Clubs, for example. It was anexperiment when we started it up in 1983, and now nine years later it's a $10 billion business with morethan 217 stores and terrific growth potential. Sam's are big stores in warehouse-type buildings aimed atsmall-business owners and other customers who buy merchandise in bulk. A membership fee entitles acustomer to shop at Sam's, which charges wholesale prices for name-brand, often high-endmerchandiseeverything from tires to cameras to watches to office supplies to cocktail sausages and softdrinks. If you've never been in one, they're a lot of fun to shop, and the people who work there are a littlecrazy. Like the old days at Wal-Mart, they're liable to do anything on a moment's notice to move themerchandise.

Just like discounting, I'm sorry to say we can't take any of the credit for inventing the wholesale clubconcept. Put yourself in our position for a moment, though, and you can see why we had to steal the ideafrom those who did roll it out. It was the early eighties, and we'd been in the discount business for aroundtwenty years. Only the efficient operators were still in business, because prices, and margins, had beenfalling steadily the whole time. Suddenly, we noticed a whole new class of sub-discounter undercuttingour prices, wholesalers with very low overhead who were selling at margins way below the 22 percent inthe discount business5 to 7 percent. Since "Low Prices Every Day" had brought us this far, we had toexplore the business. Especially since we knew that Sol Priceone of the original discount pioneerswasbehind this idea. He had started his Price Club stores in 1976.

So one day in 1983 I went to see Sol in San Diego. I had met him earlier when my son Rob and I calledon him. This time, though, Helen and I were out on the West Coast already for a meeting of the massmerchandisers, so we dropped down to have dinner with Sol and his wife Helen at Lubock's. And Iadmit it. I didn't tell him at the time that I was going to copy his program, but that's what I did.

I came home and went over to Oklahoma City, where we rented an old building for about ninety cents asquare foot, or maybe even seventy-five cents. We remodeled it and, to manage it, put together a pickupcrew of mavericks who were sort of underappreciated at Wal-Mart. We had two or three buyers. Wewhipped up a program and a design, and put the whole thing in motion. We opened our first club in1983. It had that same feel of chaos and excitement as the early days at Wal-Mart. And we went out ofour way from the very beginning to separate the Sam's Club culture from the Wal-Mart culture. One ofthe guys I picked was Rob Voss. He was not really looked on as a top management talent at Wal-Martbecause he was always swimming against the current more than he was going with it. He was a little bit ofan agitator.

Rob voss, first general merchandise manager, sam's club:

"I told Sam up front that he had a lot of egos around this company, and that they needed to understandwe were going to be doing our own merchandising. So he got up at a Saturday morning meeting and toldeverybodythis is a direct quoteThe Sam's Club operation will be doing their own merchandising. If anyof you buyers out here with Wal-Mart take exception to that, and feel that because you're the buyer of acategory you should be buying it for the entire company, I suggest you come and visit with me in myoffice on a one-on-one basis, and then I'll explain it to you in a little more detail.' From that day on, wenever had a problem."We quickly went on to open Sam's in Kansas City and Dallas and then two units in Houston. It was a lotlike Wal-Mart. Once we had those five units up and going, I knew we could run with it, and we did. Ihate to say it, but I guess it was almost what you'd call a second childhood for mea second challengeanyway. I had a chance to build a company all over again, and I tried to be as hands-on as I could,although David Glass was heavily involved with Sam's from early on too.

RON LOVELESS, RETIRED SENIOR VICE PRESIDENT, WAL-MART:

"I came over from Wal-Mart to help set up Sam's. Since we were patterned after Price Clubs,sometimes we copied them without exactly knowing what we were doing. We were bringing a WestCoast idea to the Midwest, and we didn't know how it would be received. I remember one idea thatdidn't transfer too well. Price Club had a huge stack of wine in the front of its stores. We bought thesame amount for our stores in the Midwest, and we learned the hard way that Midwesterners aren'texactly wine drinkers."Tom coughlin, senior vice president, sam's clubs:

"This business is fun. It really is. It's sobasic. So straightforward. We do no advertising, but our wholebusiness is based on selling the concept. We sell small business operators on the idea that for $25 a yearthey can have a just-in-time warehouse with all the same price advantages for goods that large companiesget. And just like Wal-Mart, our customers get to know and love our culture. They know there are nofrills whatsoever in those warehouses. They know our management people are likely to be the ones tograb the forklift and pull the goods down for them, and they come to expect it. And like it."The competition in the club business can get pretty spirited sometimes. Once I was in the big Price Clubon Marino Avenue in San Diego, and I had my little tape recorder with melike I always doand I wasmaking notes to myself about prices and merchandising ideas. This guy, a big guy, comes up to me andsays, "I'm sorry but I'll have to take your tape recorder and erase the material you've got on it. We havea policy against people using them in the stores." Well, we have the same policy, and I knew I wascaught. So I said, "I respect that. But I've got things on here from other stores that I don't want to lose,so let me write a note to Robert Price"that's Sol's son. So I wrote: "Robert, your guy is just too good. Iwas trying to get some information on this recorder about some of the items you were carrying and someof my impressions of your store, and he caught me. So here's the tape. If you want to listen to it, youcertainly have that privilege, but I have some other material on here I would like very much to haveback." So in about four days I got a nice note back from Robert, with the tape, and none of it had beenblurred or scratched out. He probably treated me better than I deserved.

The Sam's launch reflects another part of my management style that applies not only to the competition,but to our own people as well. I like to keep everybody guessing. I don't want our competitors gettingtoo comfortable with feeling like they can predict what we're going to do. And I don't want our ownexecutives feeling that way either. It's part of my strong feeling for the necessity of constant change, forkeeping people a little off balance.

A lot of folks in my position would have been perfectly content with the situation as it stood in 1984.

Our 640 Wal-Marts were earning almost $200 million a year on sales of more than $4.5 billion, we werestill growing like wildfire, and we were underway with Sam's. But I felt like we had to make a change. SoI called in Jack Shewmaker, by now our president and chief operating officer, and asked him if he wouldmind swapping jobs with David Glass, our chief financial officer. Not your everyday request from thechairman in most companies, I guess. I valued the talents of both of these guys enormously, but I had myown reasons for wanting to see how the switch might work out. Jack is so smart and aggressive and sureof himself that sometimes he could be a little rough on folks, and I wanted to see how somebody withDavid's smoother manner would handle the job.

Jack said he already knew he didn't want to stay at Wal-Mart until he was an old man, so after somediscussion, we agreed on the switch. David took the president's job, and Jack stayed on for three moreyears as chief financial officer, and he did a great job. Today, he does international consulting work, andhe remains a valuable Wal-Mart board member. David, of course, turned into a fantastic president, andabout five years ago I relinquished my CEO title to him. At that time, Jack retired.

As well as all that worked out for everyoneand it really didI won't pretend there wasn't tensionsurrounding that period in our history. This is a highly competitive business, and an even more competitivecompany. It naturally attracts a lot of ambitious people, sometimes with egos to match. Ever since mypeewee football days, I've believed almost any kind of competition is great. I expect our folks tocompete with one another and as I have said, what I hate is to see a rivalry become a personal thing,where the folks don't support one another.

Competition is actually the reason I love retailing so much. The Wal-Mart story is just another chapter inthat history of competitiona great chapter, mind you but it's all part of the evolution of the industry.

There's always a challenger coming along. There may be one on the street right now formulating a plan toget to the top. To stay ahead of those challengers, we have to keep changing and looking back over ourshoulder and planning ahead. That's one reason we bought the McLane company a few years ago. It's abig distributor to grocery stores, and it should be a great base for us to push on into that market, wherewe feel customers are ready for our way of doing business.

Right now, I see a lot of new challengers coming from offshore with some very sophisticated programs.

Some of the emerging competitors in this country who have come from Holland, Germany, and Francebear close watching. And it won't be long before we have a wave of Japanese retail concepts arriving. Idon't know if Wal-Mart can truly maintain our leadership position by just staying in this country. I thinkwe're going to have to become a more international company in the not-too-distant future. We've createdan international division in the company, and we have a joint venture with a Mexican company calledCIFRA for the development of Club Aurrera, a wholesale club concept. We've opened two with plansfor more soon. Absorbing people from other cultures quickly and smoothly into the company will presenta real challenge to Wal-Mart in the near futurebut our folks are up to it.

On the domestic front, competition in the discount business has improved tremendously in the last fewyears. Our competitors are doing a better job of serving their customers, of getting them through thecheckout lines. They're running cleaner stores with better merchandise presentations. They're making ourjob a lot harder. But so far, none of our competitors has yet been able to operate on the volume that wedo as efficiently as we do. They haven't been able to get their expense structure as low as ours, and theyhaven't been able to get their associates to do all those extra things for their customers that ours doroutinely: greeting them, smiling at them, helping them, thanking them. And they haven't been able tomove their merchandise as efficiently, or keep it in stock as efficiently, as we do.

If anyone is ever able to top us in any of those areas, we will have real concern. At this point, no one hasbeen able to do it.
Chapter 14 Expanding the Circles
　　"Distribution and transportation have been so successful at Wal-Mart because senior management viewsthis part of the company as a competitive advantage, not as some afterthought or necessary evil. Andthey support it with capital investment. A lot of companies don't want to spend any money on distributionunless they have to. Ours spends because we continually demonstrate that it lowers our costs. This is avery important strategic point in understanding Wal-Mart."JOE HARDIN,executive vice president, logistics and personnelSome of our guys around here find it amusing that I get so much credit for Wal-Mart's reputation as aworld leader in retailing and distribution technology. It's not because we're not on the cutting edge. Weare. They're amused because, as I told you, ever since I went to that IBM school in 1966, I've put up apretty good fight every time somebody wants to buy some new system for this, that, or the other. I wantthem to think hard about how they're going to justify the expense before they even come to me with it.

But there's no question about it: one of the main reasons we've been able to roll this company outnationally was all the pressure put on me by guys like David Glass and, earlier, Jack Shewmaker andRon Mayer, to invest so heavily in technology. Yes, I argued and resisted, but I eventually signed thechecks. And we have been able to move way out front of the industry in both communications anddistribution. During that period in the late seventies when Kmart's management had such a strongresistance to any kind of change, that resistance included investment in systems. At the same time, ourfellows were just absolutely convinced that computers were essential to managing growth and keepingdown our cost structure. Today, of course, they've been proven so right that they look like geniuses. Iwould go so far as to say, in fact, that the efficiencies and economies of scale we realize from ourdistribution system give us one of our greatest competitive advantages.

Many people have contributed over the years, but David Glass has to get the lion's share of the creditfor where we are today in distribution. David had a vision for automated distribution centerslinked bycomputer both to our stores and to our suppliersand he set about building such a system, beginning in1978 at Searcy, Arkansas.

DAVID GLASS:

"Searcy probably was built about two years later than we needed it, so there was a lot of pressure on usto get it up and running. The big knock on Wal-Mart was that we weren't going to be able to expandmuch beyond the 350-mile ring around our distribution center in Bentonville. Because of that logisticalproblem, our disbelievers said we would always be a medium-sized regional retailer confined to this area.

I pushed hard for Searcy as the solution. It was a real ambitious plan: our first remote, mechanizeddistribution center. Unfortunately, we needed it so badly that we had to rush it into service, and thecrunch turned it into a disastermy disaster. It was as bad as Sam's opening at Harrison, only moreserious.

"We were shipping freight out of there before we had a roof on the building, and nothingnot even thetoiletsworked like it was supposed to. We had guys like Glenn Habern, our data processing manager,and Paul Carter down there driving forkliftsuntil Habern tore down a rack and spilled Listerine all overthe place. Working conditions were terrible, and the next thing you know the union was down thereorganizing.

"It was such a nightmare that Sam began to question the whole idea of mechanized distribution. He reallywasn't sure it worked at all. Fortunately, he hired Don Soderquist from Ben Franklin around that time,and Don came in as a big supporter of what we were trying to do. He believed in mechanized distributionall the way, and he eventually took over distribution from me in 1980. He went on to do a great jobexpanding it, helping introduce a lot of innovation, including a badly needed new inventory managementsystem.

"Fortunately, we turned Searcy around and made it work because it saved our neck after we took on allthose Kuhn's stores. We had to figure out how to supply them, and our arrangement with a third-partydistributor turned into a nightmare. So we built an addition at Searcy to service them, and it solved theproblem. Searcywhich is one of our best-performing distribution centers todayreally was the key to ourwhole distribution system. After we proved it would work, we were able to duplicate the modelanywhere, and that's what we've done."I think it's fair to say that our distribution system today is the envy certainly of everyone in our industry,and in a lot of others as well. We now have twenty of these centers placed strategically in our trade areasaround the countrystill mostly within a day's drive, or about 350 miles, of the stores they serve.

Combined, they account for more than 18 million square feet of distribution space. We stock over80,000 items in our stores, and our warehouses directly replenish almost 85 percent of their inventory,compared to only about 50 to 65 percent for our competition. As a result, the gap from the time ourin-store merchants place their computer orders until they receive replenishment averages only about twodays. That probably compares to five or more days for a lot of our competitors, which don't ship asmuch merchandise through their own network.

The time savings and flexibility are great, but the cost savings alone would make the investmentworthwhile. Our costs run less than 3 percent to ship goods to our stores, while it probably costs ourcompetitors between 4  to 5 percent to get those same goods to their stores. The math is pretty simple:

if we both sell the same goods for the same price at retail, we'll earn 2  percent more profit than they willright there.

Joe hardin:

"When you own and manage your distribution and logistics channel, you have a great competitiveadvantage over companies that rely on third-party suppliers. It automatically shortens your lead times, butalso you can constantly look for ways to improve your operation and try to make it more efficient. Younever have to rely on what's going on in somebody else's shop. In our case, we generally know wherethings are in relationship to when we want them to arrive, so we can schedule and plan to move goodsinto the stores at the right time. That maximizes our in-stock positions, which is vital. You can't generatesales unless you have the product there when the customer wants it."Not only do we stock more of our merchandise in our own distribution centers, we also rely on our ownprivate truck fleet to a much greater degree than our competitors do. Our private fleet is one of thenation's largest, maybethe largest. Last year, David asked Lee Scott, our vice president who overseestransportation, to try and locate every truck and trailer in the fleet on a single day just to show that wecould do it. Of course he did, and at last count, Lee says we have more than two thousandover-the-road tractors and more than eleven thousand trailers. Unlike both Kmart and Target, whichcontract out with third parties to deliver a lot of freight from their distribution centers, we've always feltthat we needed our own fleet.

To have the kind of flexibility we wantthat ability to respond above and beyond what we could asksome outsider to do for uswe need drivers who are part of our team, drivers who are as dedicated toserving our customers as the associates in the stores. And, man, do we ever have them. When you're outon the highway and you pass by a Wal-Mart truck, you can bet your bottom dollar that the guy behindthe wheel is a true professional. He's not just driving a truck. He's dedicated to servicing those stores,and he knows he's an ambassador of Wal-Mart and everything we stand for out on the road. I'll just sayit: we have the best damned truck drivers in America, and their loyalty and their can-do attitude havemade a huge difference to this company.

LEE SCOTT:

"Our drivers really are extremely loyal to their mission, which is to serve the stores. They report back toWal-Mart continually on things like merchandise thrown out behind the store that looked like it wasgood, attitude and morale problems in the stores. For a long, long time, Sam would show up regularly inthe drivers' break room at 4a.m. with a bunch of doughnuts and just sit there for a couple of hours talkingto them.

"He grilled them. 'What are you seeing at the stores' 'Have you been to that store lately' 'How do thepeople act there' 'Is it getting better' It makes sense. The drivers see more stores every week thananybody else in this company. And I think what Sam likes about them is that they're not like a lot ofmanagers. They don't care who you are. They'll tell you what they really think."Of course, the only thing that makes the whole distribution system work so well is the dedication of thepeople all across it. The technology and hardware are just tools. The people in the system believe, just asfirmly as the associates in the stores, that their primary job is to take care of the customer. Except in theircase, the customer is the Wal-Mart store or Sam's Club they're supplying.

With that idea at the root of everything, we've developed a unique ability to customize what we do tomeet the needs of our stores. Until recently, for example, we bragged that we were making deliveriesevery day to 97 percent of our stores. Then we discovered that wasn't necessarily the best thing for all ofour stores, particularly the smaller ones. So now we've gone into a customized delivery program in whichstores can pick one of four different delivery plans. Every six months, each store decides which plan itprefers. And we also have a plan called accelerated delivery, designed for stores located within a certaindistance of a distribution center. A store in that plan can order merchandise on Monday night and get iton Tuesday night. Nobody else in the business can deliver like that on any kind of widespread basis.

When all this comes together at one of our distribution centers, it's really a sight to behold. You reallyhave to see one of these places in action to appreciate them, and sometimes I can hardly believe themmyself. But I'll try to describe the activity at one. Start with a building of around 1.1 million square feet,which is about as much floor space as twenty-three football fields, sitting out somewhere on some 150acres. Fill it high to the roof with every kind of merchandise you can imagine, from toothpaste to TV's,toilet paper to toys, bicycles to barbecue grills. Everything in it is bar-coded, and a computer tracks thelocation and movement of every case of merchandise, while it's stored and when it's shipped out. Somesix hundred to eight hundred associates staff the place, which runs around the clock, twenty-four hours aday. On one side of the building is a shipping dock with loading doors for around thirty trucks at atimeusually full. On the other side is the receiving dock, which may have as many as 135 doors forunloading merchandise.

These goods move in and out of the warehouse on some 8  miles of laser-guided conveyor belts, whichmeans that the lasers read the bar codes on the cases and then direct them to whatever truck is filling theorder placed by one of the stores it's servicing that night. On a heavy day, those belts might handle up to200,000 cases of goods. When the thing is running full speed, it's just a blur of boxes and crates flyingdown those belts, red lasers flashing everywhere, directing this box to that truck, or that box to this truck.

Out in the parking lot, whole packs of Wal-Mart trucks rumble in and out all day. I get tremendouslyexcited going out to these centers, talking with our associates and drinking coffee with them and the truckdrivers. It's amazing to me how many ideas they always have for fine-tuning the system. If you get theidea that I'm awfully proud of what we've managed to do in distribution, you're right.

To get the whole picture, though, it's important to realize that the same thing is happening simultaneouslyat nineteen other almost identical distribution centers every day. Not only that, for us to continueexpanding the way we do, we have to constantly plan the construction and staffing of more and more ofthese giant mechanized warehouses, and that's no small task for Joe Hardin and his folks. We'll probablyhave thirty in operation in just the next few years. They're already on the drawing boards.

From the time David Glass came on board in 1976, he's been pushing me to invest and invest and investin that system, and thank goodness he managed to be so persuasive. At the same time, he and JackShewmaker were also pushing hard for heavy investment in more and more, better and better computersystems, so that we could track sales and merchandise and inventories across the companyespeciallyin-store transactions. When Jack became our president and chief operating officer in 1978, he workedreally hard at getting me to invest in bar coding and SKU item control, which is a computerizedstockkeeping unit inventory system. Jack also was heavily involved in the creation of our satellite system,which turned out to be another one of our tremendous competitive advantages.

JACK SHEWMAKER:

"Glenn Habern was our data processing manager, and he and I had this dream of an interactivecommunications system on which you could communicate back and forth between all the stores and thedistribution centers and the general office. Glenn came up with the idea of using the satellite, and I said,'Let's pursue it without asking anybody.' So we got it to the point where we were ready to make aproposal, and we told Sam. He just listened. He didn't necessarily discourage me. But he didn'tencourage me either. Sam never gets excited about systems.

"The technology didn't really exist to do this for a retailer in the early eighties. But we got together withthe Macom & Hughes Corporation, and worked out a contract, and eventually we committed $24million to build it. We launched it in 1983, and I mean, Sam liked to killed me the first two years. It wasnot an immediate success. But we got it working, and now, of course, everybody has one."The satellite turned out to be absolutely necessary because, once we had those scanners in the stores,we had all this data pouring into Bentonville over phone lines. Those lines have a limited capacity, so aswe added more and more stores, we had a real logjam of stuff coming in from the field. As you know, Ilike my numbers as quickly as I can get them. The quicker we get that information, the quicker we canact on it. The system has been a great tool for us, and our technical people have done a terrific job offiguring out how to use it to our best advantage.

Jack is absolutely right about me and systems, though. I rarely get excited about them. A few years ago,we built this huge building right next to our main officesaround 135,000 square feetjust to house thecomputers, and everyone at the time told me how much room we'd have to grow. I mean it was reallyempty in there just two or three years ago. Well, already it's completely full of computer equipment. Andwhen I look back, it's no wonder. We've spent almost $700 million building up the current computer andsatellite systems we have. I'm told it's the largest civilian data base of its kind in the worldeven biggerthan AT&T's.

None of that matters to me. What I like about it is the kind of information we can pull out of it on amoment's noticeall those numbers. For one thing, we keep a sixty-five-week rolling history of everysingle item we stock in Wal-Mart or Sam's. That means I can pick anything, say a little combinationTV/VCR like I use here in my office, and tell you exactly how many of them we've bought over the lastyear and a quarter, and exactly how many of them we've sold. Not only overall, but in any or everyregion, every district, every store. It makes it tough for a vendor to know more about how his product isdoing in our stores than we do. I guess we've always known that information gives you a certain power,but the degree to which we can retrieve it in our computer really does give us the power of competitiveadvantage.

I can walk in that satellite room, where our technicians sit in front of their computer screens talking onthe phone to any stores that might be having a problem with the system, and just looking over theirshoulder for a minute or two will tell me a lot about how a particular day is going. Up on the screen I cansee the total of the day's bank credit card sales adding up as they occur. I can see how many stolen bankcards we've retrieved that day. I can tell if our seven-second credit card approval system is working as itshould be and monitor the number of transactions we've conducted that day. If we have something reallyimportant or urgent to communicate to the stores and distribution centerssomething important enough towarrant a personal visitI, or any other Wal-Mart executive, can walk back to our TV studio and get onthat satellite transmission and get it right out there. And, as I told you earlier, I can go in every Saturdaymorning around three, look over those printouts, and know precisely what kind of week we've had.

So you see, technology and distributionare every bit as important to Wal-Mart's ability to grow andmaintain control as you may have heard or read over the years. But when you see all those satellite dishesoutside our building, or hear about all the computers inside it, or look at some videotape of ourlaser-guided distribution centers, don't let anybody kid you. Without the right managers, and thededicated associates and truck drivers all across the system, all that stuff is totally worthless.
Chapter 15 Thinking Small
　　"Well, now, Sam, how big do you really want this company to be What is your plan"FEROLD AREND,shortly after coming to work at Wal-Mart"Ferold, we're going to take it as it comes, and if we can grow with our own money, we'll maybe add astore or two."SAM WALTONNot long ago somebody showed me an article written for a local magazine in 1960. It was called"Success Story of the Year," and it described how we had built up an empire of nine variety stores. Thenit quoted me as saying that we probably wouldn't grow much more because I believed in personallysupervising the nine-store group, and I thought any more stores would be "unwieldy" to manage withoutadditional supervisors. So what the heck happened How did we ever get to be the largest retailer in theworld with a philosophy like thatI really believed what I said then, and I still do. But we figured out a way to grow, and stay profitable,and there was no logical place to stop. The way I approached managing the business, I always tried tomaintain a sense of hands-on, personal supervisionusually by flying around to take a look at our storeson a regular basis. But from the very beginning, even on my paper routes in college, I have also been adelegator, trying to hire the best possible people to manage our stores. That's been the case since back inNewport.

An awful lot of water has washed over the dam since 1945, when we bought that little Front Street storein Newport, but almost every single thing we learned, every basic principle we applied in building thatstore up into a respectable business, still applies to our company today. It's hard to think of anothercompany that sustained the kind of growth we did over thirty years without experiencing any majorfinancial problems or dips in profitability. During that time, our business was growing at annual rates ofanywhere from 30 to an incredible 70 percent in some years.

Along the way, we always had lots of people waiting for us to stumble and fallespecially Wall Streettypes. They said we'd never be able to keep doing things our way after we reached $1 billion in sales.

But we did, and kept right on going. Then they said everything would fall apart at $10 billion because youjust couldn't manage a company that big with our little down-home management philosophies. We roaredpast that, and then hit $20 billion and $30 billion, and in the coming year we should hit around $53 billion.

Two years ago, we earned $1 billion in profits for the first time. That's a jump from only $41 million justten years before. Here's a chart that completely amazes me:

1960stores9Sales$1.4 millionprofits$112,0001970stores32--Sales$31 millionprofits$1.2 million1980stores276Sales$1.2 billionprofits$41 million1990stores1,528--Sales$26 billion--profits$1 billionSo now we're the largest retailer in the world, and still growing like a weed. If my chart doesn't paint aclear enough picture for you of how large the company is, here are some other ways to think aboutWal-Mart's size. Every week, nearly 40 million people shop in Wal-Mart. Last year, we sold enoughmens' and women's underwear and socks to put a pair on every person in America, with some to spare.

We sold 135 million men's and boys' briefs, 136 million panties, and 280 million pairs of socks. We soldone quarter of all the fishing line purchased in the U.S., some 600,000 miles of it, or enough to go aroundthe earth twenty-four times. We sold 55 million sweatsuits and 27 million pairs of jeans, and we soldalmost 20 percent of all the telephones bought in the U.S. And here's one I'm really proud of: in oneweek last year, we sold as much Ol' Roy private label dog food as we did in all of 1980. With sales of$200 million last year, Ol' Roy became the number-two dog food in America, and remember, we onlysell it in Wal-Mart. Another one: Procter & Gamble sells more product to Wal-Mart than it does to thewhole country of Japan.

I could go on and on, but you get the idea. We're big. Really big. That's not something I like to focus on.

I always wanted to be the best retailer in the world, not necessarily the biggest. In fact, as I said in thatarticle thirty something years ago, I've always been a little bit afraid that big might get in the way of doinga good job. Of course, being this big has some real advantages. Until we reached a billion dollars, a lot ofsuppliers and vendors just ignored us way out here in the Arkansas outback. For years, some supplierswouldn't even call on us. Now, of course, we're too big to ignore. But being big also poses dangers. Ithas ruined many a fine companyincluding some giant retailerswho started out strong and got bloated orout of touch or were slow to react to the needs of their customers.

Here's the point: the bigger Wal-Mart gets, the more essential it is that we think small. Because that'sexactly how we have become a huge corporationby not acting like one. Above all, we are small-townmerchants, and I can't tell you how important it is for us to rememberwhen we puff up our chests andbrag about all those huge sales and profitsthat they were all made one day at a time, one store at a time,mostly by the hard work, good attitude, and teamwork of all those hourly associates and their storemanagers, as well as by all those folks in the distribution centers. If we ever get carried away with howimportant we are because we're a great big $50 billion chaininstead of one store in Blytheville,Arkansas, or McComb, Mississippi, or Oak Ridge, Tennesseethen you probably can close the book onus. If we ever forget that looking a customer in the eye, and greeting him or her, and asking politely if wecan be of help is just as important in every Wal-Mart today as it was in that little Ben Franklin inNewport, then we just ought to go into a different business because we'll never survive in this one.

BILL FIELDS:

"I'm sure that our whole focus on thinking small all relates to Sam running that store in Newport, wherehe was the entrepreneur, and he was out there involved as a leader of the community. He sees thatentrepreneurial element as being so important and something he never wants us to lose. He saw the bigchange in Ben Franklin and all those other companies that lost it because they got too big and distracted,and he's just determined it won't happen here."For us, thinking small is a way of life, almost an obsession. And I suspect thinking small is an approachthat almost any business could profit from. The bigger you are, the more urgently you probably need it.

At our size today, there's all sorts of pressure to regiment and standardize and operate as a centrallydriven chain, where everything is decided on high and passed down to the stores. In a system like that,there's absolutely no room for creativity, no place for the maverick merchant that I was in the early daysat Ben Franklin, no call for the entrepreneur or the promoter. Man, I'd hate to work at a place like that,and I worry every single day about Wal-Mart becoming that way. I stay on these guys around here allthe time about it. Of course, all those vendors and suppliers would love to see us get that way. It wouldmake their jobs a lot simpler for sure. If anybody at Wal-Mart thinks we as a company are immune toBig Disease, I wish they'd just pack up and leave right now because it's always something we'll have toworry about.

For several decades now we've worked hard at building a company that's simple and streamlined andtakes its directions from the grass roots. It's a pretty tall order for an outfit that is spreading out all overthe country as fast as we are. But along the way we've learned some practical things about thinking smalland developed some principles that have had a big effect on our company's success. Before you can fullyunderstand how we got where we are today, it's important to understand these principles. Then you canrecognize how we've applied them all along the way in the building of the company. Seeing how we'vedone some of these things might help other folks out there who face the same challenge of growing theirbusiness without losing touch with the customer.

There's nothing at all profound about any of our principles. In fact, they're all common sense, and mostof them can be found in any number of books or articles on management theorymany of which I've readand studied over the years. But I think the way we've applied them at Wal-Mart has been just a littledifferent. Here are six of the more important ways we at Wal-Mart try to think small:

Think One Store at a TimeThat sounds easy enough, but it's something we've constantly had to stay on top of. Because our salesand earnings keep going up doesn't mean that we're smarter than everyone else, or that we can make ithappen because we're so big. What it means is that our customers are supporting us. If they stopped, ourearnings would simply disappear, and we'd all be out looking for new jobs. So we know what we haveto do: keep lowering our prices, keep improving our service, and keep making things better for the folkswho shop in our stores. That is not something we can simply do in some general way. It isn't somethingwe can command from the executive offices because we want it to happen. We have to do it store bystore, department by department, customer by customer, associate by associate.

For example, we've got one store in Panama City, Florida, and another only five miles away in PanamaCity Beach, but actually they're worlds apart when it comes to their merchandise mix and their customerbase. They're entirely different kinds of stores. One is built for tourists going to the beach, and the other ismore like the normal Wal-Mart, built for folks who live in town. That's why we try our best to put amerchant in charge of each store, and to develop other merchants as the heads of each department inthose stores. If the merchandise mix is really going to be right, it has to be managed by the merchandisersthere on the scene, the folks who actually deal face to face with the customers, day in and day out,through the seasons.

That makes it management's job to listen to those merchandisers out in the stores. We have these buyershere in Bentonville218 of themand we have to remind them all the time that their real job is to supportthe merchants in the stores. Otherwise, you have a headquarters-driven system that's out of touch withthe customers of each particular store, and you end up with a bunch of unsold workboots, overalls, andhunting rifles at the Panama City Beach store, where folks are begging for water guns and fishing rodsand pails and shovels; and at the Panama City store in town you've got a bunch of unsold beach gearstacked up gathering dust.

So when we sit down at our Saturday morning meetings to talk about our business, we like to spendtime focusing on a single store, and how that store is doing against a single competitor in that particularmarket. We talk about what that store is doing right, and we look at what it's doing wrong.

DAVID GLASS:

"We believe that we have to talk about and examine this company in minute detail. I don't know anyother large retail companyKmart, Sears, Penney'sthat discusses their sales at the end of the week inany smaller breakdown than by region. We talk about individual stores." Which means that if we'retalking about the store in Dothan, Alabama, or Harrisburg, Illinois, everybody here is expected to knowsomething about that storehow to measure its performance, whether a 20 percent increase is good orbad, what the payroll is running, who the competitors are, and how we're doing. We keep the company'sorientation small by zeroing in on the smallest operating unit we have. No other company does that."Focusing on a single store can accomplish a number of things. First, of course, it enables us to actuallyimprove that store. But if in the process we also happen to learn a particular way in which that PanamaCity Beach Wal-Mart is outsmarting the competition on, say, beach towels, then we can quickly get thatinformation out to all our other beach stores around the country and see if their approach workseverywhere. Which brings us to the next principle.

Communicate, Communicate, CommunicateIf you had to boil down the Wal-Mart system to one single idea, it would probably be communication,because it is one of the real keys to our success. We do it in so many ways, from the Saturday morningmeeting to the very simple phone call, to our satellite system. The necessity for good communication in abig company like this is so vital it can't be overstated. What good is figuring out a better way to sell beachtowels if you aren't going to tell everybody in your company about it If the folks in St. Augustine,Florida, don't get the word on what's working over in Panama City until winter, they've missed a bigopportunity. And if our buyers back in Bentonville don't know we're expecting to double our sales ofbeach towels this summer, the stores won't have anything to sell.

Nowadays, I see management articles about information sharing as a new source of power incorporations. We've been doing this from the days when we only had a handful of stores. Back then, webelieved in showing a store manager every single number relating to his store, and eventually we begansharing those same numbers with the department heads in our stores. We've kept doing it as we'vegrown. That's why we've spent hundreds of millions of dollars on computers and satellitesto spread allthe little details around the company as fast as possible. But they were worth the cost. It's only becauseof information technology that our store managers have a really clear sense of how they're doing most ofthe time. They get all kinds of information transmitted to them over the satellite on an amazingly timelybasis: their monthly profit-and-loss statement, up-to-the-minute point-of-sale data that tells them what'sselling in their own store, and a lot of other paper they probably wish we wouldn't send them.

I'm not going to pretend we're perfect at this. We do have our share of miscommunication, like that timethe Moon Pies were shipped to stores in Wisconsin, where they didn't exactly jump off the shelves. Andsometimes a simple attitude is as valuable as all the technology in the world. For example, we've got thisone rule I hope we never give up enforcing: our buyers here in Bentonville are required to return callsfrom the stores first, before they return the calls of vendors or anybody else, and they are required to getback to the stores by sundown of the day they get the call.

Obviously, we're too doggoned big to have every department head in every Wal-Mart spend a lot oftime with the vendors who call on us in Bentonville, so we try to think up ways to get at a similar result.

Recently, we've started seminars for our department managers. We'll pick a department, like sportinggoods or lawn and garden, then we'll pick one department headthese are the hourly associates whoactually run those departments in their storesfrom each of our store districts. That's 184 folks right now.

We'll bring all of them in to Bentonville to talk to the buyers about what's working for them, and what'snot. Then they meet with the vendors and explain what kinds of complaints we're getting about theirproducts, or what's working well. Together, all these folks formulate their plan for the coming season,and then the department heads go back to their districts and share what they've learned with theircounterparts in neighboring stores.

As much as we travel to our stores, and bring our folks in to Bentonville, though, sometimes I have thefeeling that the word is not getting out. And if it's on a subject I feel strongly enough about, I'm not abovegetting in front of one of our TV cameras here and going out by satellite to all our associates gathered infront of their TV's in the break rooms of our stores. A few years ago, I had an idea aroundChristmastime that was just burning me up to tell people about, so I went on the camera and visited witheverybody about how our sales were doing, and talked a little about my hunting, and let them know that Ihoped their holiday season was going well. Then I got to the point: "I don't think any other retail companyin the world could do what I'm going to propose to you. It's simple. It won't cost us anything. And Ibelieve it would just work magic, absolute magic on our customers, and our sales would escalate, and Ithink we'd just shoot past our Kmart friends in a year or two and probably Sears as well. I want you totake a pledge with me. I want you to promise that whenever you come within ten feet of a customer, youwill look him in the eye, greet him, and ask him if you can help him. Now I know some of you are justnaturally shy, and maybe don't want to bother folks. But if you'll go along with me on this, it would, I'msure, help you become a leader. It would help your personality develop, you would become moreoutgoing, and in time you might become manager of that store, you might become a department manager,you might become a district manager, or whatever you choose to be in the company. It will do wondersfor you. I guarantee it. Now, I want you to raise your right handand remember what we say atWal-Mart, that a promise we make is a promise we keepand I want you to repeat after me: From thisday forward, I solemnly promise and declare that every time a customer comes within ten feet of me, Iwill smile, look him in the eye, and greet him. So help me Sam."Now, I had no way of knowing how much effect a little communication like that would have on ourassociates, or on our customers. But I felt so strongly about the idea that it was worth calling attention toit by satellite, and I really meant it when I said I didn't think any other retailer in the country could do it. Ido know thisa lot of our associates started doing what I suggested, and I'm sure a lot of our customersappreciated it. We used mass communications to transmit the idea, but it was a small idea, aimed at thefolks on the front lines, the ones most responsible for keeping our customers happy and coming back toour stores over and over. And I'm not saying one way or another whether my little pep talk had anythingto do with it, but we went on from that Christmas to pass both Kmart and Sears in sales at least twoyears before even the most optimistic Wall Street analysts thought we could do it.

Keep Your Ear to the GroundAs chairman of Wal-Mart, I, of course, was the one who ultimately authorized all those expenditures fortechnology, which proved absolutely crucial to our success. But truthfully, I never viewed computers asanything more than necessary overhead. A computer is not and will never bea substitute for getting outin your stores and learning what's going on. In other words, a computer can tell you down to the dimewhat you've sold. But it can never tell you how much you could have sold.

That's why we at Wal-Mart are just absolute fanatics about our managers and buyers getting off theirchairs here in Bentonville and getting out into those stores. We have twelve airplanesonly one of them ajet, I'm proud to sayin our hangars out at the Rogers, Arkansas, airport, and that's why they're there.

We stay in the air to keep our ear to the ground. Our whole travel system is really an outgrowth of theway I managed those nine stores back in 1960 when I said I didn't want to grow anymore. Back then, asyou now know, I would get in my old Tri-Pacer and fly to those stores once a week to find out what wasselling and what wasn't, what the competition was up to, what kind of job our managers were doing,what the stores were looking like, what the customers had on their minds. Of course, I have continued tovisit stores almost constantly ever since, and it is the part of my job I enjoy the most, the part where I feelI make the greatest contribution, but with almost two thousand stores today, a lot of other folks have toget in on the act with me.

Today, the idea is pretty much the same. Our district managers are doing the job that I did back in 1960the real hands-on, get-down-in-the-store stuff. But also, we have eighteen regional managers, all ofthem based here in Bentonville. Every Monday morning, they pile into those airplanes and head acrossthe country to the stores in their regions. It's a condition of their employment. They stay out three to fourdays, usually coming back in on Thursday. We've drummed into their heads the belief that they shouldcome back with at least one idea that will pay for the trip. Then they gather with the senior managementof the companyall of whom should also have been visiting stores earlier in the week if they expect to askany intelligent questions or know the first thing about what's going onfor our Friday morningmerchandising meeting.

In addition to the fieldwork, of course, we have computer printouts at the meetings which tell us what'sselling and what's not. But the really valuable intelligence that surfaces in these sessions is what everybodyhas brought back from the stores. If they're doing their jobs right, they'll know why things are or aren'tselling, and what we ought to be thinking about selling next, or dropping from our assortment. If they'vebeen to that Panama City Beach store and seen a suntan cream display that's blowing the stuff out thedoor, they can share that with the other regionals for their beach stores. Or if they've been to a big storein the Rio Grande Valley and found out that we're getting beat by a competitor on ladies' dressesbecause their assortment is more suited to the particular tastes of that area, we can start fixing it. Whenthat meeting is over, every one of those regionals should be on the phone to the district managers, whoshould be passing the word along to the store managers, who'll get the department managers to act on itright away.

DAVID GLASS:

"Our Friday merchandising meeting is unique to retailing as far as I can tell. Here we have all theseregional managers who have been out in the field all week longthey are the operations guys who directthe running of the stores. Then you have all your merchandising folks back in Bentonvillethe people whobuy for the stores. In retailing, there has always been a traditional, head-to-head confrontation betweenoperations and merchandising. You know, the operations guys say, 'Why in the world would anybodybuy this It's a dog, and we'll never sell it.' Then the merchandising folks say, 'There's nothing wrong withthat item. If you guys were smart enough to display it well and promote it properly, it would blow out thedoors.' That's the way it is everywhere, including Wal-Mart. So we sit all these folks down togetherevery Friday at the same table and just have at it.

"We get into some of the doggonedest, knock-down drag-outs you have ever seen. But we have a rule.

We never leave an item hanging. We will make a decision in that meeting even if it's wrong, andsometimes it is. But when the people come out of that room, you would be hard-pressed to tell whichones oppose it and which ones are for it. And once we've made that decision on Friday, we expect it tobe acted on in all the stores on Saturday. What we guard against around here is people saying, 'Let'sthink about it.' We make a decision. Then we act on it."Once these regional managers have come back on Thursdays, we load up the planes with some buyersand send them out to visit the individual stores. As we've gotten bigger, we've added on all kinds of waysto keep our buyers responsive to the store needs. These days we've got folks called regional buyers,who go around and help the store managers customize the merchandise for their own stores. My favoritebuyer program is one called Eat What You Cook. Once a quarter, every buyer has to go out to adifferent store and act as manager for a couple of days in the department he or she buys merchandise for.

I guarantee you that after they've eaten what they cooked enough times, these buyers don't load up toomany Moon Pies to send to Wisconsin, or beach towels for Hiawatha, Kansas.

Push Responsibilityand AuthorityDownThe bigger we get as a company, the more important it becomes for us to shift responsibility andauthority toward the front lines, toward that department manager who's stocking the shelves and talkingto the customer. When we were much smaller, I probably wasn't as quick to catch on to this idea as Ishould have been. But as an avid student of management theory, back in the mid-seventies I startedreading the work of W. Edwards Deming, the famous statistician who taught so much to the Japaneseabout improving their productivity and competitiveness. Then Helen and I took a trip to Japan andKorea, which got me thinking about a whole bunch of different things we could do to improve ourcompany. That's probably when I first began thinking about some of the very real ways that we couldimprove our teamwork and put more authority in the hands of our people in the stores.

Our most famous technique for doing this is a textbook example of thinking small. We call it StoreWithin a Store, and it's the simplest idea in the world. Again, in many big retail companies the departmenthead is just an hourly employee going through the motions, somebody who punches a clock, then ripsopen boxes and stacks whatever's in them onto shelves. But we give our department heads theopportunity to become real merchants at a very early stage of the game. They can have the pride ofproprietorship even if they weren't fortunate enough to go to college or be formally trained in business.

They only have to want it bad enough, pay close attention, and work very hard at developingmerchandising skills. We've had many cases where the experience has fired people up with ambition, andthey've gone on to work their way through college and move on up in the company, and I hope we havemany more cases like that.

Again, this only works because we decided a long time ago to share so much information about thecompany with our associates, rather than keep everything secretive. In Store Within a Store we makeour department heads the managers of their own businesses, and in some cases these businesses areactually bigger in annual sales than a lot of our first Wal-Mart stores were. We share everything withthem: the costs of their goods, the freight costs, the profit margins. We let them see how their store rankswith every other store in the company on a constant, running basis, and we give them incentives to wantto win.

We're always trying for that fine balance between autonomy and control. Like any big retailer, Wal-Martobviously has certain procedures which we require our stores to follow or items they must stock. But wehave taken steps to make sure our stores have some autonomy. The responsibility for orderingmerchandise lies with the department head. The responsibility for promoting merchandise is with the storemanager. Our buyers have much more responsibility for deciding what's carried in our stores than buyersat most other companies. We run them hard, and we give them a tough time because we don't want themgetting a big head and thinking they're all-powerful. But the fact is that our buyersjust like our folks in thestoresare in unique positions of authority for the retail business.

Force Ideas to Bubble UpThis goes hand-in-hand with pushing responsibility down. We're always looking for new ways toencourage our associates out in the stores to push their ideas up through the system. We do a lot of thisat Saturday morning meetings. We'll invite associates who have thought up something that's really workedwell for their storea particular item or a particular display to come share those ideas with us.

The VPI (Volume Producing Item) contest is a perfect example of how we put this into practice.

Everybody from the department manager level on up can choose an item of merchandise they want topromotewith big displays or whateverand then we see whose item produces the highest volume. I'vealways thought of the VPI contest not just as a way to stimulate sales, but as a method of teaching ourassociates how to become better merchants, to show them what can be done by picking an item that'savailable and figuring out a creative way to sell it, or buy it, or both. It gives them the opportunity to actthe way we used to in the early days. They can do crazy things, like pick an item and hang it all over atree filled with stuffed monkeys in the middle of the store. Or drive a pickup truck into action alley and fillit with car-washing sponges.

We're not just looking for merchandising ideas from our associates. Our latest effort is a program calledYes We Can, Sam!which, by the way, I did not name. Again, we invite hourly associates who havecome up with money-saving ideas to attend our Saturday morning meeting. So far, we figure we've savedabout $8 million a year off these ideas. And most of them are just common-sense kinds of things thatnobody picks up on when we're all thinking about how big we are. They're the kinds of things that comefrom thinking small. One of my favorites came from an hourly associate in our traffic department who gotto wondering why we were shipping all the fixtures we bought for our warehouses by common carrierwhen we own the largest private fleet of trucks in America. She figured out a program to backhaul thosethings on our own trucks and saved us over a half million dollars right there. So we brought her in,recognized her good thinking, and gave her a cash award. When you consider that there are 400,000 ofus, it's obvious that there are more than a few good ideas out there waiting to be plucked.

TOM COUGHLIN:

"Let me tell you how Wal-Mart came to have people greeters. Back in 1980, Mr. Walton and I wentinto a Wal-Mart in Crowley, Louisiana. The first thing we saw as we opened the door was this oldergentleman standing there. The man didn't know me, and he didn't see Sam, but he said, Hi! How are yaGlad you're here. If there's anything I can tell you about our store, just let me know.'

"Neither Sam nor I had ever seen such a thing so we started talking to him. Well, once he got over thefact that he was talking to the chairman, he explained that he had a dual purpose: to make people feelgood about coming in, and to make sure people weren't walking back out the entrance with merchandisethey hadn't paid for.

"The store, it turned out, had had trouble with shoplifting, and its manager was an old-line merchantnamed Dan McAllister, who knew how to take care of his inventory. He didn't want to intimidate thehonest customers by posting a guard at the door, but he wanted to leave a clear message that if you camein and stole, someone was there who would see it.

"Well, Sam thought that was the greatest idea he'd ever heard of. He went right back to Bentonville andtold everyone we ought to put greeters at the front of every single store. A lot of people thought he'd losthis mind.

"Our folks felt that putting someone at the door was a waste of money. They just couldn't see what Samand Dan McAllister were seeingthat the greeter sent a warm, friendly message to the good customer,and a warning to the thief. They fought him all the way on it. Some people-tried hard to talk him out of it.

They tried to ignore it.

"Sam just kept pushing and pushing and pushing. Every week, every meeting, he'd talk about greeters.

He'd throw fits whenever he went into a store and didn't find one. Gradually, he wore everyone downand got his way. I'd say it took about a year and a half because they really resisted it. But Sam wasrelentless.

"I guess his vindication had to be the day in 1989 when he walked into a Kmart in Illinois and found thatthey had installed people greeters at their front doors."If people greeters were the only good idea I'd picked up from the associates in the stores over the years,I'd still say that visiting the stores and listening to our folks was one of the most valuable uses of my timeas an executive. But really, our best ideas usually do come from the folks in the stores. Period. I shouldsay, though, that the people greeters were an exception in that I'm not generally disposed to ideas thatrequire adding on people and expenses.

Stay Lean, Fight BureaucracyAnytime a company grows as fast as Wal-Mart has, pockets of duplication are going to build up, andthere will be areas of the business which we may no longer need. No boss or employee really likes todwell on such matters: it's only human nature not to want to have your job, or the jobs of the people whowork for you, eliminated. But it is absolutely the responsibility of a company's top management to bethinking about this issue all the timeto ensure a sound future for the overall company.

One way I've approached this is by sticking to the same formula I used back when we had about fivestores. In those days, I tried to operate on a 2 percent general office expense structure. In other words, 2percent of sales should have been enough to carry our buying office, our general office expense, mysalary, Bud's salaryand after we started adding district managers or any other officerstheir salaries too.

Believe it or not, we haven't changed that basic formula from five stores to two thousand stores. In fact,we are actually operating at a far lower percentage today in office overhead than we did thirty years ago,and that includes tremendous expenses for computer support and distribution center supportthough notthe actual cost of running the distribution centers. Really, it includes everything that we supply centrally inthe way of support for the stores.

Some folks in the retail business have asked me where I came up with the 2 percent formula, and thetruth is I just pulled it out of the air. In the early days, most companies charged 5 percent of their sales torun their offices. But we have always operated lean. We have operated with fewer people. We have hadour people do more than in other companies. I think we came to work earlier and stayed later. It hasbeen our heritageour obsessionthat we would be more productive and more efficient than ourcompetition. And we've accomplished that goal.

A lot of first-time visitors are kind of shocked by our executive offices. Most people say my office andthose of all the other Wal-Mart executives look like something you'd find in a truck terminal. We're in aone-story office-warehouse building. The offices aren't real big, and the walls are covered withinexpensive paneling. We never had fancy furniture or thick carpet, or suites with bars for our executives.

I like them just like they are. We sure as heck won't win any interior decorating awards, but they're allwe need, and they must be working fine. Just ask our shareholders.

DAVID GLASS:

"If you don't zero in on your bureaucracy every so often, you will naturally build in layers. You never setout to add bureaucracy. You just get it. Period. Without even knowing it. So you always have to belooking to eliminate it. You know when Tom Watson, Sr., was running IBM, he decided they wouldnever have more than four layers from the chairman of the board to the lowest level in the company. Thatmay have been one of the greatest single reasons why IBM was successful.

"A lot of this goes back to what Deming told the Japanese a long time ago: do it right the first time. Thenatural tendency when you've got a problem in a company is to come up with a solution to fix it. Toooften, that solution is nothing more than adding another layer. What you should be doing is going to thesource of the problem to fix it, and sometimes that requires shooting the culprit.

"I'll give you an example that just drove Sam crazy until we started doing something about it. Whenmerchandise came into the back of a store, it was supposed to be marked at the right price or markedcorrectly on the spot. But because it often wasn't getting done properly, we created positions called testscanners, people who go around the stores with hand-held scanners, making sure everything is pricedcorrectly. There's another layer right there, and Sam didn't ever visit a store without asking if we reallyneeded these folks.

"Well, we still have some, but what we've done is overhaul our back-office procedures to make sure weget it right more often the first time, and, in the process, we eliminated one and a half people out of theoffice in every Wal-Mart store in the company. That's big bucks.

"Really it's a pretty simple philosophy. What you have to do is just draw a line in the dirt, and force thebureaucracy back behind that line. And then know for sure that a year will go by and it will be backacross that line, and you'll have to do the same thing again."I guess one reason I feel so strongly about not letting egos get out of control around Wal-Mart is that alot of bureaucracy is really the product of some empire builder's ego. Some folks have a tendency tobuild up big staffs around them to emphasize their own importance, and we don't need any of that atWal-Mart. If you're not serving the customer, or supporting the folks who do, we don't need you. Whenwe're thinking small, that's another thing we're always on the lookout for: big egos. You don't have tohave a small ego to work here, but you'd better know how to make it look small, or you might wind up introuble.

So you see what I mean when I say you have to think small to grow big. And really, I don't have anydoubt that Wal-Mart will stay the course and reach $100 billion in sales by the year 2000. It's achallenge. Nothing like it has ever been done before, but our folks will do it. And now I'm going toconfess to a really radical thought I've been having lately. I probably won't do anything about it, but thefolks who come after me are eventually going to have to face up to this question. Even by thinking small,can a $100 billion retailer really function as efficiently and productively as it should Or would maybe five$20 billion companies work better
Chapter 16  Giving Something Back
　　"I believe that every right implies a responsibility; every opportunity an obligation; every possession aduty."JOHN D. ROCKEFELLER, JR.

By now, I hope I've given you a pretty clear impression of what my business priorities have been overthe years. If I've explained myself well, you know that I have concentrated all along on building the finestretailing company that we possibly could. Period. Creating a huge personal fortune was never particularlya goal of mine, and the proof of that lies in the fact that even to this day most of my, and my family's,wealth remains in the form of Wal-Mart stock. I think most people in our position would have hedgedtheir bets a long time ago and diversified into all kinds of investments. As it's happened, though, our verysimplistic, very personal investment strategy has turned out far better than anyone could ever haveexpected. So Wal-Mart stock has made the Waltons a very wealthy family on paper anyway.

I won't deny for a second that my approach has been single-minded. I've concentrated on keeping ourWal-Mart stores and Sam's Clubs on track, and I have to admit that I never have spent a great deal ofmy time, or energy, thinking about what some of the broader implications of our family's wealth could be.

Maybe it's because we have never had any intention of liquidating our stock. Even so, the annualdividend income from that stock has become large in its own right, and it's that income which representsthe actual wealth available to us.

As I told you early on, this kind of wealth seems to naturally attract all kinds of folks who just want us togive them a handout. We have never been inclined to give any undeserving stranger a free ride, and wewill never change our minds about that. Nor do we believe that because we have money, we should becalled upon to solve every personal problem that comes to our attention, every problem of thecommunity, the state, or, for that matter, the country.

We do, however, believe in worthy causes, and we realize how fortunate we've been as a family. So weare committed to using our personal resources for as much benefit as possiblein the areas we feel needthe most help, employing the methods we think hold the most promise. And our family's gifts reflect awide variety of interests, spread across numerous organizations, with a heavy emphasis on education.

Most of the giving we have done has been either anonymously, or linked to strict requests for no publicity, and I'm not going to go into the financial details of our charitable activities here because I don't thinkit's anybody's business but our own. I will tell you, though, that we think we do our part.

In addition to a lot of educational institutions, recipients of Walton family gifts include church groups andcommunity projects like zoos and libraries and recreation facilities. We support hospitals and medicalresearch programs. We fund arts groups and theater groups and symphonies. We give to conservationand environmental causes and veterans' groups, as well as to economic development groups and freeenterprise groups. We support public schools and private schools. Since charity almost always begins athome, many of the recipients are in the communities or at institutions to which Helen and I, or ourchildren, have personal ties. But we have also supported national organizations and even a few localcauses of national importance in such cities asNew YorkandWashington. Helen has been actively, andpublicly, supportive of a number of institutions, including the Presbyterian Church, the University of theOzarks, and theNationalMuseumfor Women in the Arts. And I have supported such groups as theCitizens Against Government Waste, Students in Free Enterprise, and the Arkansas BusinessCouncilwhich folks around here insist on calling "The Good Suit Club."We also have some pet projects to which Helen and I together are strongly, and personally, committed.

In the last ten years we have funded a special scholarship program we started which sends kids fromCentral America to college here in Arkansas. Right now we've got about 180 of them enrolled at threedifferent Arkansas schools, and we pay about $13,000 a year per student to provide tuition,transportation, books, and room and board. We got the idea while we were traveling around down inthat part of the world. And when we learned that the then Soviet union and Cuba had programs to teachtheir values to kids from other places, we decided Americans ought to be doing the same sort of thingwith our values. We want kids to learn about the tremendous potential of the free enterprise system andto see for themselves what all the advantages are of a stable, democratic government. Besides that, it willhelp some of these students, who wouldn't have otherwise received any college education, to return totheir countries and do something about their serious economic development problems. Who knows,maybe one day some of them will be running Wal-Marts or Sam's Clubs in Honduras or Panama orGuatemalaor even Nicaragua. Closer to home, the Walton family sponsors seventy scholarships of$6,000 each every year for children of Wal-Mart associates.

So we feel pretty good about what we've done up until now. But I do realize there's a bigger issue atstake here, and I've been doing a lot of thinking on it lately. As a family, we've been in the planning stagesof how we want to leverage our resources for a while now, but really the serious business of getting itdone will begin after I'm gone. Helen and I expect that an amount at least equal to our share of the familyassets will go to nonprofit organizations over a number of years.

In all likelihood, education is going to be the issue we focus on the most. It is the single area whichcauses me the most worry about our country's future. As a nation, we have already learned that we mustcompete worldwide with everybody else, and our educational process has more to do with our ability tocompete successfully than anything else. Unless we get ourselves on the right track pretty quickly, andstart rebuilding our system into one that compares favorably with the rest of the world's, we couldseriously jeopardize the future of this great country of ours. Frankly, I'd like to see an all-out revolution ineducation. We've got to target the inner-city schools and the rural poverty pockets like the MississippiDelta and figure out a way to make a difference. We have to start at the preschool level, and developways to change the environment for children so they have a chance to stay in school and learn to valuetheir educations. We have to look at the effects of so many single mothers and fathers leaving their kids athome with no guidance, and find ways to help them encourage their kids.

Incidentally, my share of the proceeds from this book will go to the New American School Corporation,which is a private initiative started by business leaders who have pledged to raise $200 million for thedevelopment of "break-the-mold schools." It's a true nonpartisan effort aimed at helping Americanschools meet the six goals established by a national governors' task force, which was convened byPresident Bush, and chaired by Arkansas governor Bill Clinton.

As the family focuses more broadly on educational reform, we want to be very careful. We are devoutbelievers in the Wal-Mart way of doing things, and we want some basis by which to measure ourinvestment. We're not satisfied that the traditional methods by which charitable foundations are operatedreally meet our criteria. Some people have crowed a great deal about all their philanthropy over theyears, but too many of these foundations, I suspect, were only begun as tax shelters without much realsense of purpose. Many of them seem to have become very nice places to work for a small group offolks who have built up pretty thick crusts of administration and bureaucracy. Those are two of the thingswe have fought the hardest to keep out of our company, so naturally we don't want them clogging up ournonprofit efforts.

We are going to insist that whatever program we support incorporates those same values. When itcomes to college educations and scholarships, for example, I've always favored programs that require therecipients to work and kick in some of their own money. For that matter, I've always preferred to hirepeople who had to at least partly work their way through schoolno doubt because of my ownbackground. The secret lies in motivating kids who aren't getting educated today towant to putthemselves through school, and to make them understand the rewards they can expect when they do.

So we are going to approach philanthropy with the same lack of reverence we gave to the traditionalmethods of the retail business when we started out there. We are going to see if we can't shake up someof the time-honored assumptions about what you can teach people, about what you can do with peoplewhose self-esteem has been beaten down, and about how you can motivate ordinary people to doextraordinary things. As just one example of the kinds of folks we're calling on in putting this efforttogether, we asked Lamar Alexander, the former governor of Tennessee and now U.S. Secretary ofEducation, to attend our last family meeting here in Bentonville and talk with us about some of the ideashe's come across for improving our public education system.

We don't come by this passion for improving education out of some fuzzy-headed notion or somethingwe read somewhere. We see the need every day at Wal-Mart. In the old days, just being bright andwilling to work hard was enough to give you all the opportunity you needed at our company. But we aresuch a sophisticated company today, and have moved so rapidly in the areas of technology andcommunications, that skill and knowledge in these fields have become a vital part of our business. Noneof this is news to anyone who keeps up with world business trends. This is the direction in which we're allheaded. And to succeed, we're just going to have to do a better job of educating and training our workforce.

One aspect of this whole philanthropy issue that has annoyed me considerably over the years is thecriticism by some of our detractors that Wal-Mart doesn't do its fair share of giving to charities. Thecriticism seems to come from folks who say we don't meet the standard guidelines for corporations,guidelines which are set, I guess, by the people who run the charity business.

Wal-Mart, like many other corporations, conducts a very aggressive United Way campaign which meetswith great success among our associates every year. In fact, we keep our United Way goal sign in theyard right outside my office here so everybody can see how we're doing. We strongly believe in UnitedWay becausein spite of all the publicity it received recently for some problems in the nationalofficemost all the money that's collected in these campaigns is directed locally. We believe in locallydirected charities, so we have a matching grant program for associates who want to raise money forcharities of their choice. We're also a big contributor to the Children's Miracle Network Telethonwhichsupports locally directed children's hospitals. Last year, Wal-Mart and its associates were the largestsingle contributors to this campaignat $7.5 million.

I think quite a few companies use charitable giving guidelines as a way to say, in effect, "We gave at theoffice," when it comes to thinking about what overall good the companies should be accomplishing. In myopinion, Wal-Mart is an entirely different sort of enterprise from that and I would argue that our relentlesseffort to improve our business has always been tied to trying to make things better for the folks who liveand work in our communities. We have built a company that is so efficient it has enabled us to save ourcustomers billions of dollars, and whether you buy into the argument or not, we believe it. That in itself isgiving something back, and it has been a cornerstone philosophy of our company.

For example, we did $43 billion in sales this year. For the last ten years1982 to 1992we haveaveraged sales of, say, $13 billion a year. So that's about $130 billion in sales. If we only saved ourcustomers 10 percent over what they would be paying if we weren't thereand I think that's veryconservativethat would be $13 billion we've saved them. That's $13 billion which is a product of a freemarket system that allows us to operate efficiently, and it's the reason our customers love us so. The truthis that Wal-Mart has been a powerful force for improving the standard of living in our mostly rural tradeareas, and our customers recognize it.

We do a lot of things to take care of our own. Some of them you already know about. Our associateshave almost $2 billion in their profit sharing fund, some of which I suppose the company could have givento charity instead. We have a relief fund for associates who are the victims of natural disasters. And eachyear, every Wal-Mart store sponsors one student in its community to a $1,000 scholarship.

Beyond that, we feel very strongly that Wal-Mart really isnot, andshould not be, in the charity business.

We don't believe in taking a lot of money out of Wal-Mart's cash registers and giving it to charity for thesimple reason that any debit has to be passed along to somebodyeither our shareholders or ourcustomers. A few years ago, when Helen convinced me that our associates here in Bentonville needed afirst-class exercise facility, she and I paid the million dollars in construction costs ourselves, plus an annualsubsidy for a few years to get it started. We paid for it to show our sincere appreciation to theassociates, but also because I don't believe in asking the customers or the shareholders to pay forsomething like thatas worthy a cause as it may be. By not designating a large amount of corporate fundsto some charity which the officers of Wal-Mart may happen to like, we feel we give our shareholdersmore discretion in supporting their own charities. And I have been particularly proud of the reallygenerous community support shown by some of our shareholders who have been with us since way backwhenespecially the early store managers. Willard Walker and Charlie Baum are two guys who have justdone great things for the community with some of what they've accumulated through their Wal-Martholdings.

Maybe the most important way in which we at Wal-Mart believe in giving something back is through ourcommitment to using the power of this enormous enterprise as a force for change. One of the betterexamples of what I'm talking about is our Bring it Home to the U.S.A. program, which we started in1985 in response to the soaring U.S. trade deficit.

Wal-Mart, like every other American retailer, is a huge importer of merchandise from overseas. In somecasestoo many in my opinionimporting is really our only alternative because a lot of American-madegoods simply aren't competitive, either in price, or quality, or both. We committed ourselves to seeing ifwe could do anything to improve the situation. The remedy we envisioned wasn't some blind patrioticidea that preaches buying American at any cost. We, like any other retailer, will only buy American ifthose goods can be produced efficiently enough to offer good value. We're not interested in charity here;we don't believe in subsidizing substandard work or inefficiency. So our primary goal became to workwith American manufacturers, and see if our formidable buying power could help them deliver the goodsand, in the process, save some American manufacturing jobs. I sent out an open letter to our suppliers,inviting them to work with us on the program. "Wal-Mart believes American workers can make thedifference," I told them, "if management provides the leadership."We were surprised ourselves at the results. It turned out that if Wal-Mart committed to high volumepurchases well in advance of shipping deadlines, a lot of American manufacturers could save enough onthe purchase of materials, personnel scheduling, and inventory costs to realize significant efficiency gains.

So, in fact, they could turn out a wide variety of merchandiseflannel shirts, candles, men's knit shirts,ladies'sweaters, bicycles, beach towels, film, videotapes, furniture, even toysat competitive prices. Wealso took a close look at our overseas buying practices and discovered a number of hidden costs, suchas having to own inventory from the time it leaves port on a ship. Using that data, we developed aformula which enabled us to make a true apples-to-apples cost comparison of buying somethingoverseas versus buying it at home. Now, if we can get within 5 percent of the same price and quality, wetake a smaller markup and go with the American product.

What we learned was that we had fallen into a pattern of knee-jerk import buying without reallyexamining possible alternatives. In the past, we would just take our best-selling U.S.-made items, sendthem to the Orient, and say, "See if you can make something like this. We could use 100,000 units ofthis, or more, if the quality holds up." I'm sure a lot of other retailers do the same thing. Today, weinstruct our buyers to make trips to places like Greenville, South Carolina; Dothan, Alabama; Aurora,Missouri; and hundreds of other out-of-the-way places in Pennsylvania, New York, Ohio, or NewHampshire, before just routinely dashing off a letter of credit to the Far East. If we could all take a littleextra trouble to work some of these deals outand the manufacturers will continue to come up with theirown creative programsI think there's still a tremendous amount of untapped potential left in this idea.

As usual, some of our criticsmostly unions in this casetook a shot at me for this idea. They said I waswrapping myself in the flag and pulling a typical Sam Walton promotion to hide the fact that we sell a lotof import goods. These folks, I'm afraid, are really living in the past. They don't believe in a free market.

They're not interested in new solutions. And they only care about jobs if they areunion jobs, many ofwhich, frankly, have priced themselves out of the market either with unrealistic wages or total inflexibility.

With this approach, we estimate we have saved or created almost 100,000 American manufacturingjobs. So before anybody dismisses Bring it Home as a publicity stunt, they should listen to the peoplewhose jobs were saved, or created, by the program.

FARRIS BURROUGHS, PRESIDENT, FARRIS FASHIONSBRINKLEY, ARKANSAS:

"It's the best thing that ever happened to Brinkley, and certainly the best thing that ever happened to me.

Before, we had a contract with Van Heusen for Penney's and Sears, but in 1984 they told us they weremoving everything to China. We were struggling from season to season with ninety jobs, when I got thiscall from a guy claiming to be Sam Walton. It turns out he actually was Sam Walton, and he wanted toknow if we thought we could make 50,000 dozen flannel shirts for him. I'll tell you what, though. He's theonly guy I ever worked for who looked me right in the eye and said, 'Son, if you can't make money offthis project, don't do it.' Most retailers couldn't care less whether the manufacturer makes money or not.

"Anyway, today we're making about two and a half million Wal-Mart shirts, and we've gone from 90employees the week Mr. Sam called to 320 today. And we know where it comes from. EveryChristmas, we give our employees Wal-Mart gift certificates."There's no charity at all involved in this program, and, in fact, I'm proud to say that it benefits us atWal-Mart in a very direct way. Every job we save creates another potential Wal-Mart customer who'snot worrying about where his or her next dollar's coming from. They have a job, and we have acustomer. So we all come out ahead. Farris was one of our early success stories, and since then we'veworked out all kinds of Buy American deals with small and large manufacturers, including FieldcrestCannon, 3M, Sunbeam, Mirro Foley, U.S. Electronics, Kentogs, Capital-Mercury, Mr. Coffee, Lasko,and Huffy.

From the time the program began in 1985, until the end of last year1991we estimate that we boughtAmerican-made goods with a retail value of more than $5 billion that would previously have beenpurchased overseas. And just to keep everybody thinking along these lines, we always post our latesttally and our latest Bring it Home success story right by the door where all our vendors have to enter ourbuilding to make sales calls.

In the same spirit, we're in the early stages of an environmental initiative, encouraging suppliers andmanufacturers to eliminate any wasteful practicessuch as unnecessary packagingthat we can. Also, wehave a fairly new program in which we donate 2 percent from purchases of Sam's American Choiceproductsa selection of our own private label products toward scholarships for students studyingmathematics, hard sciences, and computer sciences.

We aren't the least bit naive about how big a stick Wal-Mart swings in the world of retailing these days.

We know we can be very influentialpowerful if you prefer. So today I think it's important for our peopleto remember that things aren't the same as the old days, when we were the scrappy underdog having tofight for every single break. We still want to drive a hard bargain, but now we need to guard againstabusing our power. We want to find more ways, like Bring it Home, in which we can use our influence togive something back.
Chapter 17  Running a Successful Company: Ten Rules That Worked for Me
　　"One thing you'll notice if you spend very much time talking with Sam about Wal-Mart's success. He'salways saying things like 'This was the key to the whole thing,' or That was our real secret.' He knows aswell as anyone that there wasn't any magic formula. A lot of different things made it work, and in oneday's time he may cite all of them as the 'key' or the 'secret.' What's amazing is that for almost fifty yearshe's managed to focus on all of them at onceall the time. That's his real secret."DAVID GLASSI think we've covered the story of how all my partners and associates and I over the years builtWal-Mart into what it is today. And in the telling, Ithink we've covered all the principles which resulted inthe company's amazing success. A whole lot has changed about the retailing business in the forty-sevenyears we've been in itincluding some of my theories. We've changed our minds about some significantthings along the way and adopted some new principlesparticularly about the concept of partnership in acorporation. But most of the values and the rules and the techniques we've relied on have stayed thesame the whole way. Some of them are such simple common-sense old favorites that they hardly seemworth mentioning.

This isn't the first time that I've been asked to come up with a list of rules for success, but itis the firsttime I've actually sat down and done it. I'm glad I did because it's been a revealing exercise for me. Thetruth is, David Glass is right. I do seem to have a couple of dozen things that I've singled out at one timeor another as the "key" to the whole thing. One I don't even have on my list is "work hard." If you don'tknow that already, or you're not willing to do it, you probably won't be going far enough to need my listanyway. And another I didn't include on the list is the idea of building a team. If you want to build anenterprise of any size at all, it almost goes without saying that you absolutely must create a team of peoplewho work together and give real meaning to that overused word "teamwork." To me, that's more thegoal of the whole thing, rather than some way to get there.

I believe in always having goals, and always setting them high. I can certainly tell you that the folks atWal-Mart have always had goals in front of them. In fact, we have sometimes built real scoreboards onthe stage at Saturday morning meetings.

One more thing. If you're really looking for my advice here, trying to get something serious out of thisexercise I put myself through, remember: these rules are not in any way intended to be the TenCommandments of Business. They are some rules that worked for me. But I always prided myself onbreaking everybody else's rules, and I always favored the mavericks who challenged my rules. I mayhave fought them all the way, but I respected them, and, in the end, I listened to them a lot more closelythan I did the pack who always agreed with everything I said. So pay special attention to Rule 10, and ifyou interpret it in the right spiritas it applies to youit could mean simply: Break All the Rules.

For what they're worth, here they are. Sam's Rules for Building a Business:

RULE 1: COMMIT to your business. Believe in it more than anybody else. I think I overcame everysingle one of my personal shortcomings by the sheer passion I brought to my work. I don't know if you'reborn with this kind of passion, or if you can learn it. But I do know you need it. 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 aroundwill catch the passion from you like a fever.

RULE 2: SHARE your profits with all your associates, and treat them as partners. In turn, they will treatyou as a partner, and together you will all perform beyond your wildest expectations. Remain acorporation and retain control if you like, but behave as a servant leader in a partnership.

Encourage your associates to hold a stake in the company. Offer discounted stock, and grant themstock for their retirement. It's the single best thing we ever did.

RULE 3: MOTIVATE your partners. Money and ownership alone aren't enough. Constantly, day byday, think of new and more interesting ways to motivate and challenge your partners. Set high goals,encourage competition, and then keep score. Make bets with outrageous payoffs. If things get stale,cross-pollinate; have managers switch jobs with one another to stay challenged. Keep everybodyguessing as to what your next trick is going to be. Don't become too predictable.

RULE 4: COMMUNICATE everything you possibly can to your partners. The more they know, themore they'll understand. The more they understand, the more they'll care. Once they care, there's nostopping them. If you don't trust your associates to know what's going on, they'll know you don't reallyconsider them partners. Information is power, and the gain you get from empowering your associatesmore than offsets the risk of informing your competitors.

RULE 5: APPRECIATE everything your associates do for the business. A paycheck and a stock optionwill buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do forthem. We like to hear it often, and especially when we have done something we're really proud of.

Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They'reabsolutely freeand worth a fortune.

RULE 6: CELEBRATE your successes. Find some humor in your failures. Don't take yourself soseriously. Loosen up, and everybody around you will loosen up. Have fun. Show enthusiasmalways.

When all else fails, put on a costume and sing a silly song. Then make everybody else sing with you.

Don't do a hula on Wall Street. It's been done. Think up your own stunt. All of this is more important,and more fun, than you think, and it really fools the competition. "Why should we take those cornballs atWal-Mart seriously"RULE 7: LISTEN to everyone in your company. And figure out ways to get them talking. The folks onthe front linesthe ones who actually talk to the customerare the only ones who really know what's goingon out there. You'd better find out what they know. This really is what total quality is all about. To pushresponsibility down in your organization, and to force good ideas to bubble up within it, youmust listen towhat your associates are trying to tell you.

RULE 8: EXCEED your customers' expectations. If you do, they'll come back over and over. Givethem what they wantand a little more. Let them know you appreciate them. Make good on all yourmistakes, and don't make excusesapologize. Stand behind everything you do. The two most importantwords I ever wrote were on that first Wal-Mart sign: "Satisfaction Guaranteed." They're still up there,and they have made all the difference.

RULE 9: CONTROL your expenses better than your competition. This is where you can always find thecompetitive advantage. For twenty-five years runninglong before Wal-Mart was known as the nation'slargest retailerwe ranked number one in our industry for the lowest ratio of expenses to sales. You canmake a lot of different mistakes and still recover if you run an efficient operation. Or you can be brilliantand still go out of business if you're too inefficient.

RULE 10: SWIM upstream. Go the other way. Ignore the conventional wisdom. If everybody else isdoing it one way, there's a good chance you can find your niche by going in exactly the oppositedirection. But be prepared for a lot of folks to wave you down and tell you you're headed the wrongway. I guess in all my years, what I heard more often than anything was: a town of less than 50,000population cannot support a discount store for very long.

Those are some pretty ordinary rules, some would say even simplistic. The hard part, the real challenge,is to constantly figure out ways to execute them. You can't just keep doing what works one time,because everything around you is always changing. To succeed, you have to stay out in front of thatchange.
Chapter 18 Wanting to Leave a Legacy
　　"With the possible exception of Henry Ford, Sam Walton is the entrepreneur of the century."-----TOM PETERS,co-author ofIn Search of ExcellenceBy now, it's probably clear to you that I've devoted most of my life to Wal-Martstarting it, growing it,and always refining the concept of this whole phenomenon. My life has been full and fun and challengingand rewarding beyond even my wildest expectations. I've pretty much gotten my own way for the wholerun. While a lot of people were working away at jobs they might not have particularly enjoyed, I washaving the time of my life. If I wasn't in the stores trying to pump up our associates to do an even betterjob, or in the office looking over numbers to see where the next trouble spot was going to pop up, orleading cheers at a Saturday morning meeting, I was probably at the stick of my airplane, looking outover some part of this beautiful country of oursand checking out the number of cars in those Kmartparking lots. Or maybe I was taking a few hours off to get in some tennis or to hunt with my dogs.

All that has wound down for me now. I'm really sick these days, and I guess when you get older, andillness catches up with you, you naturally turn just a little bit philosophicalespecially late at night whenyou can't sleep and your mind is turning everything over and over trying to take stock of where you'vebeen and what you've done. The truth is that if I hadn't gotten sick, I doubt I would have written thisbook, or taken the time to try to sort my life out. As you now know, temperamentally, I'm much toobiased toward action to undertake such a sedentary project. But since I have, I'm going to go all the wayand try to share with you how I feel about some things that seem important to me.

This will sound strange to people who know me well, but lately I've wondered if I should feel bad abouthaving been so wholly committed to Wal-Mart. Was it really worth all the time I spent away from myfamily Should I have driven my partners so hard all these years Am I really leaving behind somethingon this earth that I can be proud of having accomplished, or does it somehow lack meaning to me nowthat I'm facing the ultimate challengeWe could've gone a lot of different ways at several points. Many folks started out in retailing just like Idid and built their companies up to a point, and then said, "I've had enough!" and sold out and bought anisland. I could have kicked back and played with the grandchildren, or I could have devoted the latteryears of my life to good works, I guess. I don't know that anybody else has ever done it quite like me:

started out as a pure neophyte, learned his trade, swept the floor, kept the books, trimmed the windows,weighed the candy, rung the cash register, installed the fixtures, remodeled the stores, built anorganization of this size and quality, and kept on doing it right up to the end because they enjoyed it somuch. No one that I know of has done it that way.

Here's how I look at it: my life has been a tradeoff. If I wanted to reach the goals I set for myself, I hadto get at it and stay at it every day. I had to think about it all the time. And I guess what David Glass saidabout me is true: I had to get up every day with my mind set on improving something. Charlie Baum wasright too when he said I was driven by a desire to always be on the top of the heap. But in the largersensethe life and death sensedid I make the right choicesHaving now thought about this a lot, I can honestly say that if I had the choices to make all over again, Iwould make just about the same ones. Preachers are put here to minister to our souls; doctors to healour diseases; teachers to open up our minds; and so on. Everybody has their role to play. The thing is, Iam absolutely convinced that the only way we can improve one another's quality of life, which issomething very real to those of us who grew up in the Depression, is through what we call freeenterprisepracticed correctly and morally. And I really believe there haven't been many companies thathave done the things we've done at Wal-Mart. We've improved the standard of living of our customers,whom we've saved billions of dollars, and of our associates, who have been able to share profits. Manyof both groups also have invested in our stock and profited all through the years.

When we started out, the whole idea was nothing but a pure profit motive: our business strategy was tobring the customers into the tent by selling the highest quality goods we could at the lowest possibleprices. It worked, and those few of us who believed in it from early on and invested in the idea got richoff it.

Obviously, everybody who went to work in a Wal-Mart didn't get rich. But there've been many storiesover the years of associates who've made enough at least to buy their first car, or own their first home,and we've had several associates who've retired with over a million dollars in profit sharing. We've beenable to help our associates to a greater degree than most companies because of what you'd have to callenlightened self-interest; we were selfish enough to see in the beginning the value to the company ofletting them share the profits.

Also, I think those associates in our company who believe in our ideals and our goals and get with theprogram have felt some spiritual satisfactionin the psychological rather than the religious senseout of thewhole experience. They learn to stand up tall and look people in the eye and speak to them, and they feelbetter about themselves, and once they start gaining confidence there's no reason they can't keep onimproving themselves. Many of them decide they want to go to college, or to manage a store, or takewhat they've learned and start their own business, or do a good job and take pride in that. Wal-Mart hashelped their pocketbooks and their self-esteem. There are certainly some union folks and somemiddlemen out there who wouldn't agree with me, but I believe that millions of people are better offtoday than they would have been if Wal-Mart had never existed. So I am just awfully proud of the wholedeal, and I feel good about how I chose to expend my energies in this life.

I know one thing for sure. We certainly changed the way retail works in this country. And when I saywe, I don't mean just Wal-Mart. Some of the fellows I told you about early in the book, like Sol Priceand Harry Cunningham and John Geisse, deserve a lot of the credit too. The whole philosophy haschanged in the retail business because of the quality discounters, of whom I believe we are the very best.

Almost from the beginning, our objective has been to charge just as little as possible for our merchandise,and to try and use what muscle we've had to work out deals with our suppliers so we can offer the verybest quality we can. Many people in this business are still trying to charge whatever the traffic will bear,and they're simply on the wrong track. I'll tell you this: those companies out there who aren't thinkingabout the customer and focusing on the customers' interests are just going to get lost in the shuffleif theyhaven't already. Those who get greedy are going to be left in the dust.

There are lessons in what's happened at Wal-Mart that go beyond retail and apply to many otherbusinesses. You start with a given: free enterprise is the engine of our society; communism is pretty muchdown the drain and proven so; and there doesn't appear to be anything else that can compare to a freesociety based on a market economy. Nothing can touch that system not unless leadership andmanagement get selfish or lazy. In the future, free enterprise is going to have to be done wellwhichmeans it benefits the workers, the stockholders, the communities, and, of course, management, whichmust adopt a philosophy of servant leadership.

Recently, I don't think there's any doubt that a lot of American management has bent over too fartoward taking care of itself first, and worrying about everybody else later. The Japanese are right on thispoint: you can't create a team spirit when the situation is so onesided, when management gets so muchand workers get so little of the pie. Some of these salaries I see out there are completely out of line, andeverybody knows it. It's obvious that most companies would be much better served by basing managers'

pay on the performance of the company or return on investment to the shareholders or some yardstickwhich clearly takes into account how well they're doing their job. And the formula has to make sure thatprofits are divided fairly among workers, management, and stockholders, according to their contributionsand risks. At Wal-Mart, we've always paid our executives less than industry standards, sometimesmaybe too much less. But we've always rewarded them with stock bonuses and other incentives relateddirectly to the performance of the company. It's no coincidence that the company has done really well,and so have they.

I believe our way of looking at things is going to come into its own in this decade, and the next century.

The way business is conducted worldwide is going to be different, and a lot of that difference is going toreflect what we egotistically think of as the Wal-Mart Way. In the global economy, successful business isgoing to do just what Wal-Mart is always trying to do: give more and more responsibility for makingdecisions to the people who are actually on the firing line, those who deal with the customers every day.

Good management is going to start listening to the ideas of these line soldiers, pooling these ideas anddisseminating them around their organizations so people can act on them. That's the way the successfulcompanies out there already are doing it: the 3M's, the Hewlett-Packards, the G.E.s, the Wal-Marts.

Great ideas come from everywhere if you just listen and look for them. You never know who's going tohave a great idea.

We can turn the whole world around just the way we've done it in retail. We can do it better than theJapanese because we're more innovative, we're more creative. We can compete with labor inBangladesh or wherever because we have better technology, which can give us more efficient equipment.

We can get beyond a lot of our old adversarial relationships and establish win-win partnerships with oursuppliers and our workers, which will leave us with more energy and talent to focus on the importantthing, meeting the needs of our customers. But all this requires overcoming one of the most powerfulforces in human nature: the resistance to change. To succeed in this world, you have to change all thetime.

When you look at what's happened to the American auto industry, it's tempting to want to treat theJapanese unfairlythe way they treat us with their protectionist laws. Our auto industry doesn't play onlevel ground. But I don't think we should counter with protectionism because it doesn't address the realproblem: the quality of our product doesn't compete with that of the Japanese, whether we want to admitit or not. The challenge is a great one for management. What they have to do is build a partnership withtheir people.

I understand that this industry has all kinds of problems we haven't seen in ours. I know that U.S. autoworkers make $22 an hour versus $16 in Japan, and that Mexican auto workers earn much less. I'm notsaying I could solve all these problems, but I'd love to have the fun of trying to take a unionized companytoday and sell its people on the idea of having to be competitive globallywhether it was in autos, or steel,or electronics. I'd love a chance at that, the pleasure of seeing if they could be motivated into a team thatwould share in all the company's successand still have a union. It would take a powerful lot ofpersuading to pull this off, but I guarantee it could be accomplished by somebody obsessed andpersistent enough. But if American management is going to say to their workers that we're all in thistogether, they're going to have to stop this foolishness of paying themselves $3 million and $4 millionbonuses every year and riding around everywhere in limos and corporate jets like they're so much betterthan everybody else.

I'm not saying every company should necessarily be as chintzy as Wal-Mart. Everybody's not in thediscount business, consumed by trying to save every possible dollar for their customers. But I wonder if alot of these companies wouldn't do just as well if their executives lived a little more like real folks. A lot ofpeople think it's crazy of me to fly coach whenever I go on a commercial flight, and maybe I do overdo ita little bit. But I feel like it's up to me as a leader to set an example. It's not fair for me to ride one wayand ask everybody else to ride another way. The minute you do that, you start building resentment andyour whole team idea begins to strain at the seams.

But now it's time for me to forget about all that's past and think about what I really want the legacy ofWal-Mart to be in the future. I'd like to believe that as Wal-Mart continues to thrive and grow, it cancome to live up to what someone once called us: the Lighthouse of the Ozarks. Only I hope we canspread the concept further than our home region here in the foothills because we're really a nationalcompany now. For Wal-Mart to maintain its position in the hearts of our customers, we have to studymore ways we can give something back to our communities. I'm tremendously proud of the things we'vedone that I've already mentioned. And we're already studying ways we can go further to stay involved, tobe more socially conscious all around. As I've said, our country desperately needs a revolution ineducation, and I hope Wal-Mart can contribute at some level, if for no other reason than selfish ones.

Without a strong educational system, the very free enterprise system that allows a Wal-Mart or an IBMor a Procter & Gamble to appear on the scene and strengthen our nation's economy simply won't work.

You may have trouble believing it, but every time we've tested the old saying, it has paid off for us inspades: the more you give, the more you get.

Finally, a lot of folks ask me two related questions all the time. The first one is could a Wal-Mart-typestory still occur in this day and age My answer is of course it could happen again. Somewhere out thereright now there's someoneprobably hundreds of thousands of someoneswith good enough ideas to goall the way. It will be done again, over and over, providing that someone wants it badly enough to dowhat it takes to get there. It's all a matter of attitude and the capacity to constantly study and question themanagement of the business.

The second question is if I were a young man or woman starting out today with the same sorts of talentsand energies and aspirations that I had fifty years ago, what would I do The answer to that is a littleharder to figure out. I don't know exactly what I would do today, but I feel pretty sure I would be sellingsomething, and I expect it would be at the retail level, where I could relate directly to customers off thestreet. I think I'd study the retail field today and go into the business that offered the most promise for theleast amount of money. Probably some kind of specialty retail, something to do with computers maybe,or something like the Gapeven the Body Shop.

Anyway, the next time some overeager, slightly eccentric shopkeeper opens up a business in your neckof the woods, before you write him off too quickly, remember those two old codgers who gave memaybe sixty days to last in my dime store down in Fayetteville. Go check the new store out. See whatthey've got to offer, see how they treat you, and decide for yourself if you ever want to go back. Becausethis is what it's really all about. In this free country of ours, that shopkeeper's success is entirely up to you:

the customer.
A Postscript
　　For the last two years of Dad's life, he fought a difficult battle against a form of bone cancer, multiplemyeloma, which, from the time of diagnosis, he understood would almost certainly prove fatal. Like everyother challenge he encountered in his life, he met this one head-on, full of optimism and ready to try newways of conquering the problem. So, with the encouragement of the whole familyand the meticuloushands-on medical care management of my brother JohnDad embarked on a variety of experimentaltreatment programs with a group of excellent doctors.

He took his medicine, but he never dwelled on either the illness that had befallen him or its potentialcures. Rather, he seized the day. At the time of the diagnosis, in early 1990, he had been working,somewhat ambivalently, on an autobiography. He canceled that project, choosing instead to spend mostof his time and energy doing what he enjoyed most: flying his plane from town to town, going fromWal-Mart to Wal-Mart, visiting with his beloved associates. Toward the end of 1991, when he began torealize that his illness was catching up with him and would soon limit his mobility, Dadat the urging of ourfamily and others again turned his attention to the idea of putting his story down on paper while he stillcould. Once he decided to write it, he threw himself into this book project with the same focus andenergy he applied to everything he did in life. He was very particular about what he wanted his book tobe, and he worked at it daily, making revisions, adding anecdotes, refining style points, urging others tocontribute their memories.

By early March, his spirits remained high as he continued work on the book, but his physical conditionwas worsening. Then he received one of the great surprises of his life. The White House wanted topresent him with the Presidential Medal of Freedom, our nation's highest civilian award. President Bushand the First Lady would be traveling to Bentonville to present the medal to Dad, and he was thrilled bythe honor. At such an occasion, of course, Dad could have invited anyone he wanted to attend theceremony, but we hardly had to ask whom he wanted to be there with him: his Wal-Mart associates.

The award was presented on the morning of Tuesday, March 17, in the auditorium of the Wal-Martgeneral offices, where Dad had held forth on so many Saturday mornings. The room was filled withseveral hundred of his associates, and their affection for Dad on this special day was particularly moving.

They really outdid themselves, and I think they may even have startled President and Mrs. Bushnot tomention the White House press corpsby giving one of the most enthusiastic Wal-Mart cheers we'veheard around here in some time. Dad's pleasure was evident, and he called it "the highlight of our entirecareer." Of course, he shared all the credit with his associates. But it was a poignant day. He had to berolled onto the stage in a wheelchair, and I think most of the associates sensed that it would be their lastget-together with him. The room was full of pride that daybut also lots of memories, and many tears.

Here is what the presidential citation said of Dad:

An American original, Sam Walton embodies the entrepreneurial spirit and epitomizes the Americandream. Concern for his employees, a commitment to his community, and a desire to make a differencehave been the hallmarks of his career. By sponsoring scholarships for Latin America, he has also workedto bring peoples closer together and to share with others the American ideals he so well represents. Adevoted family man, business leader, and statesman for democracy, Sam Walton demonstrates thevirtues of faith, hope and hard work. America honors this captain of commerce, as successful in life as inbusiness.

Afew days later, Dad entered the University of Arkansas hospital in Little Rock. Even in the final weeksof his life, he took great pleasure in doing what he had always done. One of the last people he spoke withoutside the family was a local Wal-Mart manager who, at our request, dropped by to chat with Dadabout his store's sales figures for the week. Then, less than three weeks after receiving the Medal ofFreedom, and just days after his seventy-fourth birthday, Dad's struggle with cancer finally ended. OnSunday morning, April 5, he died peacefullyas inspirational in facing death as he had been in facing life.

We will all miss him.

Rob WaltonChairman, Wal-Mart Stores Bentonville, Arkansas May 1992
Co-Author's Note
　　Sam Walton had a long history of avoiding those who wanted to write about him, and this book neverwould have come to be without several people whose persistent pursuit of its subject spanned a numberof years.

Much of the credit for my own involvement belongs to Marshall Loeb, managing editor ofFortune andmy bosswho first dispatched me to the Ozarks in December of 1988, with a clear understanding thattaking no for an answer simply wasn't an option. Kris Dahl, my agent at ICM, first encouraged me towrite a book, and listened patiently to the ups and downs of this particular one for years.

More than anyone else, Doubleday vice president Bill Barrythe fast-talking, letter-writing New Yorkbook "merchant"deserves credit for somehow first convincing Sam to write a book at all. His ongoingefforts have transcended all normal roles of a publisher. Not the least of his contributions was selectingeditor Deb Futter, who rushed in where any sane person would have feared to tread. She turned in aremarkable performance despite unbelievable deadline pressure, as have so many people in otheressential roles at Doubleday.

Inside Wal-Mart, there were co-conspirators as well. Without the patient, shrewd encouragement ofSam's personal secretary, Becky Elliott, he would have found some excuse to permanently postpone thebook. From the outset, Wal-Mart CEO David Glass lent it his official seal of approval, which meant allthe difference. And the entire Walton family supported the book. Helen Walton's grace and hospitalityunder difficult circumstances were most appreciated, as were her Razorback basketball tickets. RobWalton's professional shepherding of the project made it easier on everyone.

Finally, personal thanks to Kate Ellis and Jake Huey for enduring my absence and peripatetic schedulewithout complaint. My only regret is that I am unable to thank Sam Walton for giving me the opportunityto help him chronicle his extraordinary life. Collaborating with Sam on anything was usually theexperience of a lifetime, and this book proved no exception.

John HueyAtlanta, Georgia May 1992

The End