Sam Walton

Sam Walton: The Arithmetic of Small Towns

Days before he died, from a hospital bed in Little Rock, Sam Walton was still reading sales figures. When the news went out on 5 April 1992, it travelled by satellite to all 1,960 of his stores at once — a detail that says more about what he had built than any balance sheet. The company employed 400,000 people and turned over $50 billion a year. He had started with a variety store in a town of a few thousand people, and lost the lease on it.

A Depression Childhood on the Move

Samuel Moore Walton was born on 29 March 1918 in Kingfisher, Oklahoma, to Thomas Gibson Walton and Nancy Lee Lawrence. His father appraised farms and worked farm mortgages for Metropolitan Life, which in the Depression meant foreclosing on them. The family moved often — Springfield, Marshall, Shelbina, and finally Columbia, Missouri — and the children were expected to contribute. Sam milked the family cow, bottled the surplus and drove it to customers, delivered newspapers and sold magazine subscriptions. The habit hardened into a conviction he repeated for the rest of his life: children should be givers rather than takers in a household.

In eighth grade at Shelbina he became the youngest Eagle Scout in Missouri's history. At David H. Hickman High School in Columbia he quarterbacked the football team and was elected student body president, graduating as "Most Versatile Boy." At the University of Missouri he joined Beta Theta Pi and the honour society QEBH, served in ROTC, was elected permanent president of his class, and took a degree in economics in 1940 while still delivering papers.

Penney's, the Army, and Newport

Sears and J.C. Penney both offered him work. He took Penney's, as a management trainee in Des Moines at $75 a month, and stayed eighteen months before enlisting. During the Second World War he served as an officer in the Army Intelligence Corps supervising security at aircraft and munitions plants, reaching captain. He married Helen Robson on Valentine's Day 1943. The war settled the question of what he wanted to do: retail, for himself.

In 1945, aged twenty-six, he took a Ben Franklin variety store franchise in Newport, Arkansas, financed with $20,000 borrowed from his father-in-law Leland Robson and $5,000 of savings. Instead of buying his stock at the prices the franchisor's supplier offered, he went directly to manufacturers and pocketed the difference in price rather than in margin. Sales rose from $80,000 to $225,000 in three years. Then his landlord declined to renew the lease, wanting the store for his own son. Walton had built a thriving business on ground he did not control, and he never made that mistake again.

Bentonville, 1950

He and Helen found a site on the downtown square in Bentonville and negotiated a ninety-nine-year lease conditional on securing the shop next door; when that neighbour refused to sell, Helen's father closed the gap with a further $20,000. Walton's Five and Dime opened on 9 May 1950 and took sales from $72,000 to $175,000 within three years. Here he introduced customer self-service — then still a novelty in a variety store — and set a rule that would define everything after it: his prices would be as good as or better than stores in cities four hours away by car. If that held, people would not make the drive.

Wal-Mart Discount City

The first Wal-Mart opened on 2 July 1962 in Rogers, Arkansas, under the name Wal-Mart Discount City, selling clothing, cosmetics, housewares, appliances, jewellery and furnishings under two slogans of magnificent plainness: "We Sell for Less" and "Satisfaction Guaranteed." His brother James Lawrence "Bud" Walton, a wartime Navy pilot, was his partner in it, as he had been since 1945.

The strategic choice was deliberately contrarian. Established discounters chased cities. Walton went to small towns where there was little competition and a single large store could take the whole regional market, and he stitched them together with logistics: every store within a day's drive of a regional warehouse, served by the company's own trucks. That geometry gave him buying volume and delivery costs no local rival could match. By 1962 he and Bud ran sixteen stores across Arkansas, Missouri and Kansas. There were 190 by 1977 and 800 by 1985. Sam's Club, a warehouse format selling in bulk, followed in 1983.

Wal-Mart Stores Inc. became the largest corporation in the world by revenue and the largest private employer on earth. From 1982 to 1988 Walton was the richest man in America, losing the title in 1989 only because Forbes began dividing the fortune among him and his four children.

The Man in the Pickup

He remained conspicuously unchanged by it. He was an elder and Sunday school teacher at Bentonville's First Presbyterian Church, and built a version of servant leadership into the company's structure. He liked country music enough that Dolly Parton's debut became, in 1967, the first album widely stocked in Wal-Mart. In 1987 he and Helen founded the Walton Family Foundation, directed at K-12 education and at economic development in northwest Arkansas and the Delta. Of his own method he said simply: "You can learn from everybody."

Why Sam Is Called a Genius

President George H. W. Bush gave him the Presidential Medal of Freedom in March 1992, a month before his death; Time later placed him among the hundred most influential people of the twentieth century.

The faculty being honoured is unglamorous and real: an almost obsessive capacity to observe, copy and improve, married to a grasp of distribution arithmetic that most retailers never acquired. Walton understood earlier than his competitors that a discount chain is not a merchandising business but a logistics business — that the price on the shelf is set in the warehouse and on the road, not at the till. He built stores around trucking routes, not the other way round, and the towns he chose were selected because the arithmetic worked there, not because anyone else wanted them.

The counter-case is straightforward, and he made much of it himself. He invented almost nothing. Self-service, discounting, the warehouse club and one-stop shopping all existed before he used them; he freely credited Meijer's concept as the basis of his own, and he toured rivals' stores taking notes for decades. His talent was assembly and relentlessness rather than invention. And the machine he built has costs his admirers tend to skip: the "Walmart Effect" is the standard term for what a Walmart does to the independent retailers of the town it enters, and the company's labour practices have been contested ever since. Genius here means an unusual clarity about cost, not benevolence about consequences.

What He Left Behind

Diagnosed with hairy cell leukaemia in 1982 and bone cancer in 1990, treated at MD Anderson in Houston, he died of multiple myeloma in Little Rock on 5 April 1992, aged seventy-four, and was buried in Bentonville. Bud died in 1995. His autobiography with John Huey, *Sam Walton: Made in America*, appeared the year he died and remains the clearest statement of his thinking. His son Rob took the chairmanship; the Sam M. Walton College of Business at the University of Arkansas carries his name. The chain he began on a Bentonville square now runs thousands of stores across the United States and abroad, and American retail has never gone back to what it was before.

Achievements

• Presidential Medal of Freedom — 1992
• Educated at University of Missouri, David H. Hickman High School and Trulaske College of Business
• Worked as entrepreneur, businessperson and economist