Today’s episode is focused on Sam Walton: the Founder of Walmart.
Video Link: https://www.youtube.com/embed/03UFUmZcLNU
Did you know that Walmart is the world’s largest corporation by revenue according to Fortune Global 500 ranking? Did you know that the combined wealth of the Walton family makes them either the richest or the second-richest family in the world? All thanks to the courage and pioneering vision of Sam Walton. Here is the net worth of the Walton family based on 2024 estimates:
Alice Walton: 70.8 billion USD
S. Robson Walton: 76 billion USD
Jim C. Walton: 76.9 billion USD
That is a total of $223.7 billion!
Compare that to the top 4 richest persons in the world today based on 2024 estimates:
#1 Bernard Arnault & family $228.5 billion (LVMH)
#2 Elon Musk $204.5 billion (Tesla, SpaceX)
#3 Jeff Bezos $196.0 billion (Amazon)
#4 Mark Zuckerberg $170.4 billion (Facebook)
So, who was Sam Walton? And how did he manage to build such a massive business empire?
Sam Walton was an American businessman best known for founding the Walmart retail chain. He opened the first Walmart store in 1962, after many years in the retail business. The discount chain he founded expanded internationally, and by 2010, had grown to become the world’s largest company. Sam Walton stepped down as CEO of Walmart in 1988, at the age of 70, but remained active in the company until his death in 1992 in Little Rock, Arkansas. His journey to success was certainly an interesting one.
But first, a little about his biography:
Sam Walton grew up in Missouri. He was a good student and a great athlete. Walton quarterbacked for his high school football team and was also an Eagle Scout. He was such as a well-rounded person that upon graduation from Hickman High School in Columbia, Missouri, in 1936, his classmates nicknamed him the “most versatile boy.”
He graduated from the University of Missouri in Columbia in 1940 with an economics degree. After which he got his first retail job with J. C. Penny Company in Des Moines, Iowa.
But then World War II recruitment efforts saw him going off to serve as Army captain in the intelligence unit during the war. After the war, he returned to private life in 1945. It was at this time that he borrowed $25,000 from his father-in-law, L. S. Robson, to acquire his first store, a Ben Franklin franchise in Newport, Arkansas.
It is from this point that the real story of Sam Walton and Walmart becomes exciting…
To survive in the cutthroat retail world, Sam Walton scoured and found less expensive suppliers than Butler Brothers, the owners of the Ben Franklin franchise. But here was where his retail innovation began. Rather than sell his products at prevailing prices, he discounted his merchandise, passing the savings he achieved on to the consumer, and was content to make his profit on volume rather than on margin.
“Simple enough,” as Walton himself admitted years later. But once he realized the power of this simple idea, he never wavered from its implementation until it became the centerpiece of Walmart’s success and greatness.
This simple discount recipe worked magic for Sam Walton in Newport Arkansas as he operated his Ben Franklin franchise:
For example, in his first full year of franchise ownership, sales increased more than 45 percent to $105,000, and was up another third to $140,000 the following year. The year after that, he surpassed his rival Dunham, as sales increased 25 percent to $175,000.
In fact, business boomed so much that after only thirty months in business, Sam Walton was able to repay his father-in-law’s loan in full. In his fifth year at the Ben Franklin on Front Street in Newport, Arkansas, Sam Walton sold $250,000 worth of merchandise and made a profit of between $30,000 and $40,000! This was no mean feat. In fact, he had effectively become the leading variety store operator in Arkansas, and probably in the adjacent states as well.
But then, in a heartbeat, Sam Walton lost it all!
Why? Well, the problem was that the lease Sam Walton had signed back in 1945 for his Front Street store contained no renewal clause! It was a standard feature to include options to renew leases for the kind that Walton had originally entered. So, when the lease was up for renewal, his landlord, Mr. Holmes, refused to renew his lease. Having no place else in town to relocate his store, Sam Walton had no choice but to sell his store to Mr. Holmes at $50,000, who then turned around and handed the store to his own son! This was a major blow to Sam Walton both professionally and personally.
You see…not only had Walton built a successful business in Newport, but he had also invested a lot of himself in the Newport community. He was an active member of the board of deacons of the Presbyterian church, a member of the Rotary Club, and president of the Chamber of Commerce. In addition, Helen, his wife, loved the town so much that she really wanted to settle down there. Three of her children—John Thomas (1946), James Carr (1948), and Alice (1949)—were all born during those five years in Newport. “We had built a life there,” she recalled in 1992. “I still have good friends from those days.” But now, they had to leave because there was no other space available to relocate the store.
Here is how Sam Walton recalled this incident in his autobiography, Made in America:
“It was the low point of my life. I felt sick to my stomach. I couldn’t believe it was happening to me. It was really like a nightmare. I had built the best variety store in the whole region and worked hard in the community—done everything right—and now I was being kicked out of town. It didn’t seem fair. I blamed myself for getting suckered into such an awful lease, and I was furious at the landlord. Helen, just settling in with a brand-new family, was heartsick at the prospect of leaving Newport. But that’s what we were going to do.”
After this major setback in Newport, Arkansas, Sam Walton moved to 105 and 107 N. Main St, Bentonville in 1950 and set up another Ben Franklin franchise store which he called the Walton’s 5 & dime. It was from this humble place that the Walton empire will slowly emerge.
In less than two decades, Sam Walton, working with his younger brother, James, prospered and came to own 15 Ben Franklin stores. But frustration over the management of the chain, especially regarding delay in his desire to expand into rural communities, eventually prompted him to strike out on his own. Which led to the birth of Walmart.
So, in 1962, Walton opened his first Walmart store in Rogers, Arkansas. Success came rather quickly too. By 1976 Walmart was a publicly traded company with a share value worth about $176 million. And by the early 1990s, the worth of Walmart’s stock had already jumped to $45 billion. In 1991, Walmart surpassed Sears, Roebuck & Company to become the country’s largest retailer. And by 2010, Walmart had become the world’s largest retailer.
It is generally accepted fact that Sam Walton was responsible for a lot of Walmart’s success. He was singularly focused on his vision of discount retail stores in rural areas. He was also hard-charging, demanding, and ruthlessly hardworking. His workdays often began at 4:30 in the morning. And he expected nothing less from those who worked for him. Additionally, he wasn’t afraid to change course or reshuffle his personnel if he didn’t like the numbers that came back to him.
Sweet Revenge?
And oh, there is a kind of sweet revenge twist to Sam Walton’s Newport story. 19 years after Mr. Holmes ran him out of town and gave Sam’s business to his own son, Walmart returned to Newport Arkansas. Listen to Sam Walton as he tells the story in his autobiography:
“Walmart No. 18 … opened in 1969, and it marked our return to Newport … nineteen years after we had basically been run out of town. By then, I was long over what had happened to us down there, and I didn’t have revenge in mind…. As it happened, we did extraordinarily well with our Newport Walmart, and it wasn’t too long before the old Ben Franklin store I had run on Front Street had to close its doors. You can’t say we ran that guy—the landlord’s son—out of business. His customers were the ones who shut him down. They voted with their feet.”
Sam Walton said he didn’t have revenge in mind, but it sure must have felt good as he recalled this interesting twist of fate as he lay dying on his sick bed.
As we round up today’s feature on Movers and Shakers; here are some lessons I have learned from Sam Walton’s amazing story:
- He had the courage to follow his convictions. This was one of his biggest assets. Discount retail model was untested at the time. Purchasing power of rural America was unpopular and untested. Yet, he knew there was something there. He believed in his vision and had the courage to pursue them even when others did not understand him. Do you have the courage to pursue your vision? Believe in yourself, and dance to your own inner music.
- He was a life-long learner: Sam Walton used to say that "You can learn from everybody." An especially important feature of his career was that he kept learning until the day he died. He learned from the Butler Brothers, retail publications, and from his competitor, John Dunham, with his Sterling Store. Here is how Helen Walton, his wife, summarized it: "Of course, what really drove Sam was that competition across the street—John Dunham over at the Sterling Store. Sam was always over there checking on John. Always. Looking at his prices, looking at his displays, looking at what was going on .... I'm sure it aggravated him quite a bit early on." Spend time to learn your craft and never stop learning!
- He learned all the rules of the game. And then broke them if theyserved as obstacles to innovation. This was the only reason he could have pioneered discount retail model in rural America of all places when everyone else thought he was crazy. Here is how Richard S. Tedlow, Professor at Harvard Business School puts it:
“First, he learned all the rules. Then he broke all the rules which did not make sense to him – which meant almost all of them.”
- He was humble and non-pretentious: Sam Walton was a transparent and unassuming man who lived his entire life in rural America. He stayed true to who he was. He didn’t try to become something or someone else. He was authentic, transparent, and entirely relatable. He needed Wall Street’s money to expand Walmart, but he never sold his soul or his authentic self. Even after fame and wealth came his way, Sam Walton remained humble all through his life. He lived in the same house, continued to maintain his circle of friends, and drove his signature truck. Some may think he over did it. But that was his authentic self. Can you handle real success when it comes your way?
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