Sam Walton

In Wal-marts early years, the company began a “Buy American” campaign. This campaign was undoubtedly aimed at increasing customer loyalty. However, the campaign was also intended to “guilt” employees into accepting lower wages as a concession to providing their customers with lower profit margin American goods.

Regardless of the reasons, Wal-mart gradually pulled away from its intense advertising program touting the campaign and moved back to buying cheaper foreign goods. Now, some years later, we’re hearing rumblings of the old “Buy American” drums.

Some industry analysts are of the opinion that due to the economy customers are buying less electronics, clothing and other items that are typically bought overseas due to cheaper pricing. Sales of groceries, paper goods and health and beauty aids are up to 54 per cent of total sales and most of these are made in the U.S.

Observers believe that Wal-mart, clever as always, is simply taking advantage of the shift in product mix necessitated by the economy. If they can claim a “Buy American” stance, it’s good for business. This is true even when Wal-mart is still buying the same items from foreign suppliers.

The flip side to this advertising push is if Wal-mart is really buying more American made goods, can we expect higher prices at Wal-mart stores. In other words, is Wal-mart taking advantage of being in a position to claim “Buying American” as a strategy to justify raising prices? Are they now trying to guilt customers into paying more for a factually inaccurate policy of their buying goods made in the U.S.?

The accepted definition of frugal is, “avoiding waste” or “costs little, inexpensive”. However, most people would agree that the definition of cheapskate is much less charitable. The term cheapskate is derogatory when applied to a person and describes them as willing to pay less than what a product or service is worth, even to the point of accepting something substandard instead.

However, there is a fine line between frugal and cheapskate and Sam Walton walked it his entire life. What kept Sam on the frugal side of the line was that he saw that paying a little more now could mean making a lot more in the future.

Walton learned early on as owner of a Ben Franklin store that three things happened when he passed the savings on to customers, from deals he negotiated on product from suppliers.

1. Customers bought more of the less expensive products.
2. When suppliers saw he reduced prices in his store with the deal money—most retailers kept the prices the same and banked the extra deal money— they gave him more and better deals because he sold more of their product.
3. Walton made more money from the increased volume of sales.

Obviously, this was the bedrock concept upon which Wal-mart developed its buying strategy and sold its products.

It is also the strategy by which he lived his life and operated his company. Until his dying day, Mr. Walton lived his life as if he could barely make ends meet financially. Cost-cutting was an integral part of the culture at Wal-mart.

Sam lived his own life as an example of frugalness for his employees and he exerted his considerable charisma on frequent visits-via his private plane that he piloted—to associates at Wal-mart stores around the country.

He also pounded home to the associates that the purpose of the frugalness was to benefit Wal-mart’s customers with better prices.

Suppliers to Wal-mart were mercilessly held to providing the lowest cost possible and the example set by Sam and his associates served to demonstrate to them that Wal-mart was indeed investing the profits back into the selling price to the customer. Wal-mart promised and delivered that suppliers would make more money by selling product to Wal-mart at lower costs, because they would sell more of it.

Walton kept salaries as low as possible for cashiers to executives by a brilliant strategy. He developed a profit sharing plan that:

1. Provided compensation through subsidized stock that associates could put some of their wages into each week.
2. The associates who stuck with the company for a future payoff were the business-minded people Sam wanted.
3. Each associate strived to make Wal-mart great because their financial future was dependent upon its success.
4. The profit sharing program paid off big and as associates retired it served as a continuing inducement to others to maintain standards and service

Sam understood that he could save money on one hand while investing it in lower costs or higher associate performance with the other, and make more profits in the long run.

First and foremost, Sam Walton was always a winner. This is an important consideration because many successful individuals do not demonstrate leadership or achieve success early in life. Mr. Walton – or Mr. Sam as his associates knew him – was born Samuel Moore Walton on March 29^th, 1918.

By the age of 13, Sam had attained the status of Eagle Scout, a remarkable achievement. Many other successful people have become Eagle Scouts before going on to great success. Sam continued on to become a student leader, basketball star and state championship quarterback at Hickman High School in Columbia, Missouri. In preparation for his future in retailing, Walton graduated from the University of Missouri at Columbia in 1940 with an economics degree. He joined the army and served for three years, beginning in 1942, as a captain in the U.S. Army Intelligence Corps.

Sam and his fiancée, Helen Robson, were married on February 14, 1943. Their marriage produced four children: Rob, Jim, John and Alice.

In the years after the war, Walton worked with J.C. Penny. Armed with this experience in retail he later opened his own variety store in Newport, Arkansas, which led to the development of the highly successful Walton’s Five and Dime store in Bentonville.

Mr. Sam, at the age of 44, developed a new concept in grocery and non-foods retailing that were designed to make American-made goods available at inexpensive prices to everybody. The store opened in 1962 in Rodgers. Arkansas and the new retailing formula was an immediate and smashing success. In fact, Walmart soon had the supermarket industry scrambling to develop new concepts in an attempt to successfully compete. It is fair to say on that day in 1962, Mr. Sam fired the first shot in the revolution to develop new and better supermarket concepts that continues to this day.