My Personal Summary
This book is about Sam Walton and how he created Wal-Mart.
Sam bought his first variety store in Arkansas in 1945 at age 27. He then methodically and slowly learned how to grow profits at a single store, open new stores, and manage people.
Sam once said “there hasn’t been a day in my adult life when I haven’t spent some time thinking about merchandising.”
He was plain obsessed with the business, frequently experimented with new sales tactics, meticulously tracked the activity of competitors, and over the course of decades built a retail empire with Wal-Mart.
- Sam bought his first variety store in Arkansas with $5k of his own money and $20k from his wife’s dad at age 27 in 1945. It was called a Ben Franklin store and it was a franchise retail store ran by a group called Butler Brothers.
- The first important lesson Sam learned in his first retail store: Set prices lower but sell higher volumes to increase total profit. e.g. sell 3 widgets at $1 each instead of 2 for $1.25 each. Lower margins but higher overall profit. This would be the central idea behind Wal-Mart many years later.
- Sam grew annual sales from $75k to $250k in five years but at the end of his five year lease, Butler Brothers didn’t let him renew his lease so he had to move on. Failing to read the lease agreement was one of his first big business mistakes.
- Sam opened several variety stores after his first one and eventually opened the first Wal-Mart in Rogers, Arkansas in 1962.
- Sam priced “Image items” like toothpaste, soap, mouthwash, shampoo, etc. dirt cheap and make no profit on them just to draw customers in the door because he knew they’d buy other stuff. These image items are what he advertised in newspapers too so customers would associate Wal-Mart with crazy low prices.
- Interesting fact: Sam allowed managers of the first few Wal-Marts to own a percentage of the stores so that they were incentivized to maximize profits.
- “There hasn’t been a day in my adult life when I haven’t spent some time thinking about merchandising.” Sam is just plain obsessed with this area of business. It explains why he’s won so massively. Reminds me of when Connor McGregor said “This isn’t talent, this is obsession.” Obsessed people win because they don’t quit, ever.
- Sam would literally pop in K-mart stores or other variety stores on family vacations because he was always so curious about how other stores operated. He was constantly stealing ideas from his competition.
- The basic strategy of growing Wal-Mart early on was opening stores in small towns where other big players (like K-Mart) were unwilling to go.
- Their entire business mode revolved around offering the lowest prices humanly possible to customers. They did this by keeping costs as low as possible.
- Wal-Mart profit margins are only around 3%, which is why they simply rely on moving a ton of product.
- Sam preferred to live in Bentonville, Arkansas because it offered easy access to quail hunting in four nearby states.
- Sam also started Sam’s Club in 1983. The premise was that it had super low margins but sold items in massive bulk in a warehouse setting.
- Sam experimented with a lot of different ideas like “Hypermarts” that were even bigger than Walmart Supercenters and hardware stores inside existing Walmart’s but they weren’t profitable. When Sam did find things that were profitable (like Sam’s Club) he just went on to scale to more and more stores. He was a master of experimenting.
- Fun Fact: In the 1960s Sam was quoted as saying that he couldn’t imagine Wal-Mart expanding beyond 9 total stores because it would be too unwieldy to manage.