I think most people believe that Sam Walton, founder of Wal-Mart, was a first mover in big box discounting. He was not. Several others sprouted up around the country prior to him opening up his first Wal-Mart, and some of the largest retailers in the United States launched discounting concepts at exactly the same time.
“Swim upstream. Go the other way. Ignore the conventional wisdom. If everybody is doing it one way, there’s a good chance you can find your niche by going exactly in the opposite direction”
– Sam Walton
In 1945, at the age of 26, Sam purchased and took over a Ben Franklin variety story in Newport, Arkansas.
By 1960, Sam and his brother, owned 15 Ben Franklin variety stores, and they were one of the largest independent operators in the country. These stores produced $1.4 million in annual sales combined. It wasn’t bad, but it was also a lot of work driving around to all these stores.
Sam felt they reached their peak, so he was on the lookout for “a new idea that would break us over into something with a little better payoff for all our efforts.”
He heard of a new concept called a “family center” which were larger stores that were capable of doing $2 million per store. While evaluating the family-center, he started noticing other discounting concepts.
“So, I started running all over the country, studying the concept from the mill stores in East to California, where Sol Price started his Fed-Mart in 1955.”
By the time Sam was done traveling around the country studying the competition, he had convinced himself that discounting was the future.
He approached the Butler Brothers, owners of Ben Franklin Stores, with partnering and starting their own discounting concept, but they weren’t interested. Sam and his brother had a choice. Stay with the variety store concept and get killed when the discounters moved in, or open a discount store themselves.
“The truth is, when those Butler Brothers folks turned down my discounting idea, I got a little angry, and maybe that helped me decide to swim upstream on my own. I guess everybody who knew I was going ahead with the discounting idea on my own really did think I’d completely lost my mind.”
In 1962, Sam Walton opened his first Wal-Mart.
That same year, two, large, highly capitalized companies started discount chains. S.S. Kresge, an 800-store variety chain, opened their first Kmart with aggressive expansion plans. The biggest retailer in the country, F.W. Woolworth, also started its Woolco discount chain.
By 1967, Kmart had 250 stores to Wal-Mart’s 19.
Sam Walton was up against incredible odds, and I think he explains their ultimate success in a beautiful way.
“I can tell you this though: After a lifetime of swimming upstream, I am convinced that one of the real secrets to Wal-Mart’s phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things we were forced to learn and do, because we started out underfinanced and undercapitalized in these remote, small communities, contributed mightily to the way we’ve grown as a company. Had we been capitalized, or had been the offshoot of a large corporation the way I wanted to be [Butler Brothers], we might not ever have tried the Harrisons or the Rogers or the Springdales and all those other little towns we went into in the early days. It turned out that the first big lesson we learned was that there was much more business out there in small-town America than anybody, including me, had ever dreamed of.”
I often call Jeff Bezos, Sam Walton’s great grandson. Almost everything that Sam did in the physical retail world, Jeff is now applying to the online world.
“I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.” – Jeff Bezos
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