What Sam Walton Knew

For many years following World War II, the most famous individual in American retail was arguably James Cash Penney. Founder of the famous chain that bore his name, Mr. Penney was active in the company into his nineties, passing away at age 95 in 1971. In 1950, he published a best-selling autobiography, Fifty Years with the Golden Rule, which shed light on his life, Christian faith, and principles for running a business. Since the mid-1980’s, in a point that’s certainly beyond argument, the “most famous” distinction most assuredly belongs to Sam Moore Walton, founder of Wal-Mart. Ironically, the two men met early in Walton’s career.

Sam Walton, Born in Kingfisher, Oklahoma in 1918, decided on a career in retail early on. After graduating from the University of Missouri in 1940, he took a job as a trainee at a J.C. Penney store in Des Moines, Iowa. Robert Slater, in his book The Wal-Mart Decade (later renamed The Wal-Mart Triumph) relates a story in which Mr. Penney, on a tour of his Midwest area stores, stopped by the Des Moines store. During his visit, J.C. taught Sam how to wrap a package using the least amount of materials that would still allow the package to look attractive. Whatever else they discussed is lost to history, but I think it’s safe to say at a minimum that the young Walton walked away with some inspiration as a result of Penney's common touch, a reinforcement of his already strong sense of thrift, and most importantly an awareness of the importance of visiting the stores, something that would later become his trademark .

After a stint in the U.S. Army Intelligence Office during World War II, with borrowed money from his in-laws, Walton opened his first retail operation, buying out a poor-performing Ben Franklin store in Newport, Arkansas in September, 1945. Ben Franklin was a franchise operation based in Chicago and owned by Butler Brothers, a wholesale operation that was founded in 1877. Butler opened the first Ben Franklin variety store in 1927.

Butler exercised a great amount of control over its Ben Franklin franchisees, dictating merchandise to be stocked, merchandise sources and prices to be charged from on high. Walton, who within a few short years transformed the Newport store into the top performer in the state, chafed under Butler’s restrictive approach. Possessed of an unusual level of street smarts and a great deal of curiosity, traits that led him to examine competitors’ operations very closely, Walton soon began to develop his own retail approach - one that over time grew increasingly at odds with the Ben Franklin hierarchy.

Forced to part with the Newport store when his lease expired, Walton and his family settled in the tiny Northwest Arkansas town of Bentonville, where he opened a Ben Franklin franchise under his own name, Walton’s 5 and 10-cent store, in early 1951. Joined by his younger brother, James L. (Bud) Walton, the pair would open 16 more Ben Franklin stores over the next eleven years. The Walton 5 and 10 cent stores gave way to self-service “Walton Family Centers”, larger stores that carried a wider selection of merchandise. The stores were located primarily in Arkansas and Missouri, with a couple of units in Kansas. Walton proved to be a natural at merchandising, and by this point he was eager to introduce a new concept to his basically rural market.

Sam Walton knew that a huge opportunity existed in underserved small town markets such as the one in which his company was located, an opportunity to do business on a much larger scale than the antiquated variety store format would allow. He had read about the discounting trend that was taking root in other parts of the country, especially in the Northeast – Zayre, Two Guys , Arlan’s, Ann and Hope and Mammoth Mart, among others. In California, Sol Price had started up Fed-Mart. And of course, there was action in the Midwest, as plans for S.S. Kresge’s Kmart program began to leak out.

Walton approached Butler Brothers with his plans to build a discount store in hopes that they would be willing to partner with him on the new venture. Since his firm had a long standing relationship with Butler, he was their largest Ben Franklin franchisee, and he really didn’t want to have to set up his own merchandising and supply chain infrastructure, Walton made a pitch to Butler brass in Chicago, in an attempt to convince them a partnership would be in both of their companies’ best interests. They turned him down flat. Even two years later, after the first Wal-Marts had been launched, Sam offered his concept to Butler to franchise to their other small-market operators, and again he was spurned. Looking back, it’s staggering to fathom what those two decisions cost the Butler/Ben Franklin organization over the course of the following decades. No more offers from Sam Walton would be forthcoming.

On July 2, 1962, in the the same year that S.S. Kresge launched Kmart, who would rule the retail roost for a very long time to come, F.W. Woolworth launched the (now long gone) Woolco in an effort to stay relevant and The Dayton Company launched Target, a tiny seed of a discount operation that wouldn’t reach full flower until much, much later, Sam and Bud Walton opened the first Wal-Mart Discount City in Rogers, Arkansas.

Both Slater’s book and Sam Walton’s autobiography, Made in America (required reading, to my mind, along with Lee Iacocca’s autobiography for late 20th century business buffs) recount an interesting story that took place on the new store’s opening day. A contingent of Ben Franklin executives from Chicago showed up, asking to see Mr. Walton. They proceeded to the office at the back of the store, saying nothing along the way. Meeting in Walton’s office, they issued an ultimatum: “Don’t build any more of these Wal-Mart stores”, then left, without another word, in a huff. Wisely, he completely blew off their ultimatum.

Over the next four years, four more Wal-Mart Discount Cities were opened – in Siloam Springs, Springdale, Harrison (1 hour south of future tourist magnet Branson, Missouri) and Conway, Arkansas. Wal-Mart was on its way.

The photos above, with the exception of the sign photo, which is a bit newer, are circa 1971 and show views of various store departments. From the seventh photo, one can assume that stripes were definitely in that year. The last photo shows “Mr. Sam”, as he was affectionately called, doing what he loved to do – grabbing a store’s P.A. microphone and thanking customers for shopping at Wal-Mart.