“I’ve played to my strengths and relied on others to make up for my weaknesses.” —Sam Walton
I just finished reading another great book. Sam Walton: Made in America was really hard to stop reading, so it didn’t last long.
I thought I’d share a few great quotes.
Sam on the essence of pricing in discount retailing
“I’ll never forget one of Harry’s deals, one of the best items I ever had and an early lesson in pricing. It first 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 attention to. Harry was selling ladies’ panties—two-barred, tricot satin panties with an elastic waist—for $2.00 a dozen. We’d been buying similar panties from Ben Franklin for $2.50 a dozen and selling three pair for $1.00. Well, at Harry’s price of $2.00, we could put them out at four for $1.00 and make a great promotion for our store.
Here’s the simple lesson we learned–which others were learning at the same time and which eventually changed the way retailers sell and customers buy all across America: say I bought an item for 80 cents. I found that by pricing it at $1.00 I could sell three times more of it than by pricing it at $1.20. I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough. But this is really the essence of discounting: by cutting your price, you can boost you sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retail language, you can lower your markup but earn more because of the increased volume.” (p. 32-33)
Bud Walton, the brother of Sam Walton, about the beginning of Wal-Mart and controlling expenses
“That Newport store [a franchise Ben Franklin five-and-dime in Newport, Arkansas, opened for business on September 1, 1945] was really the beginning of where Wal-Mart is today. We did everything. We would wash 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, years ago. Our money was made by controlling expenses. That, and Sam always trying to be ingenious. He never stopped trying to do something different.” (p. 36)
Taking the best from others
“Most everything I’ve done I’ve copied from somebody else.” (p. 47)
David Glass, former President and Chief Executive Officer of Wal-Mart
“Two things about Sam Walton distinguish him from almost everyone else I know. First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong than anyone I’ve ever known. And once he sees he’s wrong, he just shakes it off and heads in another direction.” (p. 50)
Low prices through low expenses
“So while we may not have had any competition for discounting in those little towns, we weren’t strangers to competition. We were always looking at Gibson’s and any other regionals that might decide to come our way, and we knew what to do when they did: keep our prices as low as possible by keeping our costs as low as possible.” (p. 152)
Payroll in retail businesses
“…no matter how you slice it in the retail business, payroll is one of the most important parts of overhead, and overhead is one of the most crucial things you have to fight to maintain your profit margin. Back then, though, I was so obsessed with turning in a profit margin of 6 percent or higher that I ignored some of the basic needs of our people, and I feel bad about it.” (p. 163)
Loyal customers means repeat business
“Satisfied, loyal, repeat customers are at the heart of Wal-Mart’s spectacular profit margins…” (p. 164)
Shrinkage
“As you may know, shrinkage, or unaccounted-for inventory loss—theft, in other words—is one of the biggest enemies of profitability in the retail business. […] This is sort of competitive information, but I can tell you that our shrinkage percentage is about half the industry average.” (p. 172)
The secret
“The secret of successful retailing is to give your customers what they want.” (p. 221)
Meeting competitors head-on
“We decided that instead of avoiding our competitors, or waiting for them to come to us, we would meet them head-on. It was one of the smartest strategic decisions we ever made.” (p. 242)
Competitive advantages in distribution
“I would go as far as to say, in fact, that the efficiencies and economies of scale we realize from our distribution system give us one of our greatest competitive advantages.” (p. 263)
Saturday morning meeting
“So when we sit down at our Saturday morning meeting to talk about our business, we like to spend time focusing on a single store, and how that store is doing against a single competitor in that particular market. We talk about what that store is doing right, and we look at what it’s doing wrong.” (p. 281)
Paychecks to American managements
“But if American management is going to say to their workers that we’re all in this together, they’re going to have to stop this foolishness of paying themselves $3 million and $4 million bonuses every year and riding around everywhere in limos and corporate jets like they’re so much better than everybody else.” (p. 325)
Hurricane Capital 