Influencing Wal-Mart

The one aspect of the Wal-Mart story that I find most fascinating was Sam Walton’s study of the discount store industry, in the years both before and after the launch of his namesake chain. In his autobiography, Walton describes his adventures visiting discount stores all over America. “I ran the country, studying the discounting concept, visiting every store and company headquarters I could find”, he wrote. Starting in the New England area, which was in many ways the birthplace of the concept , Walton worked his way from coast to coast.

Most often, due to Walton’s humble, disarming approach (“Hi, I’m Sam Walton from Bentonville, Arkansas. We’ve got a few stores out there, and I’d like to visit with Mr. So-and-So” – whoever the head of the company was- “about his business”)and the lack of any perceived competitive threat (which of course was the case at the time), discount chain presidents everywhere were all too happy to escort Sam on a tour, showing off their empires. It was a chance to impress a small-time operator from the sticks.

Walton accurately describes the make-up of the industry at the time as largely composed of “promoter” types – wholesalers or real estate promoters with little interest in the merchandising business who saw an opportunity to strike it rich. “They would take a carbon copy of somebody’s store in Connecticut or Boston, hire some buyers and some supervisors who were supposed to know the business, and start opening up stores. From about 1958 to 1970, it was phenomenally successful”.

The frugal Walton took note of the lifestyles of the discount chiefs, many of whom lived like Roman emperors – private jets, Cadillacs, cadres of servants and so on, living off the "discounting fad" while ignoring the condition of their stores and the quality and attitude of their customer service. Many of them just became lazy, unaware while their businesses slowly deteriorated. By the beginning of the 1990’s, as Walton pointed out referencing a then recent trade magazine article, 76 of the top 100 American discount stores that were in business in 1976 no longer existed. Of course, in the 16 years since Walton’s passing, the remaining count of 24 has been severely pared down as well.

Aside from these “good examples of bad examples”, as Sam might have put it, there were some individuals for whom he developed great respect - John Geisse, who played a key role in the founding of Target and Venture was one, but at the top of Walton’s list were Harry Cunningham, former S.S. Kresge president and father of Kmart, and Sol Price, the founder of Fed-Mart and Price Club.

It’s highly likely that had Kmart not existed, Wal-Mart couldn’t have. Walton, an ardent admirer of the (early, at least) Kmart merchandising style, considered Kmart his “laboratory” and claimed to have visited more Kmart stores than anyone, even while on vacation, as his wife Helen, as quoted in Robert Slater’s The Wal-Mart Triumph attested: “Sam never went by a Kmart that he didn’t stop by and look at it”. In time, Walton gained Cunningham’s respect as well. Long after his 1972 retirement from Kresge, in what certainly ends up sounding like a backhanded slap at his old company, Cunningham was quoted in Sam’s 1992 autobiography – “From the time anybody first noticed Sam, it was obvious he had adopted all of the original Kmart ideas. I always had great admiration for the way he implemented – and later enlarged on – those ideas. Much later on, when I was retired but still a Kmart board member, I tried to advise the company’s management of just what a serious threat I thought he was. But it wasn’t until fairly recently that they took him seriously”.

Sol Price, one of the best known early proponents of the “warehouse store” concept, was a huge influence on Walton in a couple of key areas. Price, still kicking at age 92, founded Fed-Mart in 1954 as a membership warehouse store in San Diego. Eventually, Fed-Mart would grow to a 45-store chain with locations in California, Arizona and Texas. Price sold the chain to a German firm in 1975 and with his son Robert founded The Price Company, another warehouse store operation whose stores went under the name of Price Club, the following year. In 1993, he would merge his company with Costco.

For starters, Sam liked the sound of the name “Fed-Mart”, a fact often cited among the stories about the origin of the Wal-Mart name. To be sure, however, Price’s most notable influence on Walton was in regard to the warehouse store concept itself. In 1983, some months following a dinner with Price and their wives in San Diego, Wal-Mart launched its first Sam’s Wholesale Club in Oklahoma City. Despite this new competitive relationship, the two men maintained a warm personal friendship, as evidenced (and possibly tested) by a story Walton related in his book. Sam, on one of his competitive store visits, browsed the Price Club store on Morena Avenue in San Diego, tape recorder in hand, noting prices and other details about the store. Stopped by a security guard who demanded the tape, Walton obliged, asking to write a note to Robert Price about the tape, which also contained observations from other area stores. A few days later, Walton received the tape in the mail, none of it erased, accompanied by a friendly note from Price. Now, that's a friend!

The photos above are circa 1972.