فصل 04

4

Swimming Upstream

“From day one of Wal-Mart, Mr. Walton made it clear that this wasn’t just Ben Franklin with low prices on some items. He wanted real discounting. He said, ‘We want to discount everything we carry.’ When the other chains around us weren’t discounting, he said, ‘We advertise that we sell for less, and we mean it!’ So whatever else we did, we always had to sell for less. If an item came in and everybody else in town was selling it for twenty-five cents, we’d go with twenty-one cents.”

—CHARLIE CATE, store manager

As I said earlier, once we opened that Wal-Mart in Springdale, I knew we were on to something. I knew in my bones it was going to work. But at the time, most folks—including my own brother, Bud—were pretty skeptical of the whole concept. They thought Wal-Mart was just another one of Sam Walton’s crazy 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 retail industry and trying to stay ahead of those trends. This is a big contradiction in my makeup that I don’t completely understand to this day. In many of my core values—things like church and family and civic leadership and even politics—I’m a pretty conservative guy. But for some reason in business, I have always been driven to buck the system, to innovate, to take things beyond where they’ve been. On the one hand, in the community, I really am an establishment kind of guy; on the other hand, in the marketplace, 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 folks turned down my discounting idea, I got a little angry, and maybe that helped me decide to swim upstream on my own.

DON SODERQUIST, FORMER PRESIDENT OF BEN FRANKLIN, NOW VICE CHAIRMAN AND 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 our biggest franchisee. He had already opened the Rogers Wal-Mart and he was up in Chicago trying to convince our officers to franchise his discount stores in small towns. They gave him a flat no. After the meeting he came back to see me and moved right on to the subject of computers. He wanted to know all about 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 shopping—dressed in a pair of mangy cutoff jeans —at the Kmart near my house. I walked over into the apparel section and saw this guy talking to one of the clerks. I thought, ‘Jeez, that looks like that guy I met yesterday. What the heck is he doing way out here?’ I strolled 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 merchandise come in?” He’s writing everything she says down in a little blue spiral notebook. Then Sam gets down on his 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 are you doing?’ And he said, ‘Oh, this is just part of the educational process. That’s all.’ Of course, he’s still doing the same thing today, except he uses his little tape recorder.”

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. I laugh now when I look back on Wal-Mart’s beginning. In 1962, the discount industry was fairly young and full of high-living, big-spending promoters driving around in Cadillacs—guys like Herb Gibson—who had the world by the tail. But it had very few of what you’d call good operators—until 1962, the year which turned out to be the big one for discounting. In that year, four companies that I know of started discount chains. S. S. Kresge, a big, 800-store variety chain, opened a discount store in Garden City, Michigan, and called it Kmart. F. W. Woolworth, the granddaddy of them all, started its Woolco chain. Dayton-Hudson out of Minneapolis opened its first Target store. And some independent down in Rogers, Arkansas, opened something called a Wal-Mart. At the time, and for quite a 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 what makes me laugh today: it would have been absolutely impossible to convince anybody back then that in thirty years most all of the early discounters would be gone, that three of these four new chains would be the biggest, best-run operators in the business, that the one to fold up would be Woolco, and that the biggest, most profitable one would be the one down in Arkansas. Sometimes even I have trouble believing it.

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 that 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 we been the offshoot of a large corporation the way I wanted to be, 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, much more business out there in small-town America than anybody, including me, 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 got two or three truckloads of Prestone and priced it at $1.00 a gallon. Then he priced Crest toothpaste at 27 cents a tube. Well, we had people come from as far as Tulsa to buy toothpaste and antifreeze. The crowd was so big that the fire department made us open the doors for five minutes, then lock them until shoppers left. Sam grabbed a tackle box and started using it as a cash register, checking people out as fast as he could.”

We stuck with what we had learned in the variety store business about customer service and satisfaction guaranteed, but I have to admit that in those days we did not have anywhere near the emphasis on quality that we have today. What we were obsessed with was keeping our prices below everybody else’s. Our dedication to that idea was total. Everybody worked like crazy to keep the expenses down. We tried to build decent buildings, but we had to keep the rent down—we never liked to pay more than $1.00 a square foot. Our stores really didn’t look that good—they 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 bottling plant. It was all broken up into five rooms, and we bought some old fixtures from a failing Gibson’s store for $3,000. We hung them by baling wire from the ceiling. We had clothes hanging in layers on conduit pipe all the way to the ceiling, and shelves wired into the walls. But this was really a small, small town, so number 8 was another experiment.

We didn’t have systems. We didn’t have ordering programs. We didn’t have a basic merchandise assortment. We certainly didn’t have any sort of computers. In fact, when I look at it today, I realize that so much of what we did in the beginning was really poorly done. But we managed to sell our merchandise as low as we possibly could, and that kept us right-side-up for the first ten years—that and consistently improving our sales in these smaller markets by building up our relationship with the customers. The idea was simple: when customers thought of Wal-Mart, they should think of low prices and satisfaction guaranteed. They could be pretty sure they wouldn’t find it cheaper anywhere else, and if they 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 or reason whatsoever. Sam asked me to kind of group the stuff by category or department, and that’s when we 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. Sam wouldn’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 a great 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 merchandise assortment, we had no real replenishment system. We didn’t even have inventory books like we had with the Ben Franklin stores, where if necessary you could simply look over what you needed and order it from Butler Brothers, then price it accordingly. We had no established distributors. No credit. Salesmen would just show up at our door, and we would try to get the best deals we could. Sometimes it was difficult getting the bigger companies—the Procter & Gambles, Eastman Kodaks, whoever—to call on us at all, and when they did they would dictate to us how much they would sell us and at what price. P&G gave a 2 percent discount if you paid within ten days, and if you didn’t, man, they took that discount right off. I don’t mind saying that we were the victims of a good bit of arrogance from a lot of vendors in those days. They didn’t need us, and they acted that way. I never could understand it. To me, it always seemed like 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 them because those items were really at the heart of almost every early discounter’s strategy. I figured that out after I went into the first Gibson’s store. His whole concept was to buy direct at a lower cost than individual stores could buy, then charge $300 a month to run one of his franchises, and he would act as the store’s buying agent. The basic discounter’s idea was to attract customers into the store by pricing these items—toothpaste, mouthwash, headache remedies, soap, shampoo—right down at cost. Those were what the early discounters called your “image” items. That’s what you pushed in your newspaper advertising—like the twenty-seven-cent Crest at Springdale—and you stacked it high in the stores to call attention to what a great deal it was. Word would get around that you had really low prices. Everything else in the store was priced low too, but it had a 30 percent margin. Health and beauty aids were priced to give away.

As far as building the company up, we simply had no time for it. We were too busy concentrating on day-to-day operations. I had moved my office from the Ben Franklin on the Bentonville square to an old garage nearby, where I worked with three ladies who helped out with the bookkeeping. By the early sixties, we had eighteen variety stores and a handful of Wal-Marts. (For a time in there, we owned a mix of several different types of stores. We had variety stores under both the Ben Franklin and Walton names as well as our Wal-Mart discount stores. For years, while we were building Wal-Marts, we continued to run our various Ben Franklin and Walton variety stores. But we gradually phased them out, usually replacing them with Wal-Marts.) We kept a little pigeonhole on the wall for the cash receipts and paperwork of each store. I had a blue binder ledger book for each store. When we added a store, we added a pigeonhole. I know we did that at least up to twenty stores. Then once a month, Wanda Wiseman and I would close those books—enter the merchandise, enter the sales, enter the cash, balance it, and close them. Nowadays, you hear a lot about fancy accounting methods, like LIFO and FIFO, but back then we were using the ESP method, which really sped things along when it came time to close those books. It’s a pretty basic method: if you can’t make your books balance, you take however much they’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 store manager as quickly as we could—something we still do today. If there was a problem, I would get with that manager immediately. But most of them owned a piece of their stores, so they were likely to be as concerned 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, markdowns—everything —utilities, postage, insurance, taxes. I entered the numbers myself each month with a pen, which helped me remember them better. It became a habit with me, and I carried this ledger sheet in 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 us from variety stores, and they turned into the greatest bunch of discount merchants anybody ever saw. We all 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 out in Abilene to be our first Wal-Mart manager. After that, he became our first regional manager. Don had barely finished high school, if that, and he had terrible grammar. He threw people off sometimes because he only had one eye, and he looked at you sort of funny. But he was one of the finest people I have ever known 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 never any question that he was the boss, and when he wanted something done, believe me it got done. I single him 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’t make any mistakes back there picking people, if I do say so myself. Really, back early, one bad manager could have pulled us under. When you’re only making $8,000 or maybe $12,000 a year net in a store, it would have only taken one or two managers who were dishonest to lose the whole company. Sam would meet them in the stores where they worked, and invite them down to look at his stores. You know, he’s a very persuasive man; he could charm a bird out of a tree. And he and Helen would have you out to the house and serve ice cream, and they’d always ask if you and your family went to church. He was so good at evaluating and selecting these fellows. He wasn’t just looking for store managers. I think he was selecting people he thought he could go forward with. He was progressive. He knew that he needed something, 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 these fellows like Don or Claude had any college, and they didn’t want me hiring any college men. They had the idea that college graduates wouldn’t get down and scrub floors and wash windows. The classic training in those days was to put a two-wheeler—you know, a cart that you carry merchandise on—into a guy’s hands within the first thirty minutes he came to work and get him pushing freight out of the back room. They all came out of these variety stores with the same background and the same kind of philosophy and education. 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 in front of his soda fountain one day and started talking to him. I found out that he had been able to save on his salary, and I usually felt that if a fellow could manage his own finances, he would be more successful managing one of our stores. We put him into our variety store on the east side of the square in Fayetteville, so he had to compete against our other store on the west side of the square, which was run by Charlie Cate, and supervised by Charlie Baum at the time. That was a real test because nobody was more competitive than Charlie Baum—he would compete with a buzzsaw. But Claude was so skillful and nice 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, which also 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 aids—HBA 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-Robbins down in price and put in a bunch of over-the-counter drugs. It was the first discount department in our company, the health and beauty aids department at the east side of the square in Fayetteville. But I liked to have lost my best friend over that one. Charlie Baum liked to have had a heart attack. He thought I was trying to undercut him. You got to understand that Charlie is one of the most competitive people who ever lived. He’ll fight you tooth and toenail at bridge, or anything. I was just trying to see where it might lead us. Anyway, Sam knew all about it, and he said, ‘Go ahead and try it.’ He would always try things like that. He was always open to suggestions, and that’s one reason he’s been such a success. He’s still that way.”

When I started buying for Wal-Mart, I would often take Claude along with me. Pretty soon, we made him Wal-Mart’s general merchandise manager. He didn’t have any more experience at being a general merchandise manager than the guy off the street. He was a store manager, but we didn’t have anybody else so he became general merchandise manager. I don’t even know when we finally brought our first professional buyer, or even someone who had ever had any buying experience, into the company, but it was years later.

I guess the thing those early managers and I all had the most in common was that we all loved merchandising. Don’t get me wrong. Our early stores weren’t all that well merchandised. By that, I mean we 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. But we 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 Selling Item. I mean we had to. What he was doing was teaching us to look for what’s selling all the time. You had to look because you had to send in this report every week, and if you reported that nothing was selling 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’t spent some time thinking about merchandising. I suspect I have emphasized item merchandising and the importance of promoting items to a greater degree than most any other retail management person in this country. It has been an absolute passion of mine. It is what I enjoy doing as much as anything in the business. I really love to pick an item—maybe the most basic merchandise—and then call attention to it. We used to say you could sell anything if you hung it from the ceiling. So we would buy huge quantities of something and dramatize it. We would blow it out of there when everybody knew we would have only sold a few had we just left it in the normal store position. It is one of the things that has set our company apart from the very beginning and really made us difficult to compete with. And, man, in the early days of Wal-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 Rock newspaper and a Fort Smith newspaper, and he’d say, ‘Well now, Phil, let’s make us up some kind of an ad for this weekend.’ So we’d look around the store and find a big display of socks or a big display of panties, 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 we found 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 and the wastebasket —just make up our own ad out of everybody else’s ads in those newspapers. But it worked! Because we made real hot prices. He’d say there was no use running an ad everybody else was running for the same price, or why would they come in? Sam was a dime store man so at first he wanted to make a certain percentage of profit on everything. But he came around to the idea that a real hot item would really bring them in the store so we finally started running things like toothpaste for sixteen cents a tube. 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 sent him down to open store number 52 in Hot Springs, Arkansas—the first store we ever opened in a town that already had a Kmart. Phil got there and decided Kmart had been getting away with some pretty high prices in the absence of any discounting competition. So he worked up a detergent promotion that turned into the world’s largest display ever of Tide, or maybe Cheer—some detergent. He worked out a deal to get about $1.00 off a case if he would buy some absolutely ridiculous amount of detergent, something like 3,500 cases of the giant-sized box. Then he ran it as an ad promotion for, say, $1.99 a box, off from the usual $3.97. Well, when all of us in the Bentonville office saw how much he’d bought, we really thought old Phil had completely gone over the dam. This was an unbelievable amount of soap. It made up a pyramid of detergent boxes that ran twelve to eighteen cases high—all the way to the ceiling, and it was 75 or 100 feet long, which took up the whole aisle across the back of the store, and then it was about 12 feet wide so you could hardly get past it. I think a lot of companies would have fired Phil for that one, but we 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 to screw it up, but on this one he came down and said, ‘Why did you buy so much? You can’t sell all of this!’ But the thing was so big it made the news, and everybody came to look at it, and it was all gone in a week. I had another one that scared them up in Bentonville too. This guy from Murray of Ohio called one day and said he had 200 Murray 8 horsepower riding mowers available at the end of the season, and he could let us have them for $175. Did we want any? And I said, ‘Yeah, I’ll take 200.’ And he said, ‘Two hundred!’ We’d been selling them for $447, I think. So when they came in we unpacked every one of them and lined them all up out in front of the store, twenty-five in a row, eight rows deep. Ran a chain through them and put a big sign up that said: ‘8 h.p. Murray Tractors, $199.’ Sold every one of them. I guess I was just always a promoter, and being an early Wal-Mart manager was as good a place to promote 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 show he could do it. Things may not be quite as wild today as they once were, but being a Wal-Mart manager is still a great place to promote items because it is such a part of our heritage, and it is a part we had better always hold on to. Over the years, I’ve had so much fun with this, and it really is amazing how much merchandise you can move with just a little promotion. Folks always ask me what are some of the big moments I remember in the history of Wal-Mart, and I usually say, oh, when we passed a billion dollars in sales, or 10 billion, or whatever. But the truth is, some of my fondest memories are of plain old everyday items that we sold a ton of by presenting nicely on endcaps (displays at the end of aisles)—or on tables out in action alley (the big horizontal aisle running across a store just behind the checkout counters). I guess real merchants are like real fishermen: we have a special place in our memories for a few 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 called a Bedmate. I think I picked this one up one day by going out and talking to one of those salesmen waiting in the lobby—which is something I like to do from time to time just to keep in touch. At the time I don’t think we even carried mattress pads, but somehow or another I felt it was an unexplored item or an item we 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 our stores. 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 Aladdin Company, the folks who make Thermos bottles. He had his samples with him, and I asked him the usual question, what do you have that is real hot that we could promote successfully? And he had a half-gallon red 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 I got him down a little more, ran it at an even lower price, and we went crazy with that thing. We sold carloads 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 so well. But I finally realized that because I was the chairman, and because they knew I’d be coming into their stores sooner or later, our associates would get at it on those items I chose and move those things right on out. I learned I had to be careful the time we promoted the Moon Pies. These gooey marshmallow snacks, which are real popular in the South, were another one of my great items. I got on to them in Tennessee, where I ran into a department head, a woman who had been selling Moon Pies in an unbelievable way just by putting them out where folks would notice them. Well, I knew they weren’t being 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 my item, ship it to all our stores, and sell it five for $1.00 instead of 23 cents apiece?” They went for it and came down in their price to 12 ½ 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 got carried away with my item and we shipped them to Wisconsin. Those people up there never heard of Moon Pies before, and they weren’t too interested in learning about them. It was the kind of mistake we had 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 to compete with Sam on it because it is just unbelievable the compliance he gets. I think the Chattanooga Bakery, which makes Moon Pies, made him their man of the year. If they didn’t, they should have. No one in history has ever even dreamed you could sell Moon Pies like that. But see, if he picks an item, he’ll say he wants a table in front of the check stands, and he wants fifteen cases of Moon Pies there broken down into vanilla, chocolate, and caramel, in whatever ratios he decides they’re going to sell. That Bedmate thing was ordinarily a side-counter item—maybe you stock four on a side counter and they sell a few a month. Well, Sam takes a table in action alley, designs the sign himself, and makes a rule that you have 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 Apple Juice. It was just sensational. It sold tons. So I would go to the stores, and get them to take that minnow bucket up front to the people greeter at the door, put ice in it, ice down the apple juice, and give away samples out of his minnow bucket. I particularly did it in stores I knew he was going to visit. It drove him crazy, 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 it teaches, which rubs off on all the associates and the store managers and the department heads, is that your stores are full of items that can explode into big volume and big profits if you are just smart enough to identify them and take the trouble to promote them. It has been a real key to helping this company dramatically increase its sales per square foot. If you are going to show the kind of double-digit comparable store sales increases that we show every year, and grow a company the way we’ve grown ours, you have to be merchandise driven. Otherwise, you become like everybody else. I can name you a lot of retailers who were originally merchandise driven, but somehow lost it over the years. In retail, you are either operations driven—where your main thrust is toward reducing expenses and improving efficiency—or you are merchandise driven. The ones that are truly merchandise driven can always work on improving operations. But the ones that are operations driven tend to level off and begin to deteriorate. So Sam’s item promotion mania is a great game and we all have a lot of fun with it, but it is also at the heart of what creates our extraordinary high sales per square foot, which enable us to dominate our competition.”

By the way, I’m promoting an item in the stores this year that I think is a real winner: a halogen car headlight for only $10.94. I teamed up on it with Jack Welch, the CEO of General Electric. It’s a good example 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 on item promotion helped us to make up for a lot of shortcomings we had—an unsophisticated buying program, a less than ideal merchandise assortment, and practically no back-office support. It was another 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 our managers together once a week and critique ourselves—that was really our buying organization, a bunch of store managers getting together early Saturday morning, maybe in Bentonville, or maybe in some motel room somewhere. We would review what we had bought and see how many dollars we had committed to it. We would plan promotions and plan the items we intended to buy. Really, we were planning our merchandising programs. And it worked so well that over the years, as we grew and built the company, it just became part of our culture. I guess that was the forerunner of our Saturday morning meetings. We wanted everybody to know what was going on and everybody to be aware of the mistakes we made. When somebody made a bad mistake—whether it was myself or anybody else—we 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 as much time as we could checking out the competition. It’s something I did from the beginning, and it’s something I insisted all our managers do.

CHARLIE CATE:

“I remember him saying over and over again: go in and check our competition. Check everyone who is our competition. And don’t look for the bad. Look for the good. If you get one good idea, that’s one more than you went into the store with, and we must try to incorporate it into our company. We’re really not concerned with what they’re doing wrong, we’re concerned with what they’re doing right, and everyone is doing something right.”

CLARENCE LEIS:

“When Gibson’s first came into Rogers, we practically lived between the two stores. My assistants, John Jacobs 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 behind that store, and at night, after both stores were closed, John and Larry would go over to Gibson’s and get down 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 no attention whatsoever to the way things were supposed to be done, you know, the way the rules of retail said it had to be done. You should have seen us on some of those early buying trips to New York. We had hired this wholesaler from Springfield, Missouri, a guy named Jim Haik, to work with us as sort of an agent. We had bought goods from him, so we said we needed someone to hold our hand and take us around New York to get some merchandise. Jim was a good guy, a straight guy. He took Don Whitaker and me around and introduced us to his sources. He would say, ‘These are guys from a little chain down in 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 line of merchandise and just buys that one line. I don’t think any of those guys in New York really understood our thinking, but we were a store whose profit and volume had to be driven by finding real bargains on things we could promote out in the sticks. And we did. I usually found my best buys in men’s shirts from a guy named Harry Criss at Colonial Manufacturing. He would give us special treatment, meeting us at his showrooms by seven in the morning so we would have extra time to work the street. I always appreciated 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, Phil Green, Claude Harris, Gary Reinboth. We had this budget, and we knew we could spend X amount of dollars, whatever it was. We would have $10,000 for this department, or $20,000 for that one, right on down the line. So here we were, a bunch of guys from Arkansas wandering around New York City. It was all new to me. I had never been to New York City. Sam would split us up into pairs—some would buy 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 us had ever bought men’s before. We were mostly hardlines merchants, who didn’t know much about clothes. We went down to the Empire State Building where all the men’s clothes manufacturers were, and I will never forget that day as long as I live. I had never seen anything like it. We got real carried away and just bought sweaters, pants, all kinds of stuff. Then at night we would get together back at our hotel room and see what we’d spent. Most of the time we would have overbought and somebody would have to 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 and roll with the flow. We always walked everywhere. We never took cabs. And Sam had an equation for the trips: our expenses should never exceed 1 percent of our purchases, so we would all crowd in these little 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 New Yorkers to do that is something really difficult, you know, because they all catch the train and they’ve got their 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 all the 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 the same as General Motors.’

“Then the guy would come back and say, ‘Well, I found you in there, and you do have good credit. So what 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 no reason to meet that early. We can’t even get into the buildings that early.’ And he’d just say, ‘We’ll find something to do.’

“The next morning he would talk some janitor or somebody into letting us in the building, and we’d be sitting there outside the showroom when those folks started coming in to work. Like I said, I think he was trying to make a point: just because we’re in New York doesn’t mean we have to start doing things their way.”

I expect Gary’s right about my trying to make a point. Because wherever we’ve been, we’ve always tried to 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 pretty simple to figure out if you want to. And whether or not other folks want to accommodate us, we pretty much 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 the trip. We sure don’t see any reason now to turn around and join the rest of the pack headed downcurrent.